Tag Archives: first notice of loss

Breakthrough for Blockchain?

While the enormous potential for blockchain in insurance has been apparent for a while, I’ve been waiting to see a breakout application hit the real world. I think I saw one last week, albeit in a different industry.

An article on Quora reported that Amadeus, a global reservation system, has adopted a blockchain-based system for verifying health clearances, such as COVID-19 vaccination records, for travelers.

The system will have to adapt as the pandemic continues to unfold and, in particular, as policies on eligibility for travel evolve, so success is by no means guaranteed. But I think this rollout is one to watch, because it’s the first I’ve seen that aims at truly massive scale, of the sort that will need to occur in the insurance industry as blockchain tracks certificates of insurance, manages first notice of loss and so on.

Initially, the blockchain system, IBM’s Digital Health Pass, is being used by just six airlines: Air Europa, Air Corsica, French Bee, Air Caraibes, Air Canada and Norwegian Air Shuttle. But all 474 airlines in Amadeus can activate the capability, and the need is pressing — the Quora article opens with a description of travelers queued up at London’s Heathrow airport for as long as six hours in April while waiting for agents to make sense of the various COVID-19 health clearances.

“Imagine small cards, stamped documents, and digital apps in various languages and formats,” the article says. “The lack of standardization was a killer.”

With the blockchain system, travelers provide credentials that back-end technology authenticates against the requirements of each country and airline, recording all information in a secure ledger. When travelers approach agents at airports, they have a QR code emailed to them that is then scanned and validates their eligibility for travel. The process is simpler for travelers and far simpler for agents. The process is also adaptable. As travel restrictions change, the electronic systems can sort through all the complexity in the background and still give the agent a binary decision: authorized or not authorized.

The hope is that blockchain could extend well beyond the health pass and supplant much of the other paperwork, including physical passports, that comes with travel, especially across borders. But just having the health pass work at scale would, for me, be plenty of validation for the blockchain concept.

We know from our friends at the Riskstream Collaborative that applications such as for proof of insurance and for first notice of loss are in advanced stages of development. And once one use takes hold — even if it’s in the airline industry — I think the technology will mature and trust will increase, meaning that progress will happen rapidly from then on.



Insurance-as-a-Service 2021

It seems there are more insurtech predictions than ever for P&C insurance in the new year. Some of my favorites include; rise of the ecosystems, embedded insurance (in just about every product and service) and big strides for AI and telematics.

Ever since the insurtech wave began, massive disruption has been anticipated. Several startups have done just that. Some have enabled efficiency gains through automation. Others have made the customer experience easier and faster, from shop to quote to bind and everything in-between. Usage-based insurance solutions are changing how insurance is consumed through pricing based on usage amounts or personalized degree of risk. All sorts of new companies are simplifying insurance policy language or organizing information in one place. Many intend to create insurance-as-a-service, or proactive insurance.

Despite all of these advances, the insurance model itself still remains reactive. The claims model is probably the most reactive part of insurance; services generally do not begin until after a claim is made. And there is a five-day average lag from time of loss until a customer initiates first notice of loss (FNOL). The promise of telematics crash detection is beginning to change this dynamic, allowing for immediate claim services. GM’s recent OnStar automatic crash response is one of numerous telematics concepts that detect and engage proactively. However, adoption rates and insurer activation are currently very low.

Should insurance prevent, detect and mitigate losses proactively?  

Smart home sensor technology offers a similar promise by detecting and preventing losses. Water shut-off and leak detection systems can both identify and prevent damages. Distracted driver prevention and driver coaching technologies can avoid accidents altogether.

So, should insurance go beyond traditional reactionary services and serve to prevent, detect and mitigate losses proactively? The short answer is usually a resounding, yes. After all, fewer losses are of mutual benefit to both customers and insurers alike, not to mention for society at large. There are some pockets where insurers are already helping mitigate losses, but there are several barriers to broader prevention and detection remaining.

Barriers to proactive insurance models

Loss control is a well-leveraged capability by insurers mainly in commercial lines. Safe work places for workers compensation claim avoidance, fire safety prevention and fleet driver programs are a few examples. In contrast, personal lines have been underserved because safety programs are costly to administer. Loss prevention for personal lines has been centered on risk selection and pricing, thus underwriting. Home and auto lines loss prevention efforts have paled in comparison, focused on issues such as FAQs or free replacement of washing machine supply hoses. Such efforts have not demonstrated meaningful benefit.

Insurance company discounts have not kept pace with customer expectations for smart home sensors. Costs to install are another barrier. Although usage-based insurance can generate significant savings, much of the marketing attention is devoted to switch-and-save or attracting new customers. This may be just one reason for low adoption rates, often around 5% of an insurer’s portfolio. Tackling the issues of discounting, promoting or explaining technologies and addressing privacy concerns could go a long way to achieving higher adoption. And advancing technologies like telematics to coach and guide drivers to prevent accidents calls for much more customer engagement.

