Claims are going digital. Many processes, from the FNOL to adjusting and payout, can now be completed digitally. This is good in many ways. Digitizing claims increases speed and efficiency, leading to happier policyholders. According to McKinsey & Company, it can also reduce claims expenses by 25 to 30%.

As with any major change, however, digitizing claims can lead to problems if you’re not cautious. Here are five mistakes to avoid.

Mistake #1: Ignoring Customer Preference

According to the J.D. Power 2020 U.S. Property Claims Satisfaction Study, 27% of customers want their claims to be handled offline, and only 4% would prefer a fully digital claims experience. At the same time, digital solutions for certain processes, such as first notice of loss and estimation, have a positive impact on the claims process.

In general, customers want digital options, even if some of them don’t feel ready for a fully digital experience. And here’s another thing – customer preferences change. Although customers may want a mix of digital and traditional options to begin with, as they become more comfortable with digital tools, and as more insurance customers who grew up with smartphones and other tech tools come onto the scene, it’s likely that preferences will lean heavily toward digital processes.

Mistake #2: Staying Off the Cloud

Storing and accessing data can be a headache. Cloud-based technology can provide key benefits to insurers, including improved efficiency and cost-reduction.

Insurers are starting to take note. An Accenture survey of claims executives found that 20% of insurers plan to move claims to the cloud or to a SaaS model within the next two years, and 26% are looking at cloud and SaaS options.

Mistake #3: Putting Too Much Trust in AI

Claims automation can save resources, while artificial intelligence and machine learning are giving insurers new tools to fight fraud. This is great – but there are caveats.

Just like humans, AI may be susceptible to biases. In one example covered by ZDNet, algorithms that had been trained on costs in insurance claims data ended up prioritizing care coordination for white patients over black patients even though the level of illness was the same.

In machine learning, if there are biases in the data you feed into a program, the results will be biased as well. This is something that everyone needs to be cautious of.

Mistake #4: Being Lax About Cybersecurity

Data breaches and ransomware attacks continue to plague businesses around the globe. Digitization and data go hand in hand, and while this pairing can provide many benefits for insurers, the cyber risks cannot be ignored.

Insurers need to protect both their customers and their bottom line. They also need to comply with the California Consumer Privacy Act and other data privacy laws. This means taking cybersecurity seriously.

Mistake #5: Not Getting Started

Digital transformation is here. There are still some issues to work out, and insurers should proceed with caution. At the same time, there are clear advantages to be gained in terms of reduced costs, improved efficiency and increased customer satisfaction.

Now is the time to get started, while acknowledging that you don’t have to change everything all at once. Consider your goals as a company. Also consider your customers’ preferences. Then figure out which digital tools will help you get there.

As you evolve your claims strategy, consider adding a quality insurance BPO partner to your team. Covenir happily co-exists with your claims team and your other vendors, adding customized and focused support whenever you need some extra help. Download our FNOL case study to learn more.