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NASHVILLE, Tenn. — The use of data science is expected to increase in the claims management industry as the field continues to evolve, according to senior third-party administrator executives.
When it comes to preventing and managing claims, "data science is, in some respects, potentially the holy grail for helping us do that better," said Scott Hudson, CEO of Itasca, Illinois-based Gallagher Bassett Services Inc.
He added that the insurance industry is in the “very early stages” of incorporating data science practices, such as building predictive models. “In some respects, it’s kind of uncharted territory.”
Mr. Hudson and other executives spoke during a panel discussion Thursday morning at the Claims and Litigation Management Alliance Conference in Nashville, Tennessee. The panel was moderated by Nicholas Conca, New York-based chief claims officer with insurance and reinsurance holding company Markel Service Inc.
Andrew Robinson, global chief operating officer for Atlanta-based Crawford & Co., said much of the claims industry’s use of data science will involve sifting through “dark” or unstructured data. That can include mining notes in workers compensation, auto, liability and other types of insurance claims for information that can determine a claim’s potential for resolution or problems.
Rick Taketa, president and CEO of Parsippany, New Jersey-based York Risk Services Group Inc., said multiple technologies have the potential to be used for such data analysis.
"We're talking about advances in the ability to look at broad amounts of data with high computing power and look for patterns, whether that's (through) artificial intelligence, machine learning, (or) natural language processing,” Mr. Taketa said.
Technology will allow claims handlers to focus on the most important details of claims resolution, said David North, president and CEO of Memphis, Tennessee-based Sedgwick Claims Management Services Inc.
“This is a tough business,” Mr. North said. “The concept of defending a claim requires a huge amount of intellectual capital. Right now, we spend a lot of time in our business causing the really smart human beings that touch those claims to do minutiae that a machine ought to be able to do for them, and can do much more efficiently and effectively, giving humans feedback to make better decisions.”
Mr. Hudson noted that he believes technology-based claims handling can coexist with human claims professionals without reducing industry jobs. For instance, he said technology could help with auditing, which can comprise 40% to 50% of claims management.
"The people aren't going away," Mr. Hudson said. "The process and technology will allow us to eliminate a lot of the less value-added activities that are still in a lot of our claims processes today."
However, Mr. Robinson cautioned that it would be “foolhardy” not to consider how the growing use of data science could affect claims management careers.
For instance, technology likely will reduce product malfunctions that drive liability claims for manufacturers, he said. Technology also could reach a point, he said, that it would be able to handle “low-complexity, high-volume claims” in place of human handlers.
"We are unequivocally, at some point, going to see a decrease in frequency of the kinds of claims that we handle as an industry, and I think we're foolhardy to think that is not a structural change that will occur,” Mr. Robinson said.
CLM is a sister company of Business Insurance.