The Past 4 Years Have Exposed the Urgency of Modernising Reinsurance Platforms (4 of 5: Human Error)
Blog Series 4 of 5
In our opening Whitepaper for this series, ‘Business Case for Reinsurance Administration Automation’, we discussed the two major disruptive forces that have forever changed the reinsurance market: natural catastrophes and COVID-19. In 2021 alone catastrophe losses surpassed $100 billion, with $450 billion in aggregate since 2017. When it comes to the life insurance market, COVID-19 has increased life insurance purchases by 32%. On the property and casualty side, the American P&C Insurance Association forecasts that COVID-19 claims will reach $1 trillion a month. As a result, the last four years saw exponentially increased insurance claims, with COVID-19 posing additional daily challenges such as lockdowns, parental fatigue with children learning from home, quarantines, all contributing to staff burnout and human error.
With reinsurance programs becoming more sophisticated and processes more complex, and with most work still conducted manually, human error is a key contributor to a company’s bottom line. According to ReSource Pro, there are an average of nine errors per policy. According to the American Medical Association, health insurance companies are averaging a 19.3% error rate which translates to nearly $17 billion annually. That’s in a regular year, before the additional challenges of last four years.
In our Manual Processing article of this series, we addressed the Deloitte survey, in which 60% of reinsurance contracts have a high complexity level and companies are struggling to automate these processes. Among these companies, 69% gave low ratings on their ability to integrate third-party data, making data availability among the weak points of the process. In addition, 50% said their company continues to use spreadsheets, further increasing manual labor and human error.
When it comes to reinsurance some of the most common errors are:
1) A claim is not allocated to reinsurance contract(s), or the claim is allocated to certain reinsurance contracts, but not all
2) A claim is incorrectly allocated to reinsurance contracts and consequently wrongly recovered
3) A claim recovery is allocated to reinsurance contracts, but calculated incorrectly
4) Claims accounting and technical billing are poorly handled, resulting in late – or missed – recoveries
Processing all this data without having to pay the high cost of human error can only be achieved by integrating technology designed to do just that. That means an insurance and reinsurance digital platform that is designed to operate at large data volume, with precision and effective data analysis, delivering an even greater customer-centric approach. Where tailored automatic insurance solutions per customer’s profile and needs with minimal risk are possible without the painstaking process of manually gathering all the data and information as well as calculations needed to determine the optimal price and risk per customer, per policy. This will enable people to make better decisions and focus on providing services rather than cumbersome calculations and data collection across multiple platforms that often don’t communicate with each other. It will enable people to focus on the more complex matters that require special attention and ultimately eliminate the human error factor from the company’s bottom line results.
To learn more on how you can modernise your insurance platform, click here!