Paul Carroll
What do you see as the main challenges in insurance claims today?
Chris Bassett
Most of these topics have been on our clients' radars for quite some time and are now receiving increased attention because the industry has been focused on addressing significant issues over the last couple of years. We've seen global disruption from COVID-19, which led to dramatically changed behaviors around auto insurance, accompanied by various forms of inflation.
Customer experience remains a consistent challenge, particularly in recognizing evolving customer service expectations. There's also the less-discussed aspect of affordability - how to provide exceptional claims experience while maintaining profitability and keeping policies affordable for insureds. This involves understanding what policyholders truly value in their claims experience, while also educating them about the costs associated with providing these services.
Efficiency continues to be a major focus, with different technologies rotating through the spotlight. We've seen phases of RPA [robotic process automation], digital tools and chatbots, and now generative AI. What we're learning is that efficiency challenges are best addressed by focusing on people and processes first, then strategically implementing technology to support these elements.
Understanding and influencing customer behavior has become increasingly important, particularly following the unexpected shifts in behavior during the pandemic. While the Internet of Things [IoT] was a major focus two to three years ago, we've recognized its complexities and are now exploring different approaches to understanding clients. From a claims perspective, we're seeing increased interest in efficient claims management through parametric coverages for personal lines, especially in challenging areas like Northern California property insurance.
The industry is also exploring advanced technologies like generative AI, but with a notably more cautious approach than with previous technological innovations. Chief claims officers are taking a responsible stance, carefully ring-fencing trials and waiting for the technology to mature before full implementation. This is particularly important given the sensitive nature of claims decisions and their impact on people's lives.
These themes have remained largely consistent with what we've observed previously, and we expect them to continue in the short to mid-term.
Paul Carroll
Are you talking to people much about agentic AI? If so, how are organizations responding to agentic AI compared with their current focus on generative AI?
Chris Bassett
The focus right now is predominantly on the fundamentals. While there's significant interest and we've seen some impressive demos of advanced AI technology, most conversations center on addressing fundamental challenges like managing multiple legacy systems. Organizations are concentrating on establishing common data models to improve reporting visibility, streamlining operational processes, identifying capability gaps and working with partners to incorporate effective solutions - essentially getting their core business operations tight. When it comes to more advanced technology, many companies are taking a wait-and-see approach before implementing it into their business operations. This marks a shift from a few years ago when there was more eagerness to experiment with emerging technologies like IoT and chatbots.
This caution stems from two factors. First, some prior technology advancements haven't delivered the expected results as quickly as had been expected, and that’s led insurers to adopt perhaps a more critical mindset. Second, while there's recognition that generative AI and more advanced forms of AI could play a significant role, these technologies begin to overlap with decision-making functions traditionally handled by claims agents. In practice, we recommend that AI ought to complement human reasoning – but inevitably it adds a layer of complexity to their adoption.
Paul Carroll
I always love the theory of chatbots, and then I deal with one and get brought back to reality. What are some notable examples of how generative AI is being used in insurance claims processing?
Chris Bassett
The most compelling example I've seen is a demo currently being developed into a trial for personal property claims. What makes it particularly impressive is that it features an interface fully built around a generative AI model that not only draws from historical claims knowledge but also actively incorporates real-time information to update its recommendations.
In a live demonstration, the system could convert phone call audio to text and feed that information into the model, automatically recalibrating its decisions and recommendations. When working with photographs, adjusters could isolate specific elements within the images for detailed analysis, which would then update the recommendations regarding the cause of loss. While still in early stages, the technology’s potential is remarkable.
However, this example also highlighted that human claims agents with sufficient expertise would still be essential for effective decision-making. The real value of the system lies in its ability to reduce ambiguity and provide claims professionals with a comprehensive suite of tools to support their work. It's the most sophisticated application we've seen in this space so far, and it's quite impressive.
Paul Carroll
It's interesting you talk about the human interaction because I gather one of the things you're talking to people a lot about is talent. How are insurance companies addressing talent development and recruitment while integrating new technologies into their operations?
Chris Bassett
Talent development is one of the core areas we're focusing on with clients. We're facing a dwindling talent supply across the insurance industry, particularly in underwriting and claims. The challenge lies in ensuring our clients have well-developed talent pipelines to address these shortages.
The most effective claims adjusters possess extensive knowledge across different lines of business and understand how their operations work. We're concentrating on establishing methods to bring people in, get them engaged in claims work, and rotate them effectively to build that essential breadth of knowledge.
When it comes to new talent, we're finding that younger professionals are generally more tech-savvy and familiar with available technologies. This makes the technological adoption process smoother at that level. However, what remains constant is the adjuster's role as the core decision-maker.
Our most advanced clients are exploring ways to integrate technologies to support and enhance the adjuster's capabilities rather than replace them. When we start considering AI performing the majority of an adjuster's role, we're looking at fundamental changes to the overall insurance model - that's a level of transformation that requires careful consideration.
