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The Current State of Australia’s Insurance Sector

call centre operator

For all of us heavily involved in the motor claims industry, we are experiencing a difficult and challenging period as we are all cognisant of the fact that Australia’s General insurance sector is generating a high volumes of consumer complaints via the Australian Financial Complaints Authority (AFCA). In 2022-23, the voluntary body for banks and insurance received a record number of complaints. 

 

Complaints regarding comprehensive motor insurance represented 30%, with claim delays being the no. 1 source of complaints. 

 

There are numerous factors influencing this current state and it’s been well documented that skills and labour shortages; supply chain pressures and increased levels of regulatory compliance are all having an effect on claims processing.

The Cost of Complexity

Increased levels of claim file administration to maintain compliance with broadened legislative requirements have delivered complexity in managing claims and therefore slowed down processes. To me, it seems to support and protect the consumer, regulatory authorities appear to have made it more complex for insurers to handle claims, which ultimately hinder the industry’s ability to provide adequate service and responsiveness to customers.

 

Obviously, regulatory oversight is critical to the insurance sector, protecting customers while ensuring financial institutions and their service providers operate in an ethical and responsible manner. But unfortunately designing and implementing revised procedures, updating complex systems and technology and procuring and skilling up resources required to comply with regulatory requirements, across large complex organisations, is not so simple and will take time.

Macro Challenges for Insurers

On top of ensuring core claims administration practices are configured to reduce the levels of complaints, macroeconomic concerns like inflation, rising interest rates, climate change, and geopolitical tensions are all further complicating the way insurers manage clients’ needs. This increased interconnectivity has been fuelled by technological advances that tie insurers more directly to the global financial system, environmental changes, and other macro conditions that impact operations, adding complexities to their ways of working.

 

The benefits of tech innovation also deepen risks, requiring more collaborative efforts between regulators and industry – especially in the face of cybersecurity challenges. For example, APRA’s preventative measures for cyber risks include enforcing information security standards and intensifying supervision to converge tech solutions with talent upskilling and oversight. 

 

The dynamic and multi-faceted challenges insurers face illustrates the importance of cross-industry collaboration and stress testing to mitigate threats to financial stability. Strategic partnerships between underwriters and service providers can also address current shortcomings in claims processing efficiencies and cost control, and in turn the declining affordability and accessibility of insurance – providing specialist firms with the resources and incentives to extend their reach, networks, and services.

Technology as an Enabler

The evolution of insurance providers has seen the industry transform from disparate entities that simply receive money for a policy and pay a claim – to an interwoven network of tech companies that grow and change with advancing tech solutions.

 

AI adoption is shifting from novelty to necessity, which is driving adoption within insurance. KPMG’s 2023 global tech report found that 52% of insurers believe AI (including machine learning and GenAI) is the most important technology in helping them achieve their ambitions over the next three years. 

 

Furthermore, KPMG’s 2023 Insurance CEO Outlook highlighted a significant degree of trust in AI with 58% of CEOs in insurance feeling confident about achieving returns on investment within five years. The ability to automate functions and analyse vast amounts of data quickly are powerful draw cards for an industry with many functions that can be automated across finance, customer engagement, administration, and operations.

 

However, complete automation is a misguided idea. There’s widespread misconception that AI is a silver bullet to solving operational challenges. Sure, AI can play a pivotal role in faster and more accurate claim notification, triaging claims more effectively and setting them down the right path – but AI will not eliminate the need to speak with a human.

 

Certain processes can be streamlined through intelligent technology, but insurance is a fundamentally people-centric sector, dealing with mishaps and disasters that require human compassion, understanding, and oversight. Furthermore, many insurers are still working out use cases for AI, layering the technology across traditional processes to see if it creates efficiencies or more intuitive user experiences.

Early Intervention to set up the claim for success.

A key challenge insurance providers face is that customer interactions are often too transactional, especially during the first notification of loss stage. This needs to be rethought as initial contact reporting a claim is seen as a simple interaction that can be done by entry level talent – demonstrating the need for compassion rather than any technical capability. 

 

First contact in its current state will rarely solve a claim, it is the starting point for what can be numerous hand offs and decision points. This stage of the claim process has significant room for improvement, potentially through AI, to ensure claim is properly processed and handled to help customers feel confident and adequately informed. 

 

Technology can also play a critical role in creating alignment between, for example, faster initiation of supply chain. Intelligent technology can improve communication between stakeholders, integrating advanced analytics to better triage claims, and help appoint the right supplier much earlier in the process, thus better managing cost and communications.

 

More than often at AAMC, we are appointed well after the initial date of loss meaning we often do not see an assessment for weeks as the claims works its way through the multistage touchpoints and departmental hand offs. Through increased collaboration and intelligent technology, insurers can engage the correct partner early, facilitating ongoing communication, and thereby minimising complaints due to lack of transparency, since updates can be automatically scheduled and sent.

AAMC’s Place in the Industry

As Australia’s largest provider of specialist accident management and assessing services – AAMC understands the challenges faced by insurers; we empathise with their plight as we operate in the same environment. Whether it is the difficulties of strict regulation or evolving customer expectations, we are committed to delivering solutions that promote early engagement with suppliers, simplifying the complexities insurers face. 

 

Over the past 20+ years, we have developed expertise, systems, and capabilities in motor vehicle accident management that include a contact centre for customer interaction, dedicated suppliers for vehicle repairs, plus in-house assessors, and technical experts.

 

Considering our role and history within insurance, we have seen firsthand how complexity can often hinder not just our insurer clients, but ourselves as a supplier, which makes it challenging for delivering services in a timely and effective manner. Ongoing collaboration and communication are important steps in eliminating the current complexities insurers face. 

 

AAMC exists to ensure a consistent and excellent claims experience for its clients’ customers. We were created to offer a structured and consistent motor accident management and assessing service, countering the fragmented market of small, local providers. We envisioned and maintain a centralised, national approach to accident management, ensuring consistency in service and cost, and efficiency in claims processing.