Tag Archives: moment of truth

Standing Strong in the Moment of Truth

In a blink of an eye, the world – society and all of humanity – are being stressed at every level imaginable due to the rapid spread of COVID-19. No one could ever have imagined or planned what this could really be like … including our industry. But since the beginnings of insurance, we have had a history of weathering all storms, all types of disasters and even pandemics. And I am confident that we will weather this one, as well. Insurance is a financially strong, resilient industry. We serve as a safety net for society, mitigating risks for all types of disasters – man-made or natural. This is who we are and what we do. And this is our moment of truth.

In the midst of all of this upheaval, we have a unique opportunity to do what is right by being a strong, dependable force for good. Our world – our employees, customers, partners and everyone in our ecosystem and beyond – need our strength and resilience, right now, tomorrow and every day moving forward. 

On the other side of this pandemic wave, the core of who we are as an industry will remain the same, but every aspect of what and how could be altered by this experience. The rules of engagement are changing, even as I write this blog. And that is okay. Every disaster presents new clarity and new experiences that create opportunities. 

At SMA, we are confident that new ideas, new approaches and new ways to accelerate the connections with our employees, customers, partners and everyone in our ecosystem will happen by adjusting and advancing digital transformation strategies and plans. 

See also: The Best Tools for Disaster Preparation  

Just remember, we are all part of this amazing insurance industry, and we are all standing strong. We will continue to stay present in this moment of truth. And we will do our absolute best to help you, as well. Just stay safe and healthy. 

Claims: Beyond the ‘Moment of Truth’

I have proudly worked in the North American insurance claims and information technology industry for over 30 years and have witnessed significant, albeit gradual, improvements in process and service. More recently, almost overnight, the switch of information gathering and distribution from analog to digital has transformed claims.

Mobile consumer technologies have been adopted rapidly, disrupting sales and distribution models and their supply chains. Instant gratification has become a natural expectation.  

Insurance Claims Process Evolution

In insurance, claims remains the “moment of truth.” Claims represents the best single opportunity for an insurer to engage personally with its customer, satisfy the coverage promise and foster loyalty. But claims has begun to evolve. It has been a highly complex, labor-intensive, stubbornly long, expensive and customer-unfriendly process. But it is benefiting in a big way from new and exciting technologies, and investors are eager to place bets on a new generation of entrepreneurs who shun working for large corporations (at least until those companies acquire them for mind-boggling amounts).  

The “Amazon effect” (immediate delivery of virtually anything from entertainment to information to merchandise to food through a simple, digital interface) drives consumer expectations even for insurance claims service, no matter the behind-the-scenes complexities involved. In the fiercely competitive personal lines market, traditional carriers are responding by transforming the claims process to make it more “Amazon-like.” In the process, carriers are lowering claim costs, producing savings that can then be reinvested in lower, more competitive, insurance premiums. 

See also: Breakthroughs Finally Appearing in Claims   

The claims process is still complex. It involves many disparate technologies and services, and firms that range from very large corporations to smaller, more local providers. Integrating and streamlining all of the related interactions is not trivial. But new, low-cost computing capabilities and information management technologies are enabling the interoperability of this ecosystem, leading to an array of profound changes, including these 12.

