Artificial Intelligence in Health Insurance: Smart Claims Management

In 2021, the number of health insurance claims nearly quadrupled. While this could be due to the Covid-19 pandemic, it demonstrates the need for a more effective and streamlined claims management process – that’s where artificial intelligence comes in.

Artificial intelligence is already making waves in most industries, and the health insurance industry has the most to gain. From faster claims processing to optimized service delivery and accelerated processes, the benefits of AI in the health insurance sector are simply innumerable.

This article will focus on the role of artificial intelligence in health insurance, particularly in the claims management process.

What is Smart Claims Processing?

To understand smart claims processing, we first have to define claims processing. Claims processing is the whole process of managing policyholders’ claims. It coverers all stages of claims management, right from the initial contract, to the fulfillment of the claims agreement. This includes everything from claims review, adjustment, fraud investigation, and the acceptance or rejection of the claim by the insurance provider.

Claim processing is complex, nuanced, and typically involves time-consuming administrative tasks. It is also fraught with legal and technical checks, which require thorough analysis before processing the claim.

Smart claims processing is barred with the same challenges. The only difference is that instead of using predominantly human labor to process the claims, insurance companies leverage artificial intelligence capabilities to perform all processes in real time while getting maximum risk oversight.

The Role of AI in Health Insurance

Artificial intelligence has completely revolutionized the insurance industry. Industry players are leveraging AI capabilities for core business processes such as marketing, pricing policies, fraud detection, and much more. By utilizing AI capabilities, insurance companies can provide affordable, tailor-made services to policyholders.

Here are a few ways in which artificial intelligence in health insurance is impacting smart claims management:

Automated claims processing

Traditionally, insurance providers operated on a fee-for-service model. The model typically required manual intervention for numerous processes including adjudication and audits. It also proved inefficient for industry players pushing towards outcome-based models.

Over the past decade, all major insurers and insurtechs have been pushing towards digitizing their entire claims process. By digitizing their workflows, insurance providers have enjoyed significant gains in the form of lower operational costs, reduced cycle times, and improved service delivery.

AI-powered automatic claims processing platforms can transfer claims and all necessary health records in real time. They also process the claims, perform validation of the customers’ eligibility and benefits, and assess the alignment of the policyholder’s medical diagnostic data with the provider’s contract – all in real time.

Additionally, AI-powered smart claims management offers analytics capabilities by assessing the effectiveness of treatment through tracking medication errors, adverse drug interactions, and adherence to medication therapies. Ultimately, this leads to a significant reduction in regulatory penalties, expensive hospitalization, and morbidity due to medication errors.

Providing a modern experience for the modern policyholder

A vast majority of consumers prefer buying insurance and dealing with their insurance providers online. Most major insurers have smartphone apps that allow policyholders to submit paperless claims, thus eliminating the otherwise mundane and taxing process of filing lengthy claims.

This is especially notable among younger policyholders. In 2021, 44% of customers aged 18 to 29 bought insurance online. Experts project this trend to grow exponentially as insurance providers intensify their online presence. The use of chatbots and other automated service delivery platforms might also boost customer engagement, ultimately leading to more conversions.

Fraud detection thanks to advanced analytics

The FBI estimates that fraudulent claims result in more than $40 billion in losses every year in the US alone. In turn, the increased burden on insurers causes them to raise insurance premiums, which ultimately results in fewer insurance sales.

The traditional method of checking the relevance of claims typically involves checking each claim manually to determine its validity. Unfortunately, the process is time-consuming and quite ineffective.

According to a McKinsey report, insurance companies classify 7 out of 10 health insurance claims as unusual, meaning they are potentially fraudulent. This accounts for nearly 70% of all health claims. Considering the fact that insurance companies have to re-investigate all these claims, the method is ineffective and proves that people are not very good at fraud detection, at least not on their own.

AI provides advanced analytics, which is very effective in detecting fraud. By combining unsupervised and monitored machine learning models with behavioral analytics, insurance providers can significantly reduce the cost of fraud, and subsequently, insurance premiums.

