How to Automate Your Claims Processing

In an industry built on trust, precision, and timely support, traditional insurance claims processing is often a source of frustration for both insurers and policyholders. Long cycle times, manual data entry, slow support, and siloed information are just a few of the challenges that bog down claims teams.

According to McKinsey, automation and AI are already helping insurers reduce costs and scale, with adopters of AI achieving 6.1 times as many returns as insurers who haven’t invested in the technology. It’s clear that AI offers an opportunity to differentiate and grow in a meaningful way.

Let’s walk through the fundamentals of automated claims processing, highlight its benefits and barriers, and explore best practices for teams looking to automate claims processing.

What is automated claims processing?

Automated claims processing is the use of AI and automation to execute manual or time-consuming parts of the claims process with minimal human intervention. Insurance AI support can assist in all aspects of claims processing, including form reviews, data updates and analysis, policyholder support, and even knowledge and policy management.

How automated claims processing works

Here’s how automated claims processing works, step-by-step:

1. A policyholder submits a claim

When an incident has occurred, such as car damage or a visit to the hospital, the policyholder submits a claim to their insurer for coverage, called a First Notice of Loss (FNOL).

AI agents can assist policyholders through the submission process. Chat, SMS, and even voice agents can authenticate policyholders, capture and verify their information, kickstart the claims process, and answer any questions the policyholders may have.

2. A claim handler reviews the claim

Once a claim handler receives an FNOL, they review relevant policy terms to determine coverage. 

AI and automation, including generative AI, help make this process significantly more efficient. These tools can independently search policies, pull specific terms and conditions, and cross-reference with third-party databases to confirm details.

3. The insurer verifies the claim

After reviewing the policyholder’s claim and policy, the insurer then validates it with other relevant details, such as:

• Damage and repair estimates
• Photographs, witness statements, and other evidence
• Medical records

Automation makes this process faster and more accurate by pulling the needed data from various sources, uploading it, and analyzing it with machine learning.

4. The insurer decides to approve or deny claims

Once the insurer has reviewed and verified a policyholder’s claim, they then decide whether to approve or deny it. 

While human teams should always make the final decision to ensure fairness, automation can help by recommending payment amounts and determining coverage. 

5. If approved, the insurer initiates payment

If the insurer approves their policyholder’s claim, they send payment. Rather than send physical checks, insurers can use AI and other technologies to transfer payment digitally, ensuring a quick transaction and clear proof of payment.

6. The insurer analyzes the claims data

Now, the insurer reviews the entire claims process and data to identify trends, possible fraud, or areas for improvement.

AI and automation make this process much more insightful by analyzing the data and identifying patterns, saving insurers hours of time.

By blending AI and robotic process automation, insurers can streamline the entire claims process from beginning to end, making it more timely, accurate, and convenient.

Why automate? 5 key benefits of claims processing automation

AI and automation tools offer insurers tangible opportunities for optimization and growth. Here are 5 key benefits insurers can expect from investing in claims processing automation:

Speed and efficiency

Manual claims can take days or even weeks to process. Automated workflows drastically reduce turnaround times by automating manual and time-consuming tasks. Policyholders can submit faster and more easily with the assistance of AI agents, while claims teams can focus their time on higher-value tasks rather than administrative ones.

Accuracy and error reduction

Human errors in data entry, form processing, or claims routing can be expensive, delay decisions, and risk non-compliance. Robotic process automation validates data at all times, reducing the chance for error and making every claim more consistent.

Lower operational costs

Automation significantly reduces the human labor required to process each claim, allowing insurers to reduce expenses while scaling their initiatives. According to Deloitte, insurers using automation and AI in claims operations report cost reductions between 20-50%. Implementing AI for policyholder support can additionally reduce costs, especially across channels like chat, SMS, voice, email, and more.

Improved customer experience

Convenient technology is now a part of everyone’s lives, and policyholders expect a seamless experience from their insurers. Automated claims tools enable faster response times, 24/7 access to support, and convenient, timely results, which fosters trust and satisfaction. 

Regulatory compliance and audit readiness

Staying compliant is crucial for insurers, but it can be a challenge. Systems powered by AI and RPA automatically track claims, timestamps, and decision trails to ensure that insurers stay as compliant as possible. Tools like Capacity’s AI-powered Knowledge Base makes it easier to index relevant information, keep it up-to-date, and make it easy to find.

Common challenges with automating claims processing (and how to overcome them)

Of course, every new technology comes with risks and challenges. Let’s explore some common roadblocks to automating claims processing and how insurers can overcome them to make the most of their tools:

Legacy systems and data silos

It can be difficult to integrate traditional insurance systems to modern tools. ROI can then be limited, as some data stays siloed and still has to be manually pulled or updated.

👉 How to solve it: Look for automation platforms with pre-built integrations, responsive support teams, and open API tools. Capacity offers over 250+ integrations alone that easily connect your existing tech stack.

