This article was produced in partnership with Gallagher Bassett
Global supply chain issues are a major obstacle for insurers, as they affect the claims management processes in various ways.
A new survey by Gallagher Bassett, published as part of The Carrier Perspective: 2024 Claims Insights report, shows that 62% of insurers worldwide faced difficulties in 2023 with managing claims from start to finish due to global supply chain troubles, with a much higher 83% in New Zealand and Australia experiencing related disruptions to claims.
“This suggests that many insurers are finding it hard to handle claims smoothly and effectively, especially during peak or disaster events,” said Steven Walsh, Chief Client Officer at Gallagher Bassett New Zealand.
Walsh views the supply chain problems as highlighting the need for inventive solutions. Fortunately, one is available.
According to regional insurers, 65% of those surveyed are focusing on technology solutions, which is notably higher than the global average. Improved digital capabilities, especially generative AI solutions, are a timely and valuable tool for solving the problem.
“AI has many benefits for the insurance sector, such as end-to-end visibility in claims processing. AI tools can help improve operational efficiency in different insurer domains,” said Walsh.
“Gallagher Bassett is already using AI-enabled decision-support tools to help our people with intake and triage, claims assignment, investigation, reserving, and sentiment analysis.”
AI is affecting many parts of the insurance value chain. The Gallagher Bassett survey shows that in 2023, 90% of insurers in New Zealand and Australia used AI in customer service, with 58% using it for claims processing. These are much higher than the global benchmarks, which suggests that New Zealand is leading the way in AI adoption in the insurance sector.
New Zealand's insurers are proactive in dealing with supply chain pressures that affect efficient claims management in this country, which is relatively remote and at the end of many trade routes.
“New Zealand and Australian insurers are ahead of the curve, with 50% already using these tools and another 40% actively working towards using AI chatbots or generative AI tools,” said Joe Powell, Senior Vice President of Analytics at Gallagher Bassett.
Similarly, while 13% of global firms had not started to use AI chatbots or generative AI in their processes, only 3% of firms in New Zealand and Australia were still not taking any action in 2023. This level of adoption is remarkable given that 2023 is widely seen as the starting point for mainstream availability of generative AI for consumer use.
Expectations around potential benefits are higher in this region than globally, across areas such as speed and operational efficiency, costs, and customer service level. Notably, 63% of insurers in New Zealand and Australia see AI as leading to better claims outcomes compared to just 49% globally.
However, there are some areas where strategies to deal with supply chain disruptions could be improved. One example is in underwriting as insurers here are using AI in underwriting at a rate of 19% versus 25% globally.
Another is adopting new technologies for assessing disasters and resolving related claims. The Gallagher Bassett survey shows that 37% of insurers globally used new technologies to assess disasters after severe weather events but only 30% did so in New Zealand and Australia.
Considering that the country experienced the two biggest insurance weather events in its history in 2023 with a combined estimated cost of $3.75bn from the Auckland Anniversary floods and Cyclone Gabrielle, this area seems like a good opportunity for insurers here to further prepare for the future.
Some examples of best practices include satellite imagery, 3D technology, and predictive modelling technologies to analyse large datasets, such as historical weather patterns and claims data.
“This could help in finding recurring patterns and assessing the possible severity of weather events, enabling fast and thorough damage assessments,” said Walsh.
AI solutions have some potential drawbacks and implications for how insurance firms operate and not all of these are about whether AI will make us obsolete.
When introducing any new technology, there are always doubts about how it will fit with existing systems and traditional methods.
The main concern for 43% of respondents from New Zealand and Australia is how to integrate AI smoothly into business operations. Making sure that AI follows the rules (35%) is the next big concern, while 13% of insurers are cautious about managing data privacy and security.
“Addressing the worries about integrating AI and setting up best practices in daily operations is crucial for the industry's future,” said Walsh.
“To achieve the benefits of AI for claims processing in a safe and reliable way, a tailored approach to enabling AI needs to focus on data privacy and ease of use. With our private and secure general- purpose AI model, Gallagher Bassett is focused on using the advantages of AI-powered decision-support solutions.”
This involves testing AI applications in specific areas, such as claims management and settlement, first notice of loss (FNOL) sentiment analysis and scanning for risk indicators, claims assignment, investigation, and improving existing models by using more unstructured data.
For this purpose, Gallagher Bassett has a specialised cross-functional team that concentrates entirely on insurers' unique goals and objectives.
“We work as part of our clients' teams, providing the right support at the right time to positively impact [their] employees and business. With decades of experience, our experts are dedicated to achieving excellent outcomes at every stage in the claims lifecycle.”
This approach also considers the human side of the issue. As more people get used to using AI, the need for a human 'pilot' becomes clearer. This is especially true for complex claims.
“While technology provides valuable data analysis and insights, there is a need for the human element to understand the subtle and sometimes subjective aspects of a claim. Moreover, data analysis requires more than just algorithms; it needs human intervention to discover hidden patterns, identify contextual factors, and exercise critical thinking,” said Walsh.
One thing is sure - AI is going to change the insurance world and partnering with an experienced claims professional who is at the forefront of the changes happening will be key.
“Insurers must also be ready to face the challenges that lie ahead. Insurers must maintain
flexibility and adaptability in their strategies to overcome these challenges,” said Walsh.
Gallagher Bassett (GB) is New Zealand’s leading provider of claims and risk management solutions for insurance carriers. GB is committed to providing solutions that reduce risk, improve efficiency, and deliver superior outcomes. Gallagher Bassett was also named as Most Innovative Insurance Companies in Australia and New Zealand.