Claims in 2020 and Beyond

  • Control over first notice of loss (FNOL) will be contested as technology enables real-time accident notification. The change will allow for new influences in claim process response, resolution and the customer relationship 
  • Average cost of auto repair will rise further, exceeding $3,600, as more late-model-year cars enter the car park loaded with costly accident avoidance and self-driving technology that requires post-accident scanning and recalibration. A $5,000 average repair cost is already in sight. This trend will be reinforced by strong consumer preference for more expensive light trucks and SUV/CUVs, now representing 70% of new sales, and, soon, more electric vehicles (EVs)
  • As cost of repair climbs, so, too, will total loss frequency. It is now at 24% for some carriers, increasing claim costs and placing added stress on valuable claims-adjusting resources. Tech-enabled processing solutions will emerge to compress cycle times and ensure compliance, but deployment and integration will take time 
  • The collision repair industry and its traditional direct repair program (DRP) relationships with insurers will change in more fundamental ways as OEM repair network certification programs gain traction, with support and encouragement from trade groups, consumer safety, legal and regulatory advocates. This, in turn, will add upward pressure on average repair costs  
  • Growth in claims self-service, including auto photo estimating, will outpace other methods of inspection. The change will upend staffing models and disrupt appraisal work forces as well as the traditional collision repair referral process
  • A culture of speed and transparency will develop and attract new talent, filling an important gap
  • AI, including computer vision, machine learning, data analytics and automation, will begin to streamline and compress the insurance claims process, identify and deter fraud and remake related work forces and skill sets 
  • Digital imagery and measurement from aerial to drone to ground-based will permanently alter the property claims estimation, settlement and repair process. The change will create new strategic partnerships between carriers and third-party providers and transform the property claims field and desk appraisal
  • On the journey toward touchless claims, carriers are realizing that they need to deliver empathy at scale. They will leverage intelligent platforms while recognizing and deploying emotional data – and achieving a proper balance between digital and human touch 
  • CEO-led diversity and inclusion initiatives will become critical to attract talent in claims and boost organizational performance across the enterprise as well as increase competitiveness in the market
  • Emerging technologies getting greater attention and testing in claims use cases will include virtual and augmented reality (VR/AR) for staff training, field service and support
  • Success in the art of developing and managing effective strategic alliance and partnerships and collaborating with others, including competitors, will become table stakes for innovation 

Collaboration in Action

Now, more than ever, cross-industry collaboration across the vast claim ecosystem is critical to delivering an efficient, high-quality, low-cost claims experience to policyholders. One excellent forum for such collaboration is Connected Claims USA Summit, taking place this year in Chicago on June 24-25. As chairman of this exciting event, I invite you to join us this summer to discuss and learn how to move from strategy to action and implement the future of claims today.

See also: Future of Claims Intake for Insurance?  

What if Auto Claims Just Keep Dropping?

This week’s announcement by the National Insurance Crime Bureau (NICB) that vehicle theft is down by more than 50% compared with 1991, despite an increase in population and registrations of more than 60 million cars, caused me to consider the much bigger implications of shrinking frequency in the entire category of auto claims and what it means to the $200 billion-plus U.S. auto insurance industry.

In an impressive achievement, auto claims frequency has been creeping down slowly but surely since the 1986 new vehicle model year, when high-mounted brake lights became standard equipment by federal mandate. While fluctuations did occur in some years, caused by a variety of macroeconomic factors, the trend is assuredly downward. Factors include an aging driver population, reductions in miles driven because of a protracted recession and increasing gas prices, increased migration to more urban areas and the emergence of alternative transportation models.

Without becoming distracted by the nuances of frequency variations between various lines of auto insurance coverage (physical damage; collision and comprehensive and liability; bodily injury and property damage), the fact is that the net overall accident frequency trend continues downward. Indeed, adjusted loss ratios for auto insurance carriers fell to an industry average 65.8 in 2013, and some carriers posted even better results. Lower auto claim frequency was clearly a factor.

Add to this: the increasing introduction by almost all automakers of driver-assist and crash-avoidance technologies; the rapid penetration of telematics that enable real-time driving hazard and safety alerts; and the specter of fully autonomous (self-driving) vehicles coming faster than anyone might imagine. Further dramatic auto claim frequency reduction can be considered a certainty.

The auto insurance premium pie is set to get smaller. Younger consumers, increasingly urban dwellers, are shunning vehicle ownership for improved public transportation systems, municipal-sponsored bicycle-sharing programs and vehicle and ride sharing. And, over the recent prolonged recession, those who did purchase auto insurance become comfortable with higher deductibles as a means of reducing premium costs. That behavior is not likely to change. Usage-based insurance (UBI) programs, at least so far, have attracted mainly drivers with safer records, as well as low-mileage drivers. So, UBI has further eroded auto premium. The claim and loss-cost improvements from these programs anticipated by carriers may or may not materialize in time, but that will depend on carriers learning to leverage data and create custom products much more effectively.

Ironically, the auto claim was known as “the moment of truth” for auto insurers – their chance to reinforce the loyalty of policyholders by making good on their service promises at a challenging time for the customer. As the number of opportunities for carriers to provide claim service excellence diminishes, they will have to find alternative customer engagement strategies. Risk reduction and accident avoidance could just be that opportunity.

Regardless, the bottom line is this: Auto insurance carriers (as well as their key trading and supply chain partners) should start today to position themselves to survive in a market that is slowly but surely shrinking and changing.