This post is part of a series based on discussions with senior leaders in insurance, including Arno de Wever, Head of Commercial P&C Insurance at Amazon Web Services (AWS). One theme was clear: while underwriting often takes the spotlight, claims is where the biggest cost savings are hidden. For COOs, reducing claims leakage by even 1–2% can deliver outsized impact, since around 60% of premiums are paid out in claims.
Claims: the biggest lever in a COO’s toolkit
In most insurance companies, IT and admin expenses account for only 3–4% of costs. Claims, by contrast, consume around 60% of premium income. That makes claims the single biggest driver of combined ratios — and the area where COOs can make the most meaningful change.
A small shift in claims costs has an immediate impact. Even moving the loss ratio by a single percentage point can translate into millions saved and a measurable improvement in margins.
Where leakage comes from
Claims leakage is unnecessary spend caused by inefficiencies in process and data handling. Adjusters often sift through hundreds of pages of documentation, medical reports, photos, and videos — without tools to structure or analyse this information efficiently. Key insights are missed, and decisions vary widely by adjuster.
Fraud adds another layer. Industry estimates suggest that around 15% of claims may involve some form of fraud, from staged accidents to exaggerated bills. Beyond fraud, leakage also arises from overlooked reinsurance recoveries or inconsistencies in how claims are handled.
Without automation, spotting patterns like staged accidents or repeated suspicious activity requires significant human effort and is often missed altogether.
How AI reduces claims leakage
AI gives COOs a way to control claims costs without sacrificing customer service:
- Faster coverage checks. Early determinations of whether an incident is covered speed up the cycle.
- Data enrichment. Models can process unstructured inputs — images, videos, and long reports — and turn them into structured insights for decision-making.
- Fraud detection. AI surfaces anomalies across telematics, accident locations, or medical documentation that humans may miss.
- From compensation to remediation. AI enables insurers to resolve claims by arranging repairs or services, reducing the reliance on cash payouts.
What COOs gain from tackling claims leakage
- Cost savings at scale. Even a 1–2% reduction in claims spend materially improves combined ratios.
- Operational consistency. Every claim is checked against the same set of rules, reducing variability and human error.
- Faster resolution. Customers receive quicker responses, strengthening satisfaction and retention.
- Fraud reduction. Smarter detection reduces fraudulent payouts, protecting profitability.
Overcoming barriers
Claims handlers may fear losing control, and workers’ councils may worry about automation reducing jobs. In practice, AI takes away repetitive administrative work while leaving claims professionals in charge of decisions. This allows them to focus on higher-value tasks such as judgment and negotiation — making the role more skilled and rewarding.
Claims: the COO’s next frontier
Underwriting often gets the most attention, but claims is where cost discipline truly pays off. For COOs under pressure to improve combined ratios, AI-enabled claims handling is no longer optional — it is the fastest path to measurable impact.
Do You want to explore proven claims use cases? Book a free consultation with us.
Take the next step
Discover solutions, customer success stories, and events on our dedicated Insurance page.
