Poor claims experiences could put up to $170 billion in global insurance premiums at risk by 2027, according to New Accenture Research
Artificial intelligence technologies such as machine learning and data analytics can transform the claims value chain and improve customer outcomes
NEW YORK, LONDON and HONG KONG; August 3, 2022 – Up to $170 billion in insurance premiums could be at risk in the next five years due to poor claims experiences, with process inefficiencies in underwriting potentially costing the industry another $160 billion over the next five years. same period, according to a new report. by Accenture (NYSE: ACN).
report, “Why AI in Insurance Claims and Underwriting?”, based on surveys of more than 6,700 policyholders in 25 countries; more than 120 claims managers in 12 countries; and more than 900 US-based insurers. It explores how the insurance industry is responding to the latest market dynamics, pressure from new competitors, challenges facing underwriters and the growing demand for seamless customer experiences – as well as how artificial intelligence (AI) technologies ) can be applied to satisfy and retain customers and transform the underwriting function.
The report found that a third (31%) of claimants were not completely satisfied with their experiences handling home and auto insurance claims over the past two years. Of that 31%, six in 10 (60%) cited speed of settlement issues and 45% cited issues with the closing process.
Dissatisfaction around the claims experience is a major reason customers switch insurers. Nearly a third (30%) of unhappy claimants said they had switched carriers in the past two years and a further 47% said they were considering doing so. Overall, consumers who reported not being completely satisfied could represent as much as $34 billion in premiums annually, or as much as $170 billion over the next five years.
The report says AI technologies can improve the claims process. For example, four in five (79%) of claims leaders surveyed said they believe automation, AI and machine learning-based data analytics can bring value across the claims value chain – from reporting to fraudulent claims, to damage assessment and loss assessment, booking, adjustment, processing optimization and replacement. However, adoption of these technologies has been slow to date, with only about a third (35%) of demand leaders reporting that their organizations are advanced in their use of these technologies. However, this could change, as nearly two-thirds (65%) of insurance companies plan to invest $10 million or more in these technologies over the next three years, prioritizing AI-based applications and technologies automation, according to surveyed claims executives.
The report also found that insurers can reduce underwriting operating costs through the adoption of AI technologies, making up to $160 billion in efficiency gains by 2027. While firms currently struggle with outdated systems and inefficient processes, the research found that up to in 40% of them time is spent on non-core and administrative activities – an annual efficiency loss of 17 billion to 32 billion dollars. More than half (60%) of insurers surveyed believe that improvements can be made to the quality of their organizations’ processes and tools.
“AI is no longer a technology of the future, but an established capability that many insurance innovators are already putting to work to deliver better customer experiences and empower their workforce,” said Kenneth Saldanha, who leads Accenture’s insurance industry group globally. “As humans and AI work together ever more closely in insurance, companies will be able to reshape the way they operate, becoming more efficient, fluid and adaptive. Those who are already moving to use artificial intelligence will be able to create sustainable competitive advantages.”
Read the full report,”Why UA on Insurance Claims and Underwriting?” to understand how to drive AI at scale in insurance.
The report is based on four insurance claims and underwriting surveys, analyzing customer and employee experiences and how insurers are responding:
- A survey of 6,754 insurance policyholders in 25 countries on their most recent experiences in making motor and property insurance claims;
- A survey of 128 insurance claims executives in 12 countries regarding the strategies of their claims organizations;
- A survey of 434 US-based property and casualty insurers conducted in collaboration with The Institutes, an insurance education provider; AND
- A survey of 500 US-based life insurance underwriters regarding technology adoption.
To arrive at the figure of $170 billion in premiums at risk, Accenture used modeling in conjunction with survey data from 6,700 insurance claimants, analyzing the global personal auto and property insurance market to calculate annual premium volume and percentage of people making a request. every year. This was used in conjunction with consumer survey data relating to the proportion of people who reported that they were not completely satisfied with their claims experience and those who said that, as a result of their dissatisfaction, they had switched carriers or would do so over the next five years. Accenture used a similar approach to calculate the $160 billion in efficiency gains in the underwriting figure—taking into account annual personal, commercial and life premium volumes and costs spent on employee underwriting to determine an underwriting expense ratio . Efficiency gains were calculated to be 0.5–1 percentage point of the expense ratio, representing between $9 billion and $15 billion globally per year.
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