Improved customer service

A well-executed smart claims management system can help improve customer experience exponentially. AI-powered analytics can, for example, help customers detect treatment anomalies and suggest personalized care interventions. Analytics can also provide a deeper understanding of the path of illness and suggest appropriate interventions, which ultimately results in lower medical costs due to reduced unnecessary hospitalization.

Data generated from AI-powered analytics can also help in studies across multiple fields, especially when it comes to comparing the effectiveness of a particular treatment.

Risks and challenges facing smart claims management

Building a successful AI-powered smart claims management solution requires process restructuring, a robust data model, and training models equipped with high-quality data. If there is any bias in the training data, the resulting model will equally produce biased and incorrect predictions.

Additionally, deploying a successful AI solution may require an insurance company to integrate its customer data with other sources such as EMRs and lab results. Attaining this third-party data is quite difficult due to privacy concerns. Therefore, insurance companies need to adopt appropriate de-identification techniques to anonymize data, thereby addressing any privacy concerns.

How can Health Insurance companies optimize smart claims management?

Health insurance providers need to embrace new technologies to meet the rising customer expectations, create operational efficiencies, reduce operational costs and ultimately stay ahead of the competition.

Depending on a company’s unique challenges and goals, insurance companies can leverage the following innovations to streamline claims management.

Machine learning

Insurance companies can benefit greatly from machine learning capabilities. ML can help insurers overhaul their entire claims management process by making it faster, more efficient, and highly accurate.

Major insurance providers are already achieving faster claims management by understanding patterns in the claims data and pre-assessing claims based on collected data. In addition to making the process faster and more streamlined, ML can also help insurers benefit from improved loss analysis.

By automating the entire claims process, ML can help in both claims registration and claims settlement. Additionally, when combined with predictive models, ML can help insurance companies get a deeper understanding of the cost of claims and reduce fraud, which could save them millions of dollars.

Intelligent process automation

Insurance companies can leverage intelligent process automation (IPA) to improve efficiency and save time during the claims management process. IPA can for example help insurance companies automate their rule-based, repetitive tasks such as assigning claims adjusters based on their availability, location, and workload.

Intelligent automation is also beneficial in processing bulk claim payments, which typically require speed and efficiency. And, like with ML, IPA can help insurance companies detect fraudulent claims.

Wearable’s and connected services

Wearable’s can help insurance providers monitor physical activity, movement, health, and mortality in real time. Data from wearable’s can also provide insights into the mortality risk of people seeking health and life insurance.

By using data from wearable’s, insurers are better able to offer tailor-made insurance premiums based on an individual’s risk profile, which leads to cheaper premiums for low-risk customers.

Data analytics

Insurance companies are making significant investments in data analytics and predictive modeling. These technologies have the potential to revolutionize nearly every aspect of insurance from risk assessment, premium pricing, claim assessment, and claim settlement.

We’re likely to see further developments in data analytics due to the availability and abundance of customer data from wearable’s, the Internet of Things (IoT), mobile applications, and social media platforms.

Benefits of Smart Claims Management

Leveraging artificial intelligence capabilities offers numerous benefits for insurance providers and their customers. Some of the most notable benefits are:

Huge cost savings

Around 14% of all health insurance claims are rejected after being cited as false claims. Considering the amount of money lost to fraudulent claims, this is a major win for insurance companies. These numbers are projected to grow as more insurance companies leverage AI capabilities in their claims management process.

Shorter turnaround time

The level of automation that comes with smart claims management ensures that claims are cleared in record time. AI algorithms can process multiple claims simultaneously and flag potentially fraudulent claims. AI algorithms are also more accurate, thus significantly reducing the number of clerical errors associated with manual processing.

Streamlined service delivery

Artificial intelligence platforms provide customers with online channels where they can upload claims and communicate with the insurance company seamlessly. Considering the fact that 81% of American consumers think that a positive customer experience increases their chances of making another purchase, insurance companies have a lot to gain from investing in AI platforms.

Final thoughts on Artificial Intelligence in Health Insurance

Health insurance companies have come a long way from using bulk paperwork to process insurance claims to the almost paperless automated claims management provided by artificial intelligence. Although they still need to overcome the hurdles associated with privacy concerns when collecting customer medical data, future reforms and de-identification techniques may make smart claims processing even more efficient.

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