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Training the Future Claims Adjuster

Unless you’ve been frozen in carbonite for the past 15 years, you’re probably aware that the insurance industry is facing two imminent HR crises:

  1. A Brain Drain– Twenty-five percent of the industry workforce is expected to retire by 2018, according to Insurance Business America. But wait! It gets better. In addition to filling vacancies caused by attrition, companies will have to recruit workers to staff the 200,000 new jobs the Bureau of Labor Statistics expects the industry to create by 2022.
  1. An Enthusiasm Gap– Even today, the industry is struggling to attract young talent. According to a 2012 study by the Griffith Insurance Education Foundation, only 5% of Millennial students describe themselves as “very interested” in working in the insurance industry. When it comes to considering a career as a claims adjuster, the “Y” in Generation Y stands for “yawn.”

Two Problems, One Solution

I believe new and emerging information technologies will play a critical role in overcoming both the Brain Drain and Enthusiasm Gap.

Many young people would rather view an endless loop of piano-playing cat videos on YouTube than work as a claims adjuster. Or so they think

With the imminent arrival of usage-based insurance, there is a lot of excitement developing in the underwriting sector, and I believe the same level of enthusiasm will also attach to technologies such as cognitive analytic computing. These new technologies are innovative. They’re challenging. They’re fun.

More important: Technologies like cognitive computing will change the very nature of the claims adjuster’s job – from one that requires a fair amount of dull administrative tasks to one that places much more emphasis on analysis, creative problem-solving and people skills.

Skills Will Trump Experience

In the future, we’ll see fewer claims adjusters in the workforce, but this smaller pool of talent will be trained in a different ways and in different skillsets than previous generations. Tomorrow’s adjuster will not possess – and will not need – the wealth of experience, knowledge and (to some extent) skills as today’s adjuster. Instead, new technologies will provide them with the tools to instantaneously obtain that knowledge, experience and skill.

The future adjuster won’t be trained in many of the manual and repetitive tasks his predecessor had to learn. Tasks with little or no value will be automated. Rather, the adjuster will have to be tech-savvy. She will have to know how to analyze information because, even with the help of cognitive computing, she’ll still need to analyze reams of information – data related to vehicles, collision-avoidance technology and event data recorders.

She will also have to be familiar with product liability issues. When self-driving cars become commonplace, adjusters may not be dealing with losses involving driver fault. Instead, they may encounter instances in which the vehicles malfunctioned – product-liability claims – and will have to know how to process claims with vehicle manufacturers and the suppliers of advanced collision-avoidance systems. Future adjusters will need to tap skills and knowledge that their forbears never dreamed of.

Tech-Savvy and People-Savvy

Future adjusters will have to be much more tech-savvy, even though they’ll be responsible for performing fewer tasks. At the same time, they’ll need superior people skills to ensure that customer service isn’t lost amid increasingly automated processes. Although the industry will automate many tasks, and many customers will be pleased with this development, customers are already demanding higher levels of customer service. The “personal touch” isn’t just a side benefit: It’s often the main driver behind a consumer’s decision to choose one carrier over another.

So adjusters of the future will be people who are very customer-oriented, very tech-savvy, very intelligent and very skilled at interpreting mountains of data. They won’t have to perform a lot of clerical and administrative tasks. Automation will virtually eliminate that work. But they will have to know how to optimize new technologies to deliver superior customer service and the best possible outcome to every claim.

We in the claims industry have to find ways to inspire, energize and interest young people in careers as claims adjusters. Currently, this isn’t a vocation many Millennials seek. With the help of new and emerging technologies, however, we can be seen as a fun, innovative and inventive sector that adds value to the lives of ordinary people. After all, getting into accidents causes a great deal of stress for most vehicle owners. For that reason, our industry needs adjusters who are adept at a wide variety of claims-processing and customer-service challenges.