See also: How to Accelerate Innovation: Pairing

The road to claims-as-a-service has some deeper issues to resolve. Crash alerts can only bring value once false positive alerts are screened and customers are thoughtfully and carefully engaged following a detected incident to ensure that making a claim is warranted. Meanwhile, FNOL contact centers are designed and staffed for inbound phone calls, dispensing only generalized information while gathering information until a licensed adjuster is ultimately assigned – which can be a day after FNOL or longer. Even though loss intake can happen around the clock, getting access to decision makers is often sequenced to the dissatisfaction of customers. 

Insurance claims processes actually limit the degree of guidance and advice due to risk concerns. Yet, a proactive model calls for addressing urgent and emergency needs regardless of reporting an FNOL. So, there are a host of risk tolerance, structural, skill and mindset barriers for incumbent insurers to resolve.

What’s next?

The future of insurance as-a-service, especially for claims, requires an action-based model that leverages on-demand support vs. generalists, guidance vs. unbridled options, rapid response vs. assignment hand-offs and on-demand experts vs. sequenced specialists – all of which are inherent in today’s claim process. Discounts, technical support and expert care will go a long way to increase adoption, and some are beginning to materialize, which is good news.

Perhaps 2021 will be the year for insurance-as-a-service to take another step forward.

Put Tow Professionals at Center of Claims

Insurance carriers have put a lot of resources into optimizing the auto claims process, and they’ve made significant progress. The industry cut the average amount of time it takes to return a repairable vehicle to the customer after the first notice of loss from 13.5 days in 2018 to 12.9 days in 2019, according to J.D. Power, and then to 10.3 days in 2020, though the 2020 gains were at least partially due to fewer cars on the road during the pandemic.  

Many insurers now provide AI-powered claims technology that enables the consumer to report an accident and supply the information needed to settle the claim without ever leaving home. Unfortunately, even with these tools, consumers still take an average of four days to report the accident and another three days to deliver the required images that allow their carrier to use these new AI tools for their claim. That’s seven days of costs — car rental fees, storage charges, etc. — and a significant delay in settling the customer’s claim.

Obviously, the vast majority of consumers want to get their cars back in working condition as soon as possible. So what explains these delays?

The primary issue is that motorists are not in the best position to capture accident information. Following an accident, they are often understandably dazed and focused on their health, the health of their passengers, interactions with law enforcement and the shock of the accident. They’re likely not thinking about taking exact photos of the damage to get their insurance company the data they need to start the claim. In the worst-case scenario, the motorist may be injured and completely unable to make a report.

If a vehicle is undrivable, it will likely be towed to a storage lot, and, many times, the claimant may take days to get the insurance company the information it needs to find and recover the vehicle, and also capture the photos needed for the claim. All the delays increase costs.

Likewise, customers may not be technically savvy. While many of us can use mobile app tools with ease, many others may not be able to navigate them without significant prompting. Even if they are able to use the tools, consumers are not experts in accident-scene images or insurance claims, so the photos they send may be incomplete or unusable, again causing further delays and increasing costs.

Enter the Tow Professional

Instead of relying entirely on consumers to self-report, insurers would likely see faster, more accurate reports if they were to partner with tow providers. After all, nearly all insurers now offer roadside assistance to their customers, so insurers will have a partner already on the scene for accidents that render the car undriveable, which are typically the most expensive claims. Plus, tow operators are in a far better position to capture accident scene information than are motorists. They’ve probably already worked hundreds, even thousands of vehicle accidents, so they’ve seen it all before; a tow operator is far more likely to be in a calm state of mind than the motorist. 

Additionally, tow operators work with vehicles and the damage they incur in an accident on a daily basis. The operators already know their way around an accident scene. Plus, as partners, they can be held to certain standards under a contract and required to undergo training to follow a repeatable process. A motorist is under no contractual obligation, will likely be filling out the accident report for the very first time and almost certainly will have never reviewed the process beforehand. And the more accident reports a tow operator files, the better the operator will become at taking proper photos and providing the required information. 

See also: The End of Auto Insurance

Of course, tow operators won’t be at the scene of every accident. If the vehicle is driveable, there’s no need for a tow, and not all customers will opt for the insurers’ roadside assistance program. But for those customers who do sign up, tow operators who are part of the insurer’s network will be on the scene for the most serious and costly accidents. By getting accurate information and photos the same day as the crash, carriers can reduce the amount of time the vehicle stays in storage and accelerate returning it to the customer or providing a settlement if it is totaled. As a result, the carrier not only saves money but increases customer satisfaction.

Tow operators are already on the scene. Insurers should leverage them to provide claims information and provide better outcomes for everyone involved.

