Why the insurance claims payout process could deter AI adoption

While many insurers are moving to adopt artificial intelligence across various aspects of their businesses, Andrew Jernigan, head of insurance at Pliant, said claims payouts are being overlooked.

Jernigan told InsuranceNewsNet this could limit effective adoption of AI and could ultimately have a negative impact on customer service levels.

“What people expect with insurance is getting the money that they’re owed,” Jernigan said. “And so, that old process that AI isn’t involved with, that large language learning models can’t tap into, that is one of the strongest barriers for insurance to be transformed.”

He said insurers risk decreased service levels and even “losing customers” if they’re unable to offer the modern, fast payouts consumers expect.

“AI is essential. It’s the one technology that’s going to transform insurance and insurtech in this next season of the industry. So I believe it’s a massive risk to not address changes in payment structures and the adoption of modern technology with that.”

Payments ‘stuck’ in the past

Jernigan explained that many insurance companies are “still stuck in legacy payment rails,” where triggered payments are processed as a direct payment to a bank or even by mailed check.

He said the first step to move past this is “not really deploying AI; it’s deploying modern payment methods to where you don’t have to collect bank info so that you have less personal information on file that could be linked with a data breach.”

“Then the next step is getting the data behind that’s associated with those payouts, because current forms of payouts have no data. It’s just, OK, trigger a payment through those old-fashioned means, and that’s all you get,” Jernigan said.

He explained that “modern means of payments, such as a virtual card,” have fields of data that can be connected to large language learning models an AI tool can then “use to parse that data and give it to you in usable formats so that the digital transformation team can take that further and deploy action plans.”

Moving past ‘complacency’

Modernizing the claims payout process can be easier than some realize, Jernigan said, and can also give “so much more room for impactful transformation.”

“Payments are one of the critical pieces of insurance that is overlooked because there has been a complacency that is turning as the reality of the ease of transforming that process is kicking in,” he said.

For example, he noted that the amount of data collected during the claims process and a payout process is “rich in future predictability and in connectivity to core systems and accounting.”

“So when you move from the legacy payment rails and adopt more recent innovations in payment, your API, you’re able to build in unlimited custom fields, usually, to capture everything from claim number, member number, policy number, adjuster ID, et cetera, all during the process,” Jernigan said.

He said that gives companies potentially “unlimited data fields” they can “build into processes now.”

However, he also emphasized that claims payouts should be “tackled simultaneously” with adoption of AI.

“This is one of those things where it must be a simultaneous shift. It must have full ownership of multiple work areas, from the CFO, the claims teams, the digital transformation team and IT or dev. There’s a lot of interoperability and collaboration that must occur in these projects,” Jernigan said.

Evaluation and compliance

While Jernigan said modernizing claims payouts can be easier than expected, he also cautioned insurers to evaluate before they get started, especially if they’re considering a third-party solution.

He cautioned that some such solutions have “pitfalls” in that they require insurers to “basically lock your data in, and that’s dangerous because many times, you’re not able to get that data out.”

“It’s essential to evaluate the system that you’re looking to change to when you’re moving from legacy payment processes to a more modernized payout system, so that you’re not locked into long-term contracts and that you’re not having to move your data into someone else’s environment where it’s stuck, that you can’t easily export out of,” Jernigan said.

He emphasized the value of “choosing a company where the information is still yours, your activity is still visible when you’re ready to go and you’re not locked into a contract that prevents you from getting data and leaving whenever you desire.”

At the same time, he said companies should be mindful of compliance standards and pay attention to details such as differences in AI legislation between European Union countries and the United States, for example.

However, he maintained that some third-party solutions providers are successfully “empowering insurance carriers to adapt and build better workflows.”

“They’re helping carriers that are needing to make these changes, because it’s the operating systems for claims underwriting and back office, the customer experience workflows in insurance that need experts really to step in and guide through that process,” Jernigan said.

Pliant is a German fintech platform founded in 2020 and operational across Europe and the United States. It primarily provides payment solutions designed to streamline insurance claims.

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