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News & Commentary

12:21 PM
Stephen Applebaum, Aite Group
Stephen Applebaum, Aite Group

Insurers Look to Claims Innovation to Survive

Great numbers of risks are being identified, quantified, reduced and even eliminated, rendering the old model of insurance less relevant each day.

The pace of innovation within and around the property & casualty insurance claims process is definitely accelerating, as evidenced by the rapidly growing number of exciting and highly promising startups, early stage and growth companies who have appeared and are enjoying traction in this space in recent years. To be sure, innovative young companies with new and disruptive business models have emerged to impact almost all areas of business and society since the dawn of "the technology explosion," which I would argue was ushered in by the convergence of the internet and affordable mobile communications and computing in or around 2004 -- less than a decade ago. However, there are additional forces at work that account for the P&C insurance industry's seemingly sudden embrace of innovation and change.

The fundamental concept of insurance dates far back in history to when man first started conducting commerce, to the time of Chinese and Babylonian traders. Early on, the concept of sharing risk made great sense because of the inability of merchants to predict events that could cause economic loss. Today, with massive and ever-growing amounts of data of every kind being collected, stored, shared, manipulated, analyzed and consumed digitally, and with the ubiquitous availability of powerful and inexpensive processing capabilities, greater numbers of such risks are being identified, quantified, reduced and even eliminated, rendering the old model of insurance less relevant with each passing day. So the insurance industry is reinventing itself in order to remain relevant.

Stephen Applebaum
Stephen Applebaum, Aite Group

In the near future of insurance -- the real Information Age -- the most successful carriers will be those who are the most skilled at mastering this flow of big data to produce, price and market their products while also using it to manage their customer relationships and process their claims most effectively. And this is where most of the innovation and disruption will come from out of the vendor community, as those with vision and more contemporary skills seize the opportunity to assist the carriers whose ranks just aren't as well endowed. Industry observers agree that innovative change is occurring and accelerating in the insurance industry. Insurance leaders including CEOs, CFOs, CIOs, CTOs, CMOs and Chief Claims Officers now accept – and some even embrace – the inevitability of technology-driven change. A growing number of insurance company CIOs now consider that leading innovation and disruption is a fundamental part of their organizational responsibility and recognize that they will need to overcome the cultural obstacles typical to large organizational structures.

[Are insurers ready for technological disruption?]

Exemplified by recent core system policy, claims and billing systems replacement and early developments in mobility and telematics, innovation is definitely afoot in the insurance industry. But broader, more disruptive innovation will need to come from outside the insurance company's walls, from innovative early-stage companies led by entrepreneurs who have the special gift of envisioning solutions, an understanding of exactly how to leverage technology to attain it and the commitment and stubbornness to remain focused and work against all odds towards that vision. Innovators can drive greater certainty in the insurance claims process and that is why they are being embraced. One of the bigger related challenges for carriers will be that while eagerly exploring these innovative new external solutions in pursuit of their reinvention, they will also need to actively support and foster existing and new internal innovation.

In future pieces we will examine and illuminate the fascinating area of P&C claims and innovation, exploring and identifying the most promising technology driven innovations being piloted and implemented successfully across the complex and constantly evolving P&C claims ecosystem.

About the author: Stephen Applebaum is a senior research analyst at Aite Group, responsible for the firm's property and casualty insurance practice. His focus is particularly on the business, regulatory and technology issues, challenges and opportunities for the property and casualty insurance ecosystem, encompassing trading partners and supply chain participants in the United States and abroad. Prior to joining Aite Group, Stephen was the principal of Insurance Claim Solutions, a strategic consultancy practice serving claims information technology and service providers to the North American property and casualty insurance industry.

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