Common Challenges In Home Fire Insurance Claims: Insights For Kentucky Homeowners – Michael Cline is managing director and claims manager in the insurance sector at Deloitte Consulting LLP. He has over 28 years of experience with claims operations and technology at insurance companies and the consultancy area. He also holds insurance industry professional designations from the Insurance Institute of America; CPCU, AIC, API, AIS and AINS. Michael is licensed to adjust property and casualty insurance in the State of Nevada and is an active member of the Insurance Institute’s National Claims Interest Group Committee.
Kedar Kamalapurkar is managing director and leader of the insurance sector claims practice at Deloitte Consulting LLP. He has almost 15 years of experience in claims management, including as a claims handler. He has led claims transformations from strategy to execution for many of the major insurance companies in the US and Europe. Kedar also holds the insurance industry’s professional designations from CPCU, AIC, API and AINS.
Common Challenges In Home Fire Insurance Claims: Insights For Kentucky Homeowners
As insurers let enabling technologies such as artificial intelligence handle an increasing share of claims, companies should enhance the capabilities and expand the roles of claims professionals to reap the benefits of advanced tools while maintaining personal engagement in the moments that matter.
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Claims are by far P&C insurers’ largest cost component, as paid losses combined with investigation and settlement expenses accounted for about 70% of US premiums collected in 2020.
The pressure is always on to enhance claims processing with new technologies and data sources that can increase efficiency, productivity and accuracy, as every dollar saved goes directly to the bottom line. This transformation was greatly accelerated during the pandemic as necessity became the mother of invention, leading to the implementation of widespread digital and virtual claims management virtually overnight. (See sidebar, “Pandemic forces faster digital transformation.”)
But interviews with chief claims officers (CCOs) from a dozen large and mid-sized passenger and commercial shipping lines in the US, Canada and the UK found that most were walking a tightrope between trying to divert more claims to automated systems and the overriding need to maintain a human touch at the moment that matters most to policyholders.
This is not an either/or choice between technology or people. Insurers should continue to strengthen their data sources and technology infrastructure to settle claims faster, more accurately and at lower cost, while upskilling their claims adjusters. That way, they could maximize the value of all the newly integrated technology and available data while still being able to create a personalized customer experience.
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The challenge for insurers is how to effectively integrate these two sides seamlessly so that they can deliver the right service at the right price point to the right claimant at the right time with the goal of satisfying customers across a wide range of expectation levels.
In fact, customers pay close attention to an insurance company’s claims handling reputation. A personal consumer survey conducted by Deloitte found that 44% of US respondents conduct research on what it’s like to make a claim with a particular auto or homeowner’s insurance company before purchasing coverage—while an even higher percentage do so in China (79 %) and Australia (58%).
The fact that a claim may be the only point of contact a customer has with an insurance company can make this element critical to retention and growth.
This report focuses on how CCOs can overcome such challenges in transforming their operations, balancing the benefits of automation and more advanced technologies with customer demands for personalized service. To achieve this, insurers should seek to raise the game of field adjusters, fraud investigators, case managers, customer service representatives and other essential claims department personnel to exponential levels (see the sidebar, “What exactly is an ‘exponential’ claims professional?”).
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Advanced technologies and new data sources should increasingly complement and augment (but not necessarily replace) adjusters, managers, fraud investigators and other caseworkers. These advances should relieve them of many labor-intensive, yet low-value tasks, while arming them with tools to speed up processing and payments. This should also improve results and customer satisfaction.
Exponential claims departments and professionals should therefore have (i) the training and skills to manage and audit automated results at the case and portfolio level, (ii) the judgment to quickly determine which tools and data can best serve a particular claim, (iii) the ability to strike a balance between automation and the ongoing need for human engagement, and (iv) the ability to offer value-added services internally and externally.
The pandemic greatly accelerated claims transformation plans among the insurers participating in this research. A number of providers noted that the percentage of claims handled virtually (often with imaging technology over mobile apps) and digitally (with automated live processing) skyrocketed last year from single digits to as high as 55% in an interview with an in-person insurance company. . Meanwhile, J.D. showed Power’s 2021 US Property claims satisfaction survey that carrier acceptance of customer photos and videos for claims settlement grew from 61% in early 2020 to 68% during the pandemic.
“We were already on a journey to a digital operating model that would offer a wealth of self-service solutions and really simplify the claims process for both our people and customers, but we hadn’t made that much progress before the pandemic,” recorded a personal lines CCO. “But then the pandemic came along and eliminated the adjustment period we had budgeted for (to make the transition), so instead of taking two or three years, we had to complete that journey in a few weeks and months. I didn’t want to have believed it was possible before we actually did it.”
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It also seems highly unlikely that insurers can or even want to put this digital genie back in the bottle. “We absolutely want to keep what we’ve done in place and build on this post-pandemic. There’s no going back,” said a major commercial lines CCO that launched a virtual estimating platform in 2020 on a much accelerated timeframe.
But the same CCO added, “while we have managed to digitize half of our requirements, how do we maneuver through the other half, which are more complex and defied a technological solution? Can we somehow simplify more of them enough to handle digital so we can continue to scale up? I think that’s the final frontier for these innovations.”
Today’s tech-savvy customers are increasingly seeking greater convenience, faster turnaround times, and more self-service options—expectations that insurers are trying to meet with mobile apps, virtual assessments, and direct processing of more routine claims, among other innovations.
These technologies should free staff from routine tasks across the claims value chain. For example, with intake and triage, the use of virtual inspections, photo estimation software and automated workshop scheduling can create a digital path to contactless requirements. The same goes for drones and satellite imagery, which can allow detailed assessments of widespread disaster zones or damage to a single home or business without having to waste time sending live adjustments to the scene, often in dangerous conditions.
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Such technological improvements can make a big difference in turnaround time and customer satisfaction. A report by J.D. Power showed that for homeowner claims processed digitally, including online submission of initial notice of loss and acceptance of the insurer’s digital claim assessment, time to payment was reduced by up to 5.5 days compared to those who did not submit their claim online along with photo evidence for damage.
At the same time, these technological tools are likely to change the daily work and responsibilities of claims professionals in fundamental ways (Figure 1).
However, these new tools won’t do much good for insurers or their customers unless claims professionals are trained to make the most of them and are prepared to handle more challenging tasks after automation relieves staff of routine data collection and administrative work.
Many can be reused for higher-level data analysis – for example, in managing risk portfolios rather than individual claims. Others could focus more on fraud detection, coverage analysis and dispute resolution for outlier claims. And instead of devoting all their attention to settling losses after an event, a claims contingent could work more closely with underwriting peers who integrate many of the same new technologies and data sources, providing valuable feedback on how policy language, terms, conditions and prices play out in the market.
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Some may even want to leverage their forensic expertise more proactively to support loss control services. An interview with an auto insurance company, CCO, has aligned the company’s risk engineering and claims departments to create a continuum that prevents losses from happening in the first place.
As more digital tools come online, insurers are likely to be able to apply accelerated claims processing and automated decision-making to an increasing proportion of their overall caseload, thereby increasing the productivity of claims professionals while freeing up capacity. A natural follow-up question that is likely at the forefront of the minds of many in claims is whether automation will make them redundant? And the answer is that it depends on whether they can adapt so that they continue to add value to the customer’s claims experience.
With new data and technology available to claims professionals, their roles and responsibilities are likely to change. Traditional activities such as data collection and verification, loss assessment and claims settlement may take a bit of a back seat as
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