In a previous article
, I addressed the potential for the Internet of Things (IoT) to help P&C insurers reduce non-catastrophic losses in the homeowners insurance sector. Internet-connected products, such as advanced home security systems, water sensors and smoke alarms, are beginning to demonstrate the potential for reduced losses primarily through early notification of emergencies both to consumers as well as directly to emergency responders. But the potential insurer benefit from IoT does not stop at loss reduction; in fact this may be just the beginning. In this article I will address, at a high-level, how IoT can potentially facilitate and improve the claims management process adding even greater value for those insurers that embrace the technology in their operations.
Claims management has always been a challenging part of insurance operations. In additional to the time and expense incurred by the insurer processing and managing claims, the claims process tends to be particularly unfriendly to customers. Even if unintended, bureaucratic processes and slow response times can give consumers the impression that insurers are intentionally delaying, or worse, looking to avoid pay-outs. IoT has potential to automate data collection and communication processes while proving a “record of truth” for events leading to a claim – resulting in lower costs to the insurer and a better customer experience. Let’s look at a few specific ways IoT may make a difference in managing your claims process.
First Notice of Loss (FNOL)
Relying on a consumer to initiate a claim introduces a level of risk and uncertainty for the insurer while simultaneously lessens the quality of the overall customer experience. After a loss, especially a major one, the last thing a consumer wants to do is to pick up a phone and talk to a claims rep. Yes, arguably a courteous and compassionate rep may give a consumer some level of “piece-of-mind.” But candidly customers facing a loss are anxious their insurer is going to be difficult or uncooperative. I would argue that there are better ways to give the customer piece of mind then requiring them to initiate a communication with a call center.
IoT devices can initiate the FNOL process on behalf of the customer and can do so, arguably, in a more compassionate and helpful way. Device alarms can notify the insurer of a potential loss long before the consumer contacts your claims department. The device triggering the notification has a time/date stamp which is of course associated to a customer address and policy number – basically, all the data needed to begin a claim is already available without the customer being inconvenienced. With this data in-hand, insurers might consider a first point of human contact being an outreach message of care and concern. Even if validation or confirmation is required to formally begin the FNOL process this proactive approach would be a unique experience for the customer whose original thought is “oh no, am I covered?”
This proactive outreach may also have potential in dealing with a growing problem of “Assignment of Benefit” the home owners space is starting to see. Engaging a customer a time of loss better positions insurers to guide the customer through more structured remediation processes from the start. An insurer’s first communication might include service provider recommendations based on the loss data from the IoT devices. This process may result in helping ensure that customers are aligned with trusted vendors versus hoping for the best that the situation is resolved properly, in addition to raising the customer service bar.
See also: Insurance and the Internet of Things
Claims support and fraud investigation
Back to point one, at the time of loss, the last thing a customer wants to do is speak to an insurance company. An insured may be rattled and not paying attention to details that may later become critical to proper assessment of a claim, or worse, a fraud prevention situation. But IoT devices are computers and their data is never subjective nor emotional – it is a record-of-truth. It also doesn’t make a difference if a customer is home or away during an incident, the IoT devices responds the same way registering whatever data it is set to convey.
IoT devices may also be labeled by users with indicators of location and use data – “motion sensor in bedroom”, “leak detector under hot water tank”, “smoke alarm in basement.” The naming of the devices with this level of specificity is a normal customer behavior and one that could enhanced when IoT kits are purposed built to not only help avoid loss but also to facilitate the claims process. These devices also may be recording “normal state” to provide a record of a situation prior to a loss.
Claims processing also doesn’t need to be limited to a single IoT data point. A Smart Home is likely to contain an ecosystem of sensors, many of which have data that can be leveraged in a claim review. For instance, say a connected smoke alarm trips, if the insurer has access to other sensors in the house (e.g. thermostat) a second device data set could confirm the incident with stronger certainty. Obviously these are never-before-available data points that can both help expedite claims processing and potentially lower fraud risk.
Remediation monitoring and confirmation
While the role of a claims adjuster isn’t going anywhere for some time, IoT devices have the potential to provide an early indication of the severity of a claim: what sensors were triggered, their location in the home, response time before a user disarms or acknowledges, etc. For example, a whole-home water sensor may be able to indicate that 200 gallons were dispersed and 5 water sensors in the home may have triggered, indicating a potential moderate to large loss. And while the confirmation of damage scope may still need to come from the customer or adjuster, there is an early indication on the potential loss – and the urgency of remediation.
A bit more futuristic, but IoT devices may also play a role in monitoring the remediation process. Devices may confirm the work process or the completion of work. Humidity or air quality sensors may confirm that a premise is “back to normal state.” Video imagery from IoT devices may record before, during and after imagery to confirm work done to a standard. Sensors may even reset or re-calibrate when all parties have finally agreed “work complete.” This process may even be triggered by the Insurers system of record in claims processing.
Once the sensor is seen as an enabling tool for remediation, I believe the customer will see it as an incredibly supportive piece of technology provided by their partner, their insurer.
Of course, with all these technologies, there are important considerations on behalf of both the insurer as well as the customer.
Customer awareness and privacy
– Concerns around “big brother” and privacy are very real – but the risk can be well managed over the long run. However, consumers must feel the risk/reward ratio is balanced. The best way to do achieve this is through transparency. Let your customer know you’re your objective is to create a better product – and better yet, show them by sharing the benefit in return for your access to their sensor data. Engage the customer and ask them for their preferences when it comes to things like communications or emergency outreach. Consumers are very savvy and tomorrow’s technology requires a level of transparency yet to be seen by the market. Encourage your customers to be part of the journey.
– Computers don’t exaggerate or lie, but sensors can be accidentally triggered. Early on there will be misses and false positives and some will be costly, but that is typical in all early technology cycles. Overall benefit to all insureds will be seen quickly if the process is allowed to mature. As consumers begin to realize the value of Smart Home goes beyond simply lights and doorbells into true home safety (and insurance benefits) engagement will grow and understanding the best course of action with the data sets that available will become clear to everyone involved. If need an example illustration, just look at telematics and auto insurance.
See also: Smart Home = Smart Insurer!
– IoT device volumes are still relatively low and functionality is still limited. As the insurance industry commits to a vision, deployments will become more widespread driving down price and raising the quality bar. This is highly consistent with any early technology deployment. If insurers engage, companies will double down efforts to meet the industry’s specific needs. And, no doubt, new business models will emerge to support the economics.
The IoT market is maturing quickly, and one of the biggest beneficiaries may be the insurance industry. Looking at the variety of ways IoT can benefit your organizations (loss prevention, claims management, customer engagement, etc.) is key to building an effective business case in this early stage. Getting involved with the IoT ecosystem now will both better prepare your organization for the market evolution as well as help ensure that your needs are well represented as the technology matures. With the above benefits in mind, I hope you agree that claims management may prove to be one of the pillars of the long-term IoT business case.