Rise In Huge Settlements Helps Insurance Industry Ditch Paper for Digital

Where there’s smoke, there’s usually fire. And across the business landscape, where there’s paper, there tends to be countless inefficiencies, higher costs — and even fraud.

This holds particularly true within the insurance industry, which has long been known for its reliance on paper, manual processes and slow transaction times. But as the sector grapples with rising costs, driven by factors like complex claims and climate change, digitization offers a promising solution.

“There’s been a rise in what the industry calls nuclear verdicts. In other words, huge verdicts for policy holders, whether they be auto or especially home,” Ian Drysdale CEO at One Inc., told PYMNTS.

Such payouts, which can reach tens of millions of dollars, push insurers to increase premiums to remain solvent — and with premiums rising, the need for cost-cutting measures, like finding efficiencies through digitization and automation, has never been more urgent.

As Drysdale explained, the insurance industry has to date lagged behind other industries in terms of digital adoption, particularly when compared to sectors like retail and entertainment. Now, however, the insurance sector is catching up, driven by the demand for both inbound and outbound payments to be handled digitally.

“As the rest of the country was changing, and now we all shop at Amazon or we watch movies on Netflix, that just wasn’t happening in the insurance space,” he said. “What has changed now is that, because of all the cost pressure with the increased cost of claims, insurers are looking for cost reduction.”

Read more: Insurance Industry $500 Billion Digital Shift Driven by Gen Z Expectations

How Digitization Streamlines Premiums and Claims

Ultimately, the days of paper checks and slow-moving insurance processes are numbered. Drysdale said he believes the insurance industry is on the brink of a transformation where it will be as fast and easy as shopping online.

“What we’ve done, with major insurers from around the country, about 250 insurers so far, is completely digitalized both inbound payments, which we call premiums, and outbound payments, which are often claims, so that it’s a fast, easy, digitally driven, mobile driven experience,” said Drysdale. “One that that brings joy to possibly a situation that’s not so joyful.”

“Our mobile devices have completely changed our world,” he added, noting that faster and more mobile-friendly experiences are crucial to align with and match the rapidly evolving expectations of today’s digital-first consumers.

For consumers and insurers alike, this shift promises to deliver a better experience at a lower cost — but importantly, embracing the digitization claims and premiums also makes it harder for fraudsters to game the system.

Drysdale said different types of fraud plague the insurance sector, ranging from inflated or falsified claims to more sophisticated tactics like account takeovers during payouts. However, as more transactions move online, data generation increases, allowing insurers to leverage advanced analytics and cutting-edge innovations like artificial intelligence (AI) to identify fraudulent activities.

Digitization offers multiple layers of protection that can help ensure recipients of payouts, whether they are individual policyholders or third-party service providers like autobody shops, are properly validated. This proactive approach to fraud prevention is critical in an era where digital transactions are increasingly targeted by cybercriminals.

“It’s hard for any one insurance company, even some of the largest companies, to stay ahead of all the games that the crooks play,” said Drysdale, stressing the importance of remaining at the forefront of preventing fraud for both premiums and claims by digitalizing them.

See also: One Inc CEO Says Insurance Market Is Ripe for Embedded Payments

Reduced Costs and Improved Customer Satisfaction

The benefits of digitization are not confined to consumers alone. Insurers themselves stand to gain significantly by adopting digital solutions — after all, today’s digitally driven efficiencies are increasingly allowing insurers to reinvest in innovation and offer more competitive pricing to their customers at the same time.

Drysdale gave an example of how insurers have reduced costs by moving away from traditional paper checks, which can cost anywhere from $5 to $20 per transaction when factoring in printing, mailing and management. This shift can save tens of millions of dollars for some companies.

Customer satisfaction also frequently improves in a digital environment. Drysdale noted that AAA experienced a 10-point increase in customer satisfaction after digitizing its claims process. When payments are processed digitally and in real time, customers are less likely to be left wondering where their money is or when it will arrive — meaning insurers need to deal with fewer inbound calls from policyholders inquiring about payment statuses.

And in addition to cost savings and improved satisfaction, digitization can drive higher renewal rates. Drysdale said One Inc.’s system sends automated text messages reminding customers to pay their premiums, a tactic that has resulted in a 20% increase in renewals.

Looking ahead, Drysdale envisions a future where insurance transactions are seamless, instant, and AI-driven. He predicts a scenario where policyholders receive payment notifications on their phones before they even hang up from a call with their insurer. This speed and convenience, powered by AI and real-time payments, will become the norm. Employees may no longer need to intervene in simple claims, as AI will easily handle these processes.

“The laughable slowness of old-time insurance has gone away,” he said.