Paul Carroll
Do you have a favorite example or two of organizations successfully nurturing and developing talent?
Chris Bassett
We recently worked with a client that had an exceptional talent base, yet was looking to take their claims team to the next level. We assessed their existing internal review models and updated them to become part of their talent development cycle. This organization deals with several specialty areas, some highly complex and regionalized. Initially, they were working predominantly in silos and sharing claims handling experience and decisioning insights orally in focus group settings, which is often the case in claims management teams.
We are helping them transform this model into a comprehensive talent development program that addressed two key challenges. First, it makes it easier for staff to rotate through different loss types, rather than staying confined to one vertical, which often led to eventual exits. Second, we are introducing a focus on coaching as opposed to simply sharing information so that it’s purposeful and learning-focused.
The redesigned program will create a defined pathway starting with standardized lines around auto and home insurance and then progress to more complex coverages. As employees progress, they will participate in team-based groups with a mandate for structured coaching. This will be integrated with formal learning and development structures in conjunction with HR (with appropriate feedback loops) to provide oversight and facilitate horizontal movement at each level of seniority.
Under this new system, employees at the director level, for example, will move horizontally between relevant management positions at that rank, completing coaching and training in the process, before being promoted to the next level. This approach reduces the pressure for frequent vertical promotions while creating well-rounded leaders with comprehensive organizational knowledge. The result are senior claims leaders who have been afforded a clear view across the entire claims organization.
Paul Carroll
Any final thoughts on the evolution of claims management?
Chris Bassett
I think the biggest standout to me has been the significant shift in focus over the years. We've moved away from "shiny objects" to concentrating more explicitly on the fundamentals.
There’s also been a change in how organizations are approaching their foundation-building. Rather than implementing spot fixes, companies are focusing on establishing strong fundamentals that will support future investments and growth. This shift in thinking has been particularly evident over the last couple of years.
This evolution speaks volumes about our recent experiences, but it also reflects how firms are thinking ahead. Organizations are more focused on getting their fundamentals in place so they're prepared to take advantage of significant changes on the horizon. This pragmatic yet forward-thinking approach represents a significant shift in our industry.
Paul Carroll
I’ve wound up in the middle of a fight among three very smart and accomplished friends who are disagreeing on the future of AI. One of them is basically accusing the other two of claiming that artificial general intelligence, or AGI, is going to be possible soon, while the other two guys say he’s distorting their positions.
I tend to be the pragmatist, saying we can do an awful lot of stuff before we get to AGI. That’s certainly been the history. I've been hearing people say for decades now that AGI is almost here, and they’re still saying that. In the meantime, though, look at all the progress that’s been made even though we aren’t yet answering to robot overlords.
Chris Bassett
The most forward-thinking clients in the insurance industry are considering AGI's potential impact, particularly how it might fundamentally transform the nature of insurance beyond claims processing alone. Whether AGI is realized in the foreseeable future is up for debate, for sure.
It's similar to quantum computing, with Google's recent announcement generating excitement. While we have clients in the insurance space exploring these technologies and trying to understand their implications, organizations need to be strategic about where they invest their resources. You can't pursue every emerging technology simultaneously at any meaningful depth.
Exploring emerging or, in the case of AGI, potentially distant technologies requires a clear-eyed approach. All of our executive resources are scarce – time, attention and so on. Understanding advanced technologies and the impact they may have from a risk perspective – what impact they may have on the business – may make good sense, but understanding when the job is done is critical.
Alternately, exploring these technologies and evaluating them for potential to drive performance benefits or develop new products and services may be a solid bet, but when will you know enough to make a decision to act and how much will that cost? These are important questions to evaluate in the light of the fundamental aspects of current technology that may need to be mastered first.
Paul Carroll
As with AGI, I think I first read, maybe even wrote, about quantum computing 30 years ago. It’s wildly promising, but I'm not expecting to have to deal with it in my working lifetime.
Chris Bassett
Insurance companies aren't technology companies, and that's something we often forget. Insurance, especially claims processing, remains a very traditional business that has been enhanced by technology - which is fantastic – but perspective is key.
These decisions ought to be grounded in a clear understanding of a firm’s business identity. The best insurers I've observed are the ones who truly understand this concept. They focus on their core business and use that understanding as a litmus test for investments: Will this technology enhance our core business or is it something better suited for a tech company?
This perspective may be part of the shift we've seen in recent years. While there have been many exciting technological developments over the last couple of decades that have moved incredibly quickly, it's clear that if you don't stay true to your fundamentals and core competencies, you won't remain in business for long.
Paul Carroll
Perfect. I appreciate your taking the time.
About Chris Bassett
 | Chris Bassett is an insurance strategy and innovation specialist who partners with executives to drive profitable growth through new solution development and solving for complex business and operational challenges. He is currently a senior director with Capgemini U.S. |
