Tech Talk

Technology is a double-edged sword. With the advance of computing devices and programs like tablets, smartphones and field-based software, adjusting professionals can today do their work with greater efficiency and more flexibility. Internet claims reporting forms and services get rid of much of the delays and redundancies of paperwork. Research and investigation techniques have benefited enormously from publicly available information on social media.

And yet the gains of automation can also prove illusory. Some contend that the increased caseloads of adjusters resulting from technological efficiency can lead to burn out and undue pressure on file “closure.” Keeping up with ever-increasing client expectations of 24×7 service only adds to that pressure. And then there are the potential ethical issues surrounding social media, privacy and claims investigations, not to mention the threat of cyber liability (think: Heartbleed Bug).

How technology has changed the profession of claims handling was the subject of this year’s 47th annual joint CICMA/CIAA Ontario chapter conference February 4 at the Metro Convention Centre in Toronto.

“The pace of change in information technology over the past 20 years has been nothing short of dizzying,” noted Brian Maltman, Master of Ceremonies for the event and executive director of the General Insurance OmbudService (GIO). “It affects how we deal with claims, as much as it does the rest of our lives. We are now looking at cloud computing and social media. Is it good, is it bad – or is it both?”

Three speakers tackled the topic of technology from different viewpoints. Carol Kreiling, a vice president at Swiss Re, examined the implications of social media in claims investigations. Steven Dubenow, national manager for CKR Global, looked at the role of sophisticated analytics technology on fraud prevention. And John Kostsopoulos, president and CEO of iAutoConnect, traced the evolution of technology in auto insurance claims processing.

Keynote speaker Amber MacArthur rounded out the event with a leading-edge seminar on the latest in digital advances.

Ethics and Social Media

“Where do we even begin to talk about claims technology and how it has changed and impacted claims investigations?” Kreiling asked in her lead-off presentation. “The better question may be: what hasn’t changed with claims technology? If we look at the way we report claims, the way claims are assigned by us, monitored by us, tracked by us – there is a constant evolution. Just ten years ago, the technology used then is now considered annotated, antiquated and outdated.”

Kreiling noted that adjusters and claims managers are always looking at ways to make their processes and systems work better. Social media is just one more tool to thoroughly adjudicate claims. “Any good claims investigator will include social media investigations in his or her toolkit,” she noted.

She cited one line from the movie the Social Network: the Internet is not written in pencil; it is written in ink. “That is manna from heaven for the claims investigator.”

Kreiling urged participants to keep in mind all of the available social media platforms for use – not just Facebook, Twitter and MySpace but also hi5, Instagram, Snapchat. She noted that all these forums present a vast source of information available for public viewing and online research.

“It’s incredible what people will post,” she said. “Let’s just say someone who has filed a claim for a debilitating back injury, it is perhaps not the best idea to show photographs of themselves on vacation spelunking down into a cave, or photos from their recent dance performance.”

Kreiling also explained ethical guidelines around social media usage and investigations. “Whether you are a claims adjuster, claims manager, claims investigator or claims lawyer, there are ethical rules out there that you must obey,” she noted. “For example, the CIAA’s code of ethics states that adjusters will identify themselves as an insurance adjuster in dealings with any policyholder or claimant and shall, if requested, fully identify their principals.”

In a questionable claim, it is typically before any legal action that adjusters or investigators will get “your digital pay dirt,” according to Kreiling. “Ethically speaking, it is perfectly okay for us to view a Facebook page of a claimant on a public setting; there is nothing wrong with that.”

The usefulness of social media extends to litigation management, as well.

“Even when you have a claimant going to trial, some people think their job is done. There are lots of ways to continue to use social media technology at trial,” Kreiling noted. “If that person is represented by a lawyer, you may not send a friend request to the claimant. But let’s say you send a friend request to that person’s next-door neighbour, who doesn’t have a lawyer, to possibly obtain some impeachable information about the claimant. There is absolutely nothing wrong with that.”

However, there are some important “don’ts” when it comes to social media and claims investigations, according to Kreiling. In both Canadian and U.S. court examples, there are consistent rules around transparency.

“What you may not do is use subterfuge to get that person to accept a friend request; the rules are pretty clear on that,” she observed. “That also goes against CIAA’s code of ethics. Also, if you can’t do it, you are not allowed to ask anyone else to do it. A lawyer, for example, may not ask a paralegal or investigator or anyone else to do anything else that he is not allowed to do.”

