Best's Review

A.M. BEST'S MONTHLY INSURANCE MAGAZINE


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Claims
Claiming Progress

Technology is transforming life claims management, reducing the time it takes to process and pay claims. Executives at two major life insurers discuss issues including digital transformation and the opioid epidemic.
  • Jeff Roberts
  • September 2018
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Key Points

  • Shrinking Wait: USAA has reduced the average time it takes to pay nondigital claims by more than 33%, from an average of 45 days just a few years ago, to 25 to 30.
  • Out With the Old: Insurers are replacing outdated claims processing systems.
  • The Goal: Most life insurers aim to provide a completely digital, end-to-end claims process that includes self-service claim settlement.

The digital revolution is finally taking hold in life insurance claims.

Insurers are leveraging technology already employed in their revenue-generating operations and applying it to their claims management.

Fully digital channels are eliminating paper forms and appealing to a new generation of consumers. Artificial intelligence is shortening the process by reviewing claims in minutes, not days, and searching for subtle inconsistencies that could indicate fraud. And data analytics is providing insights into trends and informing strategic planning.

The tech upgrades have—and will continue to—revolutionize life claims management. They have resulted in quantifiable progress such as shorter processing windows and improved efficiency as well as enhancements in the customer experience.

USAA, for instance, has reduced the time it takes to process and pay nondigital claims by more than 33%, from an average of 45 days just a few years ago to 25 to 30. Digital claims are handled in only 10 to 15 days—and the bulk of that time frame stems from the wait for the death certificate.

“We're also moving toward more self-service capability, which is where we see the need,” Steve McCoy, assistant vice president for survivor relations at USAA, said in an emailed response to questions. “We recently introduced a digital experience for notifying USAA of a death, and by the end of the year will introduce additional capabilities.”

The end goal for many insurers—USAA among them—is a completely digital, end-to-end claims process that includes self-service claims settlement. USAA is best known for its auto insurance, but USAA Life Group was No. 49 in the A.M. Best ranking of Top 200 U.S. Life/Health insurers based on 2017 admitted assets.

Nearly every insurer is upgrading their processes. But companies need to continue to invest in claims innovation, according to the Best's Special Report, "Insurers—Behind the Technology Curve, and They Know It."

Insurers are acutely aware they lag behind in technology adoption. Thirty percent say upgrading or replacing their legacy administrative and claims systems is a major focus, according to the report released in February.

Another challenge is keeping track of policyholders and their beneficiaries. State regulators have cracked down in recent years, which has contributed to more than $7.5 billion in back death benefits paid. Then came MetLife's disclosure in 2017 that it lost track of more than 13,000 retirees owed monthly benefits.

“The regulatory environment as it relates to settlement requirements [has been a challenge], along with the difficulties associated with all states not having a centralized policy-finder search—making it difficult for potential beneficiaries to locate their loved ones' policies,” McCoy said.

Best's Review reached out to life insurance experts McCoy and Roger Putnam, chief operating officer, MassMutual U.S., to explain how technology is revolutionizing claims management, where those operations are headed and what deficiencies remain.

How has claims handling changed in the past year or two?

Steve McCoy

Steve McCoy, USAA

"Technology is a game changer to provide scalability and increased claim quality."

McCoy: The life insurance industry is going digital—primarily as it relates to claims. We're moving away from traditional paper claims and the inherent delay that comes with them. USAA is leveraging robotic process automation (RPA) to make our claims process faster and more accurate.

Putnam: Customer expectations are changing—primarily with respect to being paid faster and with less back-and-forth with the insurer. Historically, claims processing has been extremely paper intensive, and the process to pay a claim could take weeks or even months. More and more of our policyowners and customers want to be able to do more things online, so we've made some changes to address that, and this has helped reduce the turnaround time from beneficiary notification to the payment of the claim.

Additionally, over the past decade or so, as more people are traveling internationally, we're seeing an increasing number of U.S. citizens passing away overseas. This trend adds an additional layer of complexity to our claim adjudication process, as we increase the level of scrutiny in our review of foreign death claims. The risk of fraud is typically higher with foreign death claims, so we must utilize all tools at our disposal to validate the death and ensure that we are paying the correct beneficiary or beneficiaries.

The industry is also starting to pay greater attention to another key issue—the opioid epidemic and the potential impact it is having on mortality rates. Sadly, more people are dying at younger ages. This is a trend we will continue to watch very closely.

Where is claims handling now in the life space and where does it need to go?

McCoy: Claims handling is in a transition from paper to digital. USAA allows our members to e-sign their life insurance applications, and we've leveraged that technology to also allow beneficiaries to e-sign claims. We're also moving toward more self-service capability, which is where we see the need. We recently introduced a digital experience for notifying USAA of a death, and by the end of the year will introduce additional capabilities.

Putnam: While advanced technology is having a positive impact on claims payment, it is still primarily a manual process. In trying to move away from paper processing, we've built a phone-based claim process, which can be used if certain parameters of the claim are met.

We've also implemented electronic claims forms, whereby we can accept a digital signature—again, if certain parameters are met. These types of innovations are enabling us—and the industry—to move away from relying on paper and the added steps, cost and time delays of mailing and then scanning and indexing received mail. But it's not happening as quickly as any of us would like.

On average, how long does it take to process and pay a life claim?

McCoy: 25-30 days for nondigital and 10-15 days for digital (i.e., the time it takes to receive the death certificate).

A couple of years ago, a nondigital claim averaged around 45 days, so we've seen a significant shortening of the time to process and pay a life claim with the introduction of digital capabilities.

What is the one thing you would like to change in your life claims process?

