When losses occur during natural disasters, carriers in the $4.5 trillion insurance market understand that — in addition to safety — at the top of policyholders’ minds is how they are going to recover, and how fast. It is at these times that carriers must respond quickly and efficiently to make their policyholders whole again while keeping costs as low as possible.
Operating in a cost-sensitive and hyper-responsive market that affects all service industries, even the most sophisticated and progressive carriers often find themselves struggling to effectively deal with the scalability, complexity and unpredictability of managing a local, regional or national adjuster workforce. This typically drives up service costs, hindering service performance and ultimately hurting policyholder satisfaction, particularly in crises.
One way carriers can respond quickly and safely — and keep policyholders happy — when natural disasters strike is relying on an on-demand model to supply a scalable and affordable workforce. This article provides an overview of the strain that natural disasters place on carriers and discusses how the on-demand model can relieve pressure by revolutionizing how the insurance industry responds.
The Insurance Industry Is Feeling the Strain
Since Hurricane Andrew, the industry has shifted from a reactive to a proactive approach. This process is assisted by the development of much more sophisticated technology, fully formulated catastrophe response plans and the realization of the necessity for immediate response. Still, as natural disasters increase in frequency and strength, the insurance industry is feeling the strain.
It takes far too long to assess claims and initiate payouts following catastrophes in the current insurance environment. “Waiting six weeks, 12 weeks or more for financial reparations is terribly stressful for policyholders,” says Ryan Kottenstette, CEO at Cape Analytics. “Carriers are striving to do better, and emerging tech companies can help them.” Indeed, the internet, mobile apps, on-demand models, automated estimations, drones and storm tracking technologies are but a few examples of how technology is improving the speed at which insurance companies settle claims.
The main struggles for insurance professionals and insurance companies when dealing with large-scale natural disasters like the one-two punch of Hurricanes Harvey and Irma include extended response times and lack of resources.
Extended Response Times
“A stale claim is an expensive claim,” says John Rollins, an executive with Cabrillo Coastal General Insurance Agency LLC in Gainesville, FL. “The key… is getting to the policyholder and getting some money in their hands so they can begin the recovery process.”
Certainly, one of the biggest pain points is time. Anything that slows payouts diminishes their value at the front end of a crisis.
“There is a huge number of claims and a limited number of adjusters to handle them,” says Suzanne McCormack, director of business operations at Robert L. McCormack Public Adjusters. “As time goes on, the policyholders become more and more restless because their homes or businesses have been impacted, and they want to get back to their normal lives. People are understandably very emotional having been through the trauma of the disaster, then waiting and waiting to get back to normal.”
In addition to the emotional toll that wait times place on policyholders, delays open the door for insurance fraud. “In the past five years here in Utah, catastrophic winds have provided the opportunity for rogue roofing contractors to knock on doors with minor roof damage, claiming that they can help provide a free roof replacement,” says Brent Thurman of Keystone Insurance. “In some cases, the contractor has even removed additional shingles before the claims representative arrives in an effort to have the entire roof replaced rather than a smaller repair. This can be difficult to track during a normal claim load, let alone a time when claims adjusters are overbooked by the sheer volume of claims submitted during a catastrophe.”
Lack of Resources
Carriers have traditionally understood the value of in-person asset inspections. However, maintaining an infrastructure capable of quickly completing these inspections in any location has become cost-prohibitive for most companies.
As expected, during and after Hurricane Irma, many of Florida’s adjusters were still on the front lines in Texas, working on claims made after Hurricane Harvey hit. “I would have to say it’s difficult to find enough inspectors willing to work 12- to 14-hour days seven days a week,” says John Espenschied of Insurance Brokers Group. “Most large insurance carriers are facing thousands of claims daily that need to be inspected. However, there are only so many insurance adjusters around the country, and pulling hundreds away from their regular duties creates a shortage.”
Then there is the underlying problem of managing logistics during a crisis. “From a logistics perspective, the biggest issue for the insurance industry will be the ability or inability to ramp up quickly and effectively to appropriately service the volume of claims that have and will continue to be submitted after disasters like Hurricanes Harvey and Irma,” says Dawn Sandomeno, national director of brand management, Procor Solutions + Consulting. “Whether it is the insurance companies having enough trained staff to triage claim intake or insurance adjusters managing a portfolio of claim appointments to visit loss sites — many of which are inaccessible — the capabilities of the industry will continue to be tested.”
In fact, as insurers scrambled to get more of the nation’s 57,000 independent adjusters to Florida, it created a bidding war and the promise of a record payday for anyone available. It was reported that some Florida home insurers increased fees paid to adjusters by about 30%. In some cases, adjusters could earn $30,000 for evaluating a single complex property claim. Of course, these unprecedented increases in fees have the effect of increasing the cost of each claim.
See also: Why Is Insurance Industry So Small?
The Power of the On-Demand Model
We live in an era of immediate gratification where Uber provides rides on demand and Amazon delivers almost any product we desire on the same day we order it. Consequently, policyholders’ expectations for the types of services they want to receive continue to grow more demanding.
To respond quickly and safely, carriers can leverage innovative approaches that align business processes from information-gathering to claims adjustment. By further aligning these essential business processes in a real-time, location-based context, carriers will be in a better position to understand and calculate risk while responding during catastrophes in hours, not days.
Using workers contracted through an on-demand provider, carriers can get more done more quickly. They have access to a distributed workforce of vetted and trained information gatherers who are ready to be dispatched to the scene of a catastrophe at a moment’s notice.
As on-demand options become more accessible, the insurance industry is beginning to realize that some of its traditional processes are less efficient than they need to be. The idea of sending a highly-paid, licensed adjuster to handle every claim scenario, regardless of its complexity, is being questioned. “
During a catastrophe, many claims require only a simple validation of damage. But traditional claims handling processes are over-engineered for such a situation. Why send a highly paid, licensed adjuster when an on-demand workforce can validate the damage immediately for a third (or less) of the cost? Why tie up valuable adjuster resources on simple claims when there aren’t even enough adjusters to handle the more complex situations that do require their level of expertise?
This article is an excerpt from a white paper by WeGoLook, a provider of on-demand workforce solutions for the insurance industry and other industries around the world. You can find the full paper here.