Kreiling argued that, despite the rapid advances in technology and social media, the claims investigation process still operates by tried-and-true standards.

“The bottom line here is that think of this in terms of conducting a claims investigation back in the (pre-social media) days,” she concluded. “We found out information about claimants publicly, and we didn’t use deception. The same applies to gathering social media evidence electronically – follow that claimant publicly and don’t use subterfuge.”

Fraud Detection Technology

Steven Dubenow of CKR Global, a risk mitigation and investigation services company, was the next presenter and focused on the role of technology in fraud detection and prevention. A certified polygraph examiner and forensic psycho-physiologist, Dubenow says his firm has experience in “handling problematic front-line claims.”

“In my opinion, you can put all the technology you want in place, you can screen claims to a very high degree, but nothing will replace fraud detection better than an adjuster who is in tune and asking the right questions,” Dubenow noted. “When I sit down with good adjusters, they say things like: ‘I don’t know what it is, but I don’t like it. I can’t put my finger on it, but something doesn’t feel right.'”

He explained that “seeing the trees for the forest” is part of the job. “We are examining in very strong detail every nuance; we are looking for that little piece of information that is going to take the claim to the next level of detail and show us what has been missing.”

What can happen, however, in any claims investigation is that adjusters and fraud specialists sometimes miss the “big picture,” he noted. “This can happen to any of us, but especially to claims adjusters. The pressure on adjusters is so great and the caseload is so high, I don’t know how anyone would expect an average adjuster to detect fraud within his or her files. The average adjuster in auto physical damage is carrying 200-300 claims files; they barely have enough time to get to whatever their quota is to close files, never mind spending a half hour on each one to vet it.”

Dubenow’s observation is that “the adjusters who I think are the best at this are those who have set up some fairly basic premises and guidelines that they apply to each file. Does it make sense? Then they use that to look at the big picture. They are not focused o
n a red flag system or 50 things with or without a checkmark.”

In terms of fraud detection technology, Dubenow cited BAE Systems Detica and SAS as two of the leading software and analytics providers in the financial services industry. They provide predictive modeling, link analysis, neural networks and other techniques to find suspicious claims patterns in insurance companies and, in some cases, across insurance companies.

Dubenow cited Project Sideswipe as a good example of how technology can help link together hidden fraud patterns in multiple insurer data sets. This project was a large-scale investigation that resulted in more than 200 charges against 60 people for allegedly staging crashes in York Region and submitting nearly a million dollars in fraudulent insurance claims.

“These are people and criminals that are constantly probing insurers,” Dubenow noted. “Organized crime has a lot of money, a lot of resources and a lot of manpower. Despite what anyone in this industry says, they are also really, really smart.”

Far from holding out fraud detection technology as the holy grail of “plug and play,” he argued that these tools should only be used in the larger context of crime prevention.

“I don’t like anything that looks like a magic trick,” Dubenow noted. “Yes, we use technology and very complex databases to extrapolate data and find some consistencies. But we want a human element. And that involves a well-trained analyst who is vetting the data and looking at the data as it is coming out.”

CKR Global has developed its own proprietary link analysis program, according to Dubenow. “We take large volumes of information and transfer that to a visual format,” he said. “In starting to outlay a link analysis chart, we can see where we need to look and what we may be missing.”

Dubenow demonstrated a real-life example of a link analysis chart that allowed an adjuster and an insurance company to spot a fraudulent file. The claim involved a teacher driving to work and hitting a cyclist, who the teacher claimed not to know. “(The teacher) referred to the cyclist in terms of somebody other than a stranger,” he noted. “It was something that made the adjuster uncomfortable.”

Through a link analysis chart, CKR Global used drivers’ abstracts, property registrations, real estate transactions, driver’s licenses and other information to establish that the cyclist, who had changed his name years prior to the accident, was, in fact, the teacher’s brother-in-law.

“In this small data capture that an insured paid I think it was about $1,800 for, we were able to bring this chart forward and say, ‘what seemed to be is not.’ Obviously based on this data, the insurer was able to deny the claim,” Dubenow said.

Hi-Tech Auto Claims

John Kotsopoulos, president and CEO of iAutoConnect, then spoke about the impact of technology on the claims settlement process. He showed the evolution of auto claims processing technology – from green screens to CDs to the first bi-directional automated communication between insurers and repair shops.

New technology, including driverless cars and vehicles with built-in collision prevention technology like crash avoidance systems, lane change/forward crash warning, and steering wheel sensors, will have a dramatic effect on loss frequency and how claims are handled, he said.

