Over the years, the insurance industry has developed a reputation for processing claims, reviewing documents, and performing virtually every other essential business task at a snail’s pace. 

However, many people are unaware of how inundated with paperwork the entire industry is. This inefficiency pandemic impacts companies operating within every segment of the insurance industry, including the following:

  • Health
  • Home
  • Auto
  • Pet
  • Casualty
  • Travel
  • Life

The insurance industry is intrinsically slow and inefficient due to its business model. Before insurance companies deliver payment to providers or policyholders, they must verify the claim’s legitimacy. This requires them to request significant amounts of paperwork from healthcare providers, medical treatment facilities and, of course, the policyholders or their beneficiaries.

For years, insurance companies, and the clients they serve, have had little recourse in dealing with these inefficiencies. Fortunately, the development and evolution of intelligent document processing (IDP) technologies provide insurance companies with a viable solution for clearing up the backlog of paperwork. IDP technology is software that can efficiently process documents and structure the data they contain into a digestible format. In turn, this can decrease claim processing times, reduce a company’s reliance on labor-intensive manual processes and optimize organizational efficiency. 

Below, we make a case for IDP in insurance by highlighting some truly mind-boggling statistics and facts about this massive industry. 

5 Statistics that Demonstrate the Need for IDP in Insurance 

In recent years, it has become clear that the insurance industry’s status quo of relying on labor-intensive and inefficient manual processes is untenable. Insurance companies that do not pivot and aggressively pursue digital transformation will face shrinking profit margins, declining customer satisfaction and legitimate business continuity concerns. 

As part of this digital transformation, insurance companies must automate as many inefficient processes as possible. Automating processes at scale is known as hyperautomation. IDP in insurance will serve as the cornerstone of these hyperautomation and digital transformation efforts. 

Still not sold on the need for IDP in insurance? The five statistics listed below will undoubtedly change your mind.

1. Car Insurance Claims Can Take 30 Days or More to Process

On average, car insurance claims can take 30 days or more to process. In the meantime, the insured party could potentially be left without a functional vehicle. This could be financially crippling, especially if the policyholder does not have rental car coverage, as they must pay out of pocket for any transportation costs.

In some instances, settling car insurance claims can take much longer. For example, in California, insurers have up to 40 days to accept or reject a claim. If they accept the claim, they have an additional 30 days to issue payment. These excessive claim processing times disservice policyholders and tarnishes an insurance company’s reputation. 

Intelligent document processing solutions can expedite processing claims and forms by automatically classifying and extracting the data needed, thereby reducing the time it takes to process by as much as 95%. 

2. The Top Insurer Writes over $100 Billion in Premiums Annually 

Implementing IDP in insurance can do much more than simply reduce processing times. It can also help insurers keep up with the rapid increase in demand for services. In our modern society, consumers want insurance-based protection for as many of life’s unexpected challenges as possible. This has led to an uptick in the number of health and life insurance policies written each year.

In 2020 alone, MetLife, the largest health and life insurance company in the United States, wrote over $103.3 billion in premiums. If these premiums were written using antiquated practices, the entire process would be incredibly labor-intensive, inefficient and costly for the company. However, IDP technologies would allow the insurer to process policy documents much more efficiently and eliminate the amount of manual labor required to write these premiums. 

3. Health Insurance Claim Errors Lead to $17 Billion in Waste

IDP in insurance not only improves efficiency; this technology drastically reduces the frequency of processing errors as well. The following statistic about the insurance industry demonstrates how desperately companies need a mechanism for lowering claims errors. 

According to the American Medical Association (AMA), health insurance claim errors contribute to more than $17 billion in waste annually. The AMA found that the average error rate in claims processing among health insurance companies was a staggering 19.3%. This means that nearly one out of every five claims processed contained errors. 

IDP technology helps eliminate human-based errors from manual data entry by automating the data extraction from documents, which reduces wasted time. Insurance organizations can also increase their profit margins by reducing the amount of error-correction-related administrative expenses.  

4. The Insurance Industry Employs Nearly 3 Million People

Cumulatively, the various insurance industry sectors employ nearly 3 million people in the United States. However, like many other sectors, the insurance industry is contending with an ongoing talent shortage. Put simply, insurance companies are struggling to fill critical vacancies. In turn, this decreases the quality of service they can provide policyholders and exacerbates existing backlogs of physical and electronic documents. 

Organizational leaders in the insurance sector are exploring ways to resolve this talent shortage. In the meantime, insurance companies must find ways to do more with less without compromising service quality. IDP in insurance offers a viable means of accomplishing both of those objectives amid the current talent scarcity. 

5. IDP in Insurance Can Lead to 87% Faster Processing 

The concept of leveraging IDP in insurance sectors is not new. Several insurance companies have been using intelligent document processing technologies for years and have experienced significant efficiency improvements. 

For instance, a pet insurance company with an average claims processing time of 45 to 75 days implemented IDP technology several years ago. At the time, the company could only process 100 claims a day but was receiving many more than that. This created a backlog that would have been impossible to resolve using manual processes. However, implementing IDP technologies allowed the insurer to boost claim processing speed by 87%. The company was able to process seven times more claims per day, clear up the existing backlog, and reduce the average processing time. As an added benefit, the company was able to reduce the administrative costs associated with processing a claim, which led to better profitability. 

If insurance companies hope to thrive in this rapidly evolving industry, they must consider adopting IDP technologies. By doing so, insurers can experience similar benefits to those outlined above while simultaneously avoiding falling victim to the inefficiency trends that have plagued this industry for decades.