How to Win in Commercial Lines

Commercial lines insurance is tricky. On the one hand, it’s one of the last bastions of niche underwriting expertise — there are specialist writers who know their markets better than anyone else and enjoy customer loyalty and consistently superior profits as a result. On the other hand, it’s still simply insurance — and it’s experiencing many of the same symptoms that the rest of the P&C insurance industry is facing:

  • Increasingly sophisticated underwriting and pricing models, opening the door to adverse selection
  • An ever-shrinking number of market-dominating insurers
  • An evolving marketplace, with technology companies entering insurance and a customer base increasingly made up of Millennials

These three issues are forcing fundamental changes in the way insurers operate, creating a dynamic in which there will be clear winners and losers. It’s important to recognize the changing conditions to be successful both today and in the future.

New players entering insurance
A look at recent headlines reveals some well-recognized brands that are now turning an eye toward insurance. Tech companies like Google and Facebook, e-commerce giants like Amazon and Overstock and retailers such as Walmart and IKEA are all making waves. It’s also not just personal lines that’s being affected; Overstock’s new insurance agency offers business insurance, including workers’ compensation. Why is there a sudden interest from new players? These companies oftentimes see opportunities for profit and growth in industries when there are fundamental inefficiencies that can be exploited, and generally start by employing data-driven strategies to compete on customer acquisition. Insurance executives understand this threat, as evidenced in a recent survey by the Economist that identified distribution (i.e., acquisition of customers) as the No. 1 vulnerability for disruption.

What’s particularly troubling is that half the respondents in the survey were unsure of how well prepared the industry is for the changes coming in the next five years. With competition from non-traditional companies that are technologically savvy, are trusted by consumers and have money to burn, insurers simply cannot afford to be uncertain about their future.

Catering to a new generation
Numbering 76.6 million in the U.S., Millennials are the largest population in the country. Unfortunately for the industry, this group also happens to be the demographic most dissatisfied with insurance products and services. The U.S. Census Bureau notes that Millennials represent $1.68 trillion in annual purchasing power, which means insurance has no choice but to adapt to the needs of their future customers, business owners and employees. The industry tends to categorize Millennials as a personal lines concern (homeowners and personal auto, specifically), but commercial lines will fall behind and be caught off guard without a new mindset.

Although insurance doesn’t carry the best reputation among Millennials, there is an opportunity to educate them and win their loyalty. According to a poll by the Griffith Insurance Education Foundation, Millennials know very little about the insurance industry — 80% of students answered that they didn’t know anything about the industry at all (and only 5% claimed to be very knowledgeable. This is likely why Millennials tend to purchase insurance from companies with easy-to-navigate websites and don’t always base decisions based on price alone, according to a 2014 J.D. Power survey. If insurers don’t make the Millennial generation a priority, the likelihood of them buying insurance from other companies with better name recognition grows more and more likely, even if that company isn’t a traditional insurer.

The risk of adverse selection grows as insurers get smarter
The increased use of advanced technologies among insurers spells trouble for those that are still playing catch up — the risk of adverse selection grows as competitors leverage predictive modeling techniques and gain access to new data sources that provide a broader view of the market.

As analytics becomes more pervasive in commercial lines underwriting, leading insurers will become more adept at increasing their market share. Insurers without advanced analytical tools are more likely to bind higher-risk policyholders at inadequate rates and less likely to bind lower-risk policies by failing to match their competitor’s lower-price offering.

Adverse selection is an insidious threat, because it’s completely invisible until well after it has infected a portfolio. Accurate pricing and superior risk selection are key, and predictive techniques have served as an important competitive advantage, going beyond traditional heuristics alone.

How winners gain their advantage
Workers’ compensation is, in many ways, a leading example for the rest of commercial lines. Combined ratios continue to decrease, making it more attractive for companies (both traditional and non-traditional) to come in. This crowds the market, forcing the industry to adopt more sophisticated competitive strategies.

When properly developed and implemented, the use of predictive models is a recipe for success. It helps to achieve the pricing precision needed to stay ahead of the competition while avoiding adverse selection in the marketplace. Insurers without the ability to identify and react to adverse selection will lose their competitive advantage and simply not survive.

As we’ll share in Valen’s annual outlook report for commercial lines this week, the benefit to using the latest analytical tools are huge, and the cost of doing nothing is equally as significant. Working the hard and soft market cycles no longer brings competitive differentiation — the competition is fierce in target market segments ,where superior risk selection and pricing clearly determines who the winners and losers are.

This article first appeared on WorkCompWire.