Staff resistance and change management

New tools, especially powered by AI, can be controversial. Employees may worry that automation will replace their roles, and initial training may take time and effort that teams don’t have the bandwidth for.

👉 How to solve it: Involve your team early, communicate clearly, and emphasize that automation is there to enhance, not replace, human expertise. Implement training programs, demonstrate the benefits, and offer teams incentives for learning the new tool.

Data privacy and security

Insurance data is sensitive and requires extra protection. To protect both their policyholders and themselves, insurers need to take steps to ensure data is secure at all times.

👉 How to solve it: Choose automation partners like Capacity that are SOC 2 Type II certified, HIPAA-compliant, and offer robust encryption. Additionally, ensure you implement AI responsibly, with in-depth team training and access controls.

Real-world applications of AI in claims processing

First Notice of Loss (FNOL) automation

Imagine a policyholder gets into a minor car accident. Instead of calling a hotline and waiting on hold, they can text a virtual agent to report the incident (or call, or chat, or email). The AI agent will collect key details such as time, location, and photos, and begin the claim process instantly.

Fraud detection and flagging

Machine learning models can analyze vast amounts of claims data to detect suspicious patterns—like repeat filings, altered documents, or identity mismatches. The AI tool can then automatically flag these issues for investigation to reduce loss, protect policyholders and insurers, and ensure compliance.

Plus, voice tools like voice biometrics can authenticate callers just from the sound of their voice, reducing the risk of identity theft and minimizing pain points like authentication errors, misheard prompts, or frustrating call trees.

Claims triage and routing

AI can assess a claim’s complexity and route it to the right adjuster, or even approve it automatically if it meets all the requirements. This significantly speeds up resolutions for simple claims, increasing customer satisfaction, and frees up time for experts to handle more complex claims.

Claims document processing 

No more digging through pages of policies or stacks of forms. Natural language processing and robotic process automation can scan, categorize, validate and populate everything from police reports to medical invoices.

Virtual claims assistants

AI chat, SMS, voice, and email agents can answer policyholder FAQs, schedule appointments, collect documentation, and provide status updates 24/7. This provides policyholders with easy access to information, personalized support, and convenient experiences—in addition to reducing expenses and scaling meaningful work for insurers.

How to get started with claims automation

You don’t need to implement AI across the board on day one. When using new AI tools, it’s best to start with a ground-up, focused strategy that can scale and improve over time.

1. Set your goals and objectives

Consider your team’s biggest pain points and what, if automated, would resolve those pain points while benefiting both the company and policyholders. What do you want to improve with automated claims processing tools: cycle time, accuracy, support hold times, or a combination of them? 

Choosing a solution that can address several of goals makes them easier to achieve and also lessens the amount of time and effort needed for implementation and training. 

2. Get buy-in

An AI tool is only useful if it’s fully adopted and used. Align stakeholders across IT, claims and compliance teams, and company leadership to ensure that implementation and optimization run as smoothly as possible. 

Then, create thorough training and reference materials so that key users are comfortable with the new system and know where to find answers if they need them. Tools like Capacity’s Answer Engine®, which surfaces information and documents no matter where they live from a simple prompt, can support teams as they learn.

3. Start small

Lay a strong foundation for automation first with a use case that is easy to implement and scale. A great place to start is policyholder support; deploying AI agents to assist customers can make the entire process faster and more efficient, reducing time spent answering the same questions over and over, updating data, or routing claims.

Evaluate claims processing automation tools

There’s a wide variety of claims processing automation solutions available, from specialized claims platforms to all-in-one support automation solutions like Capacity. When researching new tools, look for:

• Workflow automation capabilities: Ensure that the tools can accomplish your goals in a meaningful way and reduce time spent pesky, time-consuming tasks. Choose tools that automate traditionally manual workflows to make processes more efficient.
• Advanced and varied AI: There are a lot of different types of AI out there, from machine learning to generative AI to robotic process automation, and they all do different things. Choose a tool that employs multiple types of AI to ensure it’s well-rounded, effective, and helpful. For example, Capacity uses three different types of AI for customer-facing support alone, including text-to-speech.
• Integration support: Many insurers use a wide variety of systems, databases, and apps, and many of their files are stored in multiple locations. Choose a solution that connects to these systems. 
• Compliance and analytics features: Insurance is highly regulated, so staying compliant and having the ability to more easily detect fraud or consumer trends are crucial. Choose tools that are compliant with relevant regulations and offer ways to analyze and grow.

Wrapping up

Automated claims processing can transform the entire claims process from beginning to end. 

For policyholders, this means 24/7 personalized support, faster claims turnaround, and an overall more consistent, convenient experience. For insurers, this means reduced costs, higher accuracy, more meaningful work for human teams, and opportunities to scale.

Whether you’re just starting your automation journey or looking to further optimize your process, now is the time for insurers to explore what’s possible with automated claims processing.

Request a demo today to learn more about how Capacity can help insurers work smarter!

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