Striding into the digital future of claims settlement
As we emerge from the COVID-19 global health crisis and lockdown restrictions are lifted, we see the city buzz returning to major metropolitan areas. Streets are busy, restaurants are crowded, and even major businesses are humming as employees return from an extended period of remote work.
However, while the cities are reviving with a new sense of purpose, one big question remains. Will the events of the past year be enough to kickstart a ‘new look’ insurance market? As we ease back into normality, will the insurance industry relax into the past or extend that stride into the future?
Reviving an outdated claims settlement process
On the surface, the future looks bright for insurance. According to credit analyst Volker Kudszus, less than 10% of insurance ratings and EMEA outlooks changed in 2020.[i]
However, with a global pandemic on the loose, any situation can be fleeting, and for insurance, there are two factors that could interrupt signs of positivity. The first is the nature of the emerging new consumer and the growing reliance on technology that is destined to continue long after the pandemic has ended.
These new attitudes and perceptions are impacting the insurance industry in new ways, particularly in the area of claims settlement. Consumers increasingly expect faster payouts on claims with greater transparency into the process.
Fallout from the COVID-19 pandemic is also impacting commercial insurers. In September of 2020, the courts ruled in favour of the Financial Conduct Authority (FCA) in a test case that would require insurers to pay on an estimated £1.2 billion in business interruption claims resulting from COVID-19 closures.
While 8 major UK insurers appealed the decision, a recent ruling dismissed the appeal, requiring rapid settlement of outstanding claims. The FCA says it will work with insurance companies to encourage prompt settlement of outstanding claims.[ii]
This brings us to the second issue facing the insurance industry: how to salvage a reputation damaged by recent events. One answer is to address the ambiguities and delays associated with the current claims settlement process.
Better claims settlement process improves insurance market image and customer satisfaction
Technology is playing an increasing role in the insurance claims process, particularly as digital payments make it faster and easier to settle funds. Digital payments can eliminate paper cheques or inefficient correspondent banking relationships for cross-border payments by utilizing in-country processing.
The answer lies with ecosystem platforms. Ecosystems bring together all of the parties necessary for an insurance transaction, such as independent adjusters, DCAs and digital payment providers, into one seamless environment utilising APIs.
APIs act as a connection layer between multiple players in the ecosystem, providing real-time visibility and unparalleled access to data. When it comes to settling loss funds, an API platform incorporating a modern settlement and liquidity management system can address many of the challenges currently inhibiting rapid and progressive payment of claims, such as:
Lengthy settlement process: Receiving a pay out on claims can take weeks to months, resulting in bad press for insurers and dissatisfied customers. By using APIs to connect insurance stakeholders with a modern digital payment system, claim settlement times can be drastically reduced, even when paying across borders, by facilitating in-country processing.
Transparency: To settle a claim, managing agents or coverholders must delegate a DCA for a syndicate. Communicating through traditional channels can add to the complexity of claims due to a lack of visibility between all parties. API-enabled networks make it possible for all participants to communicate in real time, increasing visibility across the claims process.
Security of funds: Too often, the funds needed to settle a claim are held in unregulated third-party environments, but an API-enabled ecosystem can unite FCA-regulated digital payment networks with MGAs, DCAs and coverholders to securely hold funds with complete visibility across all stakeholders.
In addition, working with an API-enabled payments network simplifies the settlement process for MGAs and coverholders who work with multiple DCAs, by providing a seamless cloud-based environment with a single portal for complete visibility into all partnerships. Connections require no additional software or changes to existing hardware.
Thanks to modern technology advancements like these, the city isn’t the only place where businesses will thrive. The insurance industry can easily evolve using a modern claims settlement process to improve customer relationships through faster payments and greater transparency.
[i] “European Insurance in Transition: Plotting A Course in A Chaotic World.” S&P Global Ratings, Dec. 3, 2020. Web.
[ii] Rupert Jones. “Small Businesses Win Covid Insurance Payouts after UK Supreme Court Victory.” The Guardian, Jan. 18, 2021. Web.