The Challenge of Combined Ratios: Aligning Claims Costs and Premiums through Innovative AI Solutions

The insurance landscape is navigating a critical phase where claims costs are surpassing premiums by a considerable margin. Recent projections from the Insurance Information Institute suggest that underwriting losses will persist until 2025, culminating in an industry-wide average combined ratio exceeding 102% by the close of 2023. Influencing factors include enduring supply chain challenges and inflation, both contributing to elevated expenses in restoring policyholders following claims.

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The surge in frequency and severity of weather events and natural disasters further compounds claims costs, triggering a rise in the number of policyholders seeking compensation. Reinsurance rates are anticipated to soar by 30-50%. Given our extensive collaborations, working with six of the top ten African insurers and processing huge volumes of African auto and health claims, Curacel is witnessing firsthand the reverberations across the insurance sector.

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How much does processing a claim cost your organisation? Learn more with the Curacel Claims Calculator.

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Understanding the Complexities: Facing Macro-Economic Pressures Head-On

While the industry comprehends the factors underpinning this dilemma, devising effective solutions remains a challenge. Regulatory constraints limit annual premium increases, making it impossible to offset growing costs easily. In Africa alone, insurance rates are projected to surge by 8.4% in 2023, nearly double the inflation rate at 4.9%. Some policyholders find themselves confronted with premiums surpassing their actual car payments. This predicament isn't confined to Africa, — globally, insurers grapple with analogous challenges. It necessitates a meticulous examination of lowering claims expenses and optimizing loss management within the ambit of these macroeconomic pressures.

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Lower Claims Expenses and Optimize Loss Management with Curacel AI

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Navigating the Automation Frontier: Beyond Process Enhancement

Recognizing the limitations of merely raising premiums or streamlining claims settlement processes, the industry is increasingly turning to innovative strategies such as claims automation. Enhancing the efficiency of the claims process stands out as a viable avenue to curtail claims costs. However, it's imperative to acknowledge that claims automation alone isn't a panacea. Strategic claims automation must be complemented by robust fraud and risk detection mechanisms, spanning both underwriting and claims processes. Curacel understands that without effective mitigation strategies, claims automation could inadvertently introduce up to 30% more fraud into the system, counteracting any efficiency gains.

Embracing a Holistic Approach: The Role of Artificial Intelligence (AI)

To truly confront the combined ratio challenge, insurers must adopt a comprehensive perspective that extends beyond mere automation or fraud mitigation. Curacel advocates for a holistic approach, leveraging modern techniques such as artificial intelligence (AI) across the policy and claims lifecycle. By initiating enhancements from the point of sale, reevaluating subrogation and recovery methods, and integrating AI technologies, insurers can significantly improve their combined ratios. This approach not only benefits insurers but also ensures a more robust and secure environment for the insured.

At Curacel, we're committed to providing innovative solutions that address the root of industry challenges, empowering insurers to thrive amidst evolving complexities.

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