Increasing efficiency in flood insurance with digital
In addition to the benefits mentioned in Part I of this series, such as speed and ease of use, appealing to the digital generation and increased transparency, digitizing flood insurance also has the ability to automate claims, add consistency to regulatory compliance and assist with fraud control. Here’s how:
Claims: Government processes are rarely simple or service oriented — and that’s something to keep in mind for individuals who choose to purchase flood insurance through the National Flood Insurance Program (NFIP). With digital insurance companies, however, claims handling is simplified thanks to computer automation. First notice of loss (FNOL) can be simplified and conducted on mobile devices, and loss validation is often assisted with the use of drones, mobile photo attachment, and satellite imagery, all resulting in faster and more accurate payments to policyholders.
Due to digital technology and digital analytics, insurers are able to transform a confusing, time-intensive process into an easy, accurate, and consumer-friendly workflow — and this matters in a big way to consumers. According to a 2019 EY survey, speed of settlement and process transparency are the most important contributors to the customer experience during a claim. And 87% of policyholders believe the claims experience affects their decisions to remain with a certain insurer. Digitizing the claims process transforms it from a necessary back-office function to a source of competitive advantage and increased customer loyalty.
Consistency and automation with regulatory compliance: The use of insurance technology automates more costly human functions and allows companies to perform routine regulatory processes more intelligently and cost effectively. Examples include state tax filings, license validation, and compliance document uploads. This allows company owners and operators to focus on higher-order activities and deliver better service to consumers.
Insurtech companies today are embracing what’s known as RegTech (regulation technology). RegTech, according to Deloitte, allows insurance company compliance professionals to work over and around legacy infrastructure impediments to connect and analyze information more smartly in order to understand where the organization may have risks and exposures based on a larger data population than was previously accessible.
Fraud control: Digital technologies such as artificial intelligence and machine learning can help detect certain characteristics of a claim, such as fraud, for example. In a report on digitization in the insurance industry, McKinsey gives the example of a European insurance carrier that significantly improved its fraud detection accuracy by implementing an AI-based fraud detection system. This move resulted in an 18% increase in fraud prevention for the company, monetary savings that are eventually passed on to the consumer.
Since most homeowners insurance does not cover damage or losses from flooding, it’s imperative that property owners purchase flood insurance coverage to protect their hard-earned physical assets. This may seem like common sense, however, out of an estimated 62 million homes that should have flood insurance, only 5.1 million do. The digitization of flood insurance can help.