The Connected World: How It Changes Claims

Automation is transforming claims processing in myriad ways. Damage appraisals that are completed in only a few hours are becoming the norm―shaving days off cycle time and making the claims process easier than ever before. Insurance customers are getting comfortable with snapping a few photos of their damaged vehicle and sending them to their insurer via a simple mobile claim app. Drones are often dispatched to inspect storm damage on a home, allowing property adjusters to complete virtual damage inspections. Data delivered electronically early in the claims process is revolutionizing the claims workflow, simplifying claim reporting and providing a wealth of actionable data to expedite claim settlements.

What do customers think about the advent of claims automation? How can insurers leverage today’s technology and real time data to wow their customers? These are just a sample of the questions we wanted to answer with our Future of Claims panel of experts at the LexisNexis Customer Advisory Meeting on Sept. 11, 2018, in Scottsdale, AZ. This session, which I moderated, included experts Dave Pieffer (P&C practice lead with J. D. Power & Associates), Jimmy Spears (AVP auto experience with USAA) and Lily Wray (VP emerging technology operationalization with Liberty Mutual).

See also: 3 Techs to Personalize Claims Processing  

Data from the 2018 J. D. Power Claims Customer Service Survey, presented by Dave Pieffer, informed our discussion around the following four themes (with the customer perspective for the themes shown in quotes):

  • Show Empathy―“Listen to Me”
  • Streamline Customer Communications―“Simplify for Me”
  • Improve Service Speed―“Prioritize Me”
  • Optimize and Balance Self-Service Options―“Empower Me”

Show Empathy

The survey found that showing empathy (“Listen to Me”) ―expressed as “ensuring the customer feels more at ease”―scores low, with an industry average of 66%. Pieffer shared that the only empathy category scoring lower was “taking the loss report in 15 minutes or less”―with an average of 59%. The panel explained the importance of listening to customers as a first priority and improving FNOL scripts to be more natural and conversational versus impersonal (such as simply providing a list of questions). Jimmy Spears emphasized the importance of adopting a user-friendly self-service claims reporting process. He introduced the term “digital hug”―an immediate digital response to a customer’s electronic claim report or message. Spears shared that often customers who report electronically will immediately also call to ask, “Did you get my report?” Providing a digital hug gives customers the assurance that they have been heard and action is underway. The panel audience participated in the session by answering real time electronic polling questions from their phones, and in this case responded that simplifying the FNOL process with fewer questions was the most important way to increase customer empathy.

Streamline Customer Communications

On the topic of streamlining customer communications (“Simplify for Me”), Spears explained that “pro-active communication is the key to success.” Pieffer shared statistics showing that customers are most satisfied when the insurer updates them with claim status information. The survey results supported this information through scores indicating deteriorating satisfaction when customers find themselves having to call their insurer or repair facility. The panel agreed that getting the claim to the right person quickly and avoiding multiple handoffs was critical to improving customer communications. This was confirmed by survey data that showed consumer ratings drop by 133 points when customers are asked to repeat information during the claims process. The audience’s real-time polling indicated that typically at least three claims employees touch even the simplest claims.

Improve Service Speed

Customers expect their insurance company to make them a priority (“Prioritize Me”) when they have a claim. While we often think this means fast claims service, Pieffer explained that the survey results indicated that setting an accurate customer expectation at loss report was equally important to processing speed. In fact, meeting customer expectations on time-to-settle increases customer satisfaction scores even more than simply providing a fast claim experience. Spears explained how his company has completely redesigned the total loss claims experience by simplifying not only claims processing but also the car purchasing process via USAA Bank services and the USAA car buying service, which allows customers to be in their next car within a few days versus a few weeks (the industry average). Audience polling revealed that the optimal time to pay a simple claim should be within three days. Pieffer noted that the survey indicated today’s industry average is about six days.

Optimize and Balance Self-Service Options

Our final discussion topic (“Empower Me”) focused on the use of self-service technology. Pieffer shared data showing that Gen X and Gen Y customers (younger than age 50) were most comfortable with submitting damage photos via a mobile app and receiving electronic claims updates. While this was not a surprise, it was interesting to learn that satisfaction with digital FNOL was low for all age groups. The panel spoke about the need to simplify the FNOL process to minimize the clicks it takes to complete a digital FNOL. This was validated by audience polling, which overwhelmingly supported simplifying FNOL apps and minimizing clicks. I shared the value of bringing real-time data into FNOL and self-service applications to electronically verify first-party information to minimize additional inquiry. Furthermore, I noted that real-time FNOL data also allows third-party information to be collected immediately and accurately to simplify the FNOL process and make self-service reporting much easier for customers, which should greatly increase customer adoption.