“The whole idea behind this is to reduce claims count,” Kotsopoulos noted. “The in-city collision claims count, they’re predicting over the next five to seven years, is going to go down 30%. That’s your gravy, that’s your day-to-day. There will be a reduction in loss frequency.”

With more sophisticated technology and more expensive parts, newer vehicles will also mean higher claims payouts for physical damage, or potentially increased claims severity.

“This is pretty high-end stuff, so how do you write the appropriate premium on it,” he observed. “Do you write a lower premium because the vehicle is now safer, or do you try to predict that this car will actually be involved in an accident or get totaled and now you’re going to pay through the roof because the technology is built into the vehicle?”

To achieve greater efficiencies in auto claims settlement, Kotsopolous explained that one key trend in the future will be managing by exception. With tools like data mining, 95% of claims could be automated through the settlement process, he noted.

“Managing by exception means only taking out those (repair) vehicles that don’t meet the insurer’s criteria,” he said. “There is technology today that will supposedly help you do this, but to this day, it is not happening. There are some who are doing better than others, but there is still lots of room for improvement.”

Brave New World

Amber MacArthur, a digital and social media specialist, gave her keynote presentation on how technology has evolved in the broader social and economic context. One tangible way to show these changes is a “technology timeline,” she noted.

MacArthur cited the example of the “personal electronic transactor” (or computer) that weighed 44 pounds circa 1970. Then, the emergence of the first “brick” cell phone that sold for $3,995 around 1980. Circa 1990s, people were talking about the Internet as a new development; by 1999, 38 million people in the U.S. had broadband access.

Fast forward to 2014. More than 50% of the population owns smartphones (19.7 million Canadians). The new iPad Air weighs 1 pound and its use is ubiquitous throughout the house; 69% use it in the bedroom and 42% in the kitchen. 19 million Canadians are on Facebook and 74% check it every day -the highest usage rate of any country in the world. Today, 3-to-5 year-olds are more likely to know how to use a computer mouse than to tie their own shoes.

The explosion of mobile technology and social media has changed the pace of digital developments at a rapid clip. Quoting famous racecar driver Mario Andretti, MacArthur told the audience: “If everything seems under control, you’re just not going fast enough.”

“In 2010, I used to talk about the rules of engagement for social media and I would talk about the ABCs – authenticity, bravery and consistency,” she noted. “This has changed in 2014.”

A new “A” is to adapt quickly… or fail. MacArthur cited the example of Kodak, the camera company that did not keep up with changing technology and ultimately declared bankruptcy. According to The Economist, “Kodak sold cheap cameras and relied on customers buying lots of expensive film… That model obviously does not work with digital cameras. Still, Kodak did eventually build a hefty business out of digital cameras – but it lasted only a few years before camera phones scuppered it.”

The second rule of engagement is the “B” of be responsive. MacArthur pointed to the Super Bowl football game in New Orleans in 2013 when there was a power outage in the third quarter. Oreo’s advertising company sent a timely tweet that went viral. “Power Out? No Problem.” read the post, which was linked to a photo of an Oreo and the tag line, “You Can Still Dunk In The Dark.” It quickly resulted in 15,000 retweets, and added about 8,000 Twitter followers for Oreo.

“This was one of the first examples of real-time social media,” MacArthur noted. “It was something that no other company had done.”

A third rule of social media (the “C”) is to create value. MacArthur used the example of McDonald’s restaurants in Australia, which “has used technology to create value by allowing its customers to research and track where their food came from.” Specifically, TrackMyMacca is a free iPhone app that customers can track where feature ingredients in the actual food purchased came from. It uses a phone’s GPS, image recognition, plus the date and time, to access McDonald’s supply chain.

“The future networker is a digital native,” MacArthur concluded in her presentation. “Whether you are using social media in your business or at home, chances are there is someone younger, adapting more quick
ly and changing all the rules. This is the (digital) generation we all need to be prepared for.”

The warning about the coming generation of digital networkers seems particularly appropriate for an insurance sector that has been slow to change. It raises several questions.

Can the insurance industry keep up with new generations of digital natives? How will the face-to-face service orientation of independent adjusters meet the expectations of mobile users who want everything to be handled via smartphone apps? Will technology lead to less human intervention in claims handling and unintended consequences? Can the sound judgment of independent adjusters be augmented or supplemented by advances in digital and social media?

These questions show that the conversation about the role of technology in claims management and insurance is ongoing and evolving. The tech talk continues.