McCoy: The ability to provide members with a completely digital end-to-end claims process to include self-service claim settlement capability. We'd also be interested in how we could leverage blockchain.

Putnam: Primarily, it would be the access we have to data for those beneficiaries on older policies. You have to remember, many of us have policies that have been on the books since the '30s and '40s—some even older than that—so the information on those policies may not be as complete as we'd like. In fact, [with] some of the older policies, we don't even have Social Security numbers for the insureds, let alone the beneficiaries.

As I mentioned earlier, we're taking the lead in our industry in driving creative ways to simplify the claims process, including handling claims via phone and with electronic claim forms. One of our aspirational goals is to be able to pre-certify beneficiaries at the point of sale by collecting a voice identification or setting them up with online access. Then, at the eventual point of a claim, we would already know that beneficiary and would be able to work with them to streamline the claim process.

We're also doing a lot more generational selling. By that I mean building the relationships with the beneficiary at the point of sale or shortly thereafter. This will enable us to maintain relationships with that family for the next generation.

What other challenges do you face?

McCoy: The regulatory environment as it relates to settlement requirements, along with the difficulties associated with all states not having a centralized policy-finder search—making it difficult for potential beneficiaries to locate their loved ones' policies.

How difficult is it to keep track of policyholders or their beneficiaries once a death occurs?

McCoy: At USAA, we have a unique membership who is very engaged with our company, so we don't find it that difficult to keep track of policyholders or their beneficiaries. A very small percentage of our claims are escheated.

What is USAA doing to find and keep track of those policyholders and their beneficiaries?

McCoy: Self-service capabilities exist within our system to maintain updated beneficiary information. Additionally, we have multiple touchpoints with our members every year to ensure beneficiaries are kept up to date.

What can life insurers do to improve their overall claims process?

Roger Putnam

Roger Putnam, MassMutual

"The industry is also starting to pay greater attention to another key issue—the opioid epidemic and the potential impact it is having on mortality rates. Sadly, more people are dying at younger ages."

McCoy: Simplify the process and provide channel of choice for beneficiaries. Reduce manual processes for those processing the claims, and maintain controls to support the automation.

Putnam: I think we can all try to break the historical bias of conservative thinking and our reliance on documentation such as a paper death certificate. We should be trying to break that mold, including making it simpler to tap into alternate data sources to validate death risk and risk tolerances.

And we are also looking at leveraging robotics to handle more routine claims and the high level of data entry involved with claim handling. These innovative changes will enable our claims professionals to add greater value by focusing on more complex claims and focus on phone and web interactions with our beneficiaries.

How are your companies investing in claims?

McCoy: USAA continues to invest in technology to increase the speed by which we are able to process claims for our members. In 2017, we implemented a new admin system for income annuities, capability for SMS text follow-up on pending claims and a RPA for claim payout processing. So far in 2018, we have expanded digital capabilities to annuity products and introduced a digital experience that allows members to submit a death notification online. We intend to add additional capabilities to this experience later this year.

Putnam: At the end of the day, our aim is to put in place an even stronger infrastructure when it comes to how we pay claims. We are consistently driving innovation and modernization, as the policyowner/customer experience is more important than ever before. We need to do this without losing sight of our purpose of helping people secure their future and protect the ones they love.

Is it fair to say that technology is a game changer in claims, and not just a theoretical one? What have been the most impactful innovations?

McCoy: Absolutely. Technology is a game changer to provide scalability and increased claim quality. The ability for beneficiaries to request annuity death claims electronically and the implementation of auto adjudication of claim processing through the use of robotic process automation has been one of the most impactful innovations.

Are manual processes still the mainstay of the claims operation?

McCoy: Manual processes will probably always exist to a point, but we're working toward process improvements and leveraging technology to automate where it makes sense and provides value. We are taking a staged approach to automating claims processing, therefore increased usage will be seen once future stages are complete. Current percentage is low until we mature the process.

How old is your claims system? When was the last time you upgraded or modernized?

McCoy: Our life claims system is more than 30 years old, and we have a plan to migrate to a new system by 2020.

Our new system—which we're already using for annuities—should eliminate many of the manual processes our member service representatives face today, improve their experience and allow them to better serve our members.

How has data analytics changed the claims process?

McCoy: [It] provides insight to claim trends and patterns, helps with strategic planning and assists with business decisions. [It] allows historical claim trends, beneficiary demographics and cause of death analysis.

Are you using artificial intelligence, and if so, do you expect to increase your use of AI?

McCoy: Currently no, but we're considering how we can leverage AI in the future.

Putnam: We look to increase the utilization of AI in areas of data entry/claim intake. AI can ultimately enable us to start making easier decisions. For instance, if a 95-year-old person dies with a $5,000 policy and the beneficiary has not been changed since inception, that claim may be a good candidate for an automated adjudication process. AI would be able to help us handle those types of claims much more quickly and cost-effectively.

Are you concerned that AI and automation could eliminate jobs?

McCoy: No, we believe AI will allow our member service representatives to focus more of their time on our members rather than on some of the more tedious work they do today, which will enhance both the employee and member experiences.

Putnam: As with any technological innovation, there is always a concern with respect to how it will impact jobs. We see AI as an instrument that is transforming and accelerating the claims process, enabling people to receive their benefits in a more timely fashion. And the work that our associates do to provide a high quality service experience for our beneficiaries is changing. The reality is, the majority of jobs in our industry—and in all industries—is going to change over the next five years, with or without AI. 

Jeff Roberts is a senior associate editor. He can be reached at jeff.roberts@ambest.com.


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