See also: The Missing Piece for Customer Experience  

The panel discussion and audience poll answers confirm that delighting customers at time of claim is all about listening to, simplifying for, prioritizing and empowering them. As the P&C insurance industry continues to advance in claims automation, these four customer expectations should be front and center to ensure greater customer satisfaction and retention.

Insurtech Is Ignoring 2/3 of Opportunity

Fifty-six cents of every premium dollar is indemnity (loss costs). A further 12 cents is needed to assess, value and pay those losses. Given that two-thirds of the insurance industry economics are tied up in losses, it would be logical that much of the innovation we are now witnessing should focus on driving down loss costs and loss adjustment expense — as opposed to the apparent insurtech focus on distribution (and, to a lesser extent, underwriting).

This is beginning to happen.

What do you have to believe for loss costs and adjustment expenses to be a prime area of innovation and disruption? You have to believe that the process (and, thus, the costs) to assess, value and pay losses is inefficient. You have to believe that you can eliminate the portion of loss costs associated with fraud (by some estimates, as much as 20%). You have to believe that there is a correct amount for a loss or injury that is lower than the outcomes achieved today, particularly once a legal process is started. You have to believe that economic improvements can happen even as customer experience improves. And you have to believe that loss costs and adjustment expenses can decline in a world in which sensor technology starts to dramatically reduce frequency of losses and manufacturers embed insurance and maintenance into their “smart” products.

See also: ‘Digital’ Needs a Personal Touch  

Having spent years as an operating executive in the industry, I happen to believe all of the above, and I am excited by the claims innovation that is just now becoming visible and pulling all of the potential levers.

We are seeing an impact on nearly all aspect of the claims resolution value chain. Take a low-complexity property loss. Technology such as webchat, video calls, online claims reporting and customer picture upload are all changing the customer experience. While the technologies aren’t having a huge impact on loss adjustment or loss costs, they are having profound impact on how claims are subsequently processed and handled.

One such example, as many have heard, is how Lemonade uses its claims bot for intake, triage and then claims handling for renters insurance. Lemonade’s average claim is a self-reported roughly $1,200 (low value), and only 27% are handled in the moment via a bot as opposed to being passed to a human for subsequent assessment. Still, Lemonade certainly provides a window to the future. Lemonade is clearly attacking the loss-adjustment expense for those claims where it believes an actual loss has occurred and for which it can quickly determine the replacement value.

More broadly, Lemonade is a window into how many are starting to use AI, machine learning and advanced analytics in claims in the First Notice of Loss (FNOL)/triage process — determining complexity, assessing fraud, determining potential for subrogation and guiding the customer to the most efficient and effective treatment.

While Lemonade is the example many talk about, AI companies such as infinilytics and Carpe Data are delivering solutions focused specifically on identifying valid claims that can be expedited and on identifying those claims that are more questionable and require a different type of treatment. These types of solutions are beginning to deliver improvement in both property and casualty. New data service providers — such as Understory, which provides single-location precision weather reports — can be used to identify a potential claim before even being notified, which can reduce loss costs through early intervention or provide reference data for potentially fraudulent claims.

Equally interesting is the amount of innovation and development appearing in the core loss-adjusting process. Historically, a property claim — regardless of complexity — would be assessed via a field adjuster who evaluates and estimates the loss. Deploying technical people in the field can be very effective, but it is obviously costly, and there is some variability in quality.

In a very short time, there are very interesting new models emerging that reimagine the way insurers handle claims.

Snapsheet is providing an outsourced solution that enables a claimant of its insurance company customers to use a service that is white-labeled for clients. The service enables the claimant to take pictures of physical damage, which is then “desk adjusted” to make a final determination of the value of the claim, followed by a rapid and efficient payment.

WeGoLook, majority-owned by claims services company Crawford & Co, is using a sophisticated crowd-sourced and mobile technology solution to rapidly respond to loss events with a “Looker” (agent) who can perform a guided process of field investigation and enable downstream desk adjusting process, as well.

Tractable provides artificial intelligence that takes images of damaged autos and estimates value (effectively a step toward automatic adjudicating). Tractable — like, Snapsheet and WeGoLook — has made great strides. Aegis, a European motor insurer, is rolling out Tractable following a successful pilot. In each of these instances, the process is much improved for customers — whether it be self-serving because they choose to do so (Snapsheet), rapidly responding to the event (WeGoLook) or dramatically reducing the cycle time (Tractable). All provide material improvements in customer experience.

See also: Waves of Change in Digital Expectations  

Obviously, each of these models is attacking the loss adjustment expense — whether through a more consistently controlled process of adjusting at a desk, using AI to better assess parts replacement vs. repair or improving subrogation, among other potential levers.

Today, all of these solutions are rather independent of each other and generally address a low-complexity property loss (mostly in the auto segment), but the possible combination of these and other solutions (and how they are used depending on type and complexity of claims) could begin to amplify the impact of technology innovation in claims.