Claims are expected to happen less frequently for some types of insurance coverage. For example, better roads, safer cars, and new vehicle crash avoidance technologies should result in fewer car accidents per 100,000 miles driven. However, those accidents that do occur will be increasingly costly. Though medical cost inflation has slowed in recent years, it is still well above the general inflation rate. A recent study predicted that it may tick back up in the near future. Also, new vehicle technologies may be more expensive to repair and replace.
Severe weather events have grown in frequency and intensity in recent years. The U.S. Global Change Research Program reports that rates of heavy downpours have been increasing steadily since the 1950s, almost doubling between the 1980s and 2000s. Hurricane activity over the Atlantic Ocean has also increased substantially since the early 1980s. If these trends continue, storm damage and flood losses will become more frequent and more severe. This will strain claim handling operations, as forecasters expect one-quarter of the insurance industry's workforce to retire by 2018.
The internet of things, in which home and business devices are connected together by networks, will affect claim activity in positive and negative ways. The sensors in these devices will alert homeowners to threatening conditions, such as rising temperatures in appliances, before they can cause damage. They can also warn property owners of suspicious activity taking place on their premises while no one is around. These alerts will help prevent or reduce losses. However, all computer networks are vulnerable to unauthorized access. Claims resulting from network security failures may become both more frequent and severe.
Digital technology is changing the claims customer experience. People accustomed to instant service from companies such as Amazon and Uber will expect the same from insurers. Some insurers now accept claim notices from customers over the phone, online, or via an app running on a smartphone or tablet. They also offer updates on a claim's status via text messaging. Ernst & Young predicts that in the future claims of less than $1,000 with no evidence of fraud will be handled automatically, with no human involvement.
As large organizations develop more sophisticated risk management programs, claims should grow less frequent and severe. Some of this will be imposed from the outside. Government regulations are requiring safer vehicles, workplaces and products. Stockholders demand greater returns on their investments, requiring controls on expenses such as the cost of risk. Also, intensifying competitions for talent may make safe workplaces an employee recruiting tool.
As the demographic and technological characteristics of society rapidly evolve, insurance claims will evolve with them. Insurers will have to adjust to claims that are less frequent but more challenging, and to customers who are used to more control over their transactions. Insurers that make those adjustments will thrive. To better prepare for your future, contact your HALO insurance agent today, 314-351-HALO (4256).