September 27, 2017
Using Catastrophes to Rethink Claims
by Denise Garth
Any effort aimed at improving the claims experience through catastrophic preparedness will bear fruit in loyalty.
Houston and Harvey. Florida and Irma. The West and the Wildfires. Hail in the Midwest. Floods in the South. Will 2017 set a new record for catastrophe claims?
According to the Insurance Information Institute (III), 2013/14/15 and the first 9 months of 2016 were welcome respites from insured disaster losses, totaling between $13 billion and $18 billion.
This is far lower than several other periods in recent history. These would include Sept. 11 in 2001 ($39.5 billion), Hurricane Katrina in 2005 ($77 billion) and 2011/2012, which were among the costliest years in U.S. history with $35 billion to $37 billion in losses. The Insurance Information Institute points out that the long-term trend is for more, not fewer, costly events. Preliminary estimates by AIR Worldwide have placed the low end of 2017 damages at over $115 billion accounting only for damage from Hurricanes Harvey and Irma.
When catastrophes hit, they hit insurers hard. They decimate the lives and livelihoods of individuals and families, but they can also wreak havoc on the systems and reputations of those who will be trying to assist in the restoration and rebuilding. Insurance executives are undoubtedly wondering if they are prepared enough, what they can do differently and what they can improve before the next natural disaster strikes. Customer service and marketing are worried about retention rates, service ratings and net promoter scores. Operations is concerned about scalability during claims events. Finance is (understandably) concerned over losses.
In my next three blogs, we will take a close look at holistic claims preparedness. How can we use catastrophe preparations to improve our customer value, save customers from additional loss and lessen claim impact on both the insured and the insurer?
Claims Pays Back
What is important to remember is that from a satisfaction standpoint, one claim or a tremendous number of catastrophic claims both have the potential to positively or negatively impact satisfaction, retention and recommendation. According to a 2016 J.D. Power post-claim survey of auto insurance customers, 84% of delighted claimants will definitely renew their policy and 83% will definitely recommend their insurer. Among displeased claimants, 12% will definitely renew and 7% will recommend their current insurer.
What does this tell us? It suggests that any effort aimed at improving the claims experience through catastrophic preparedness isn’t effort wasted if the catastrophes never come. These efforts will bear fruit in loyalty and recommendation — the positive results of a thoughtful, “rethought” claims value chain.
See also: Harvey: First Big Test for Insurtech
Adopting a Holistic View of Claims
What does a catastrophe-prepared insurer look like? How can we use our new knowledge of catastrophic events and our years with fewer claims to ready ourselves for those times when we will be inundated? What can we do to give customers a superior claims experience from pre-claim through restoration — anytime — even outside of catastrophic events? What new technologies can change and enhance the process?
Some years ago, customer-focused business practices came into vogue and most insurers started paying attention to every area of the organization and its relationship to the customer. What many didn’t realize was that this shift was never-ending, because shifting demographics and customer expectations would continually be in flux. Very few insurers realized quickly that claims is perhaps the most vital front-line touch point because of its overall power to drive loyalty. This caused their definition of the scope of the claims process to remain limited. (“People make a claim. We assess the damage and pay the claim. We use technology to quickly assess and pay.”)
In reality, claims has become a hotbed for opportunity, where a holistic vision of a technologically-advanced process can truly revolutionize everything from damage impact to efficient and effective replacement and restoration. In its depth and breadth, claims is no longer claims at all, but it encompasses everything that flows from prevention to protection to assessment and restoration.
Where Technology Intersects with Catastrophe
The process opportunities lie in the places where technology can be employed to achieve cost-savings and improve satisfaction. Just considering the possibilities can be overwhelming. Here is a tiny sample of places where technology can be employed to rethink the claims process.
- Global Information System (GIS) data to identify and predict impacted customers.
- Rules-based alert libraries, cross-referenced to policyholder property and contact data
- Drone views of property pre- and post-catastrophic events.
- Redundant and cloud-based operations and communications for reduced business impact
- Artificial Intelligence to predict likely post-catastrophe fraud scenarios.
- Adjuster mobilization, prioritizing and routing.
- Multi-touch communication plan and CRM that weaves human contact and digital contact into a cohesive approach (No claimant left untouched.)
- VR educational simulations to walk claimants through a process they may have never encountered.
- And there are so many more…
The simple exercise of walking through the claims process with an eye toward streamlining and improving service will yield a long-list of fantastic opportunities for claims innovation. Though every insurer will prioritize differently, we’ll highlight some of the most impactful areas, beginning with communications.
Where the Digital Thread Begins
You have just received a text from your insurer via a chatbot.
“Hail is coming to your area. Place your car into the garage.”
The insurer is in touch with current weather, knows your address, knows you have a garage and perhaps even knows where your car is currently parked. That would be a “digital win” and the beginnings of a digital thread that could run through many applications in insurance operations. If we can’t keep catastrophes from happening, we can keep our insureds aware of their potential. We can warn, suggest preparations, suggest evacuation, prepare and send an initial first notice of loss (just in case) and mentally prepare people for what is coming and what is next. This is just the beginning of the digital thread that will impact claims service. There are dozens of these digital threads and we’ll be discussing many of them throughout the course of this series.
See also: Hurricane Harvey: A Moment of Truth
We should acknowledge at the outset, however, that no insurer can employ and “conquer” every digital opportunity at once, and every insurer will have a unique perspective on how these technologies should be acquired or employed. In some instances, technologies will be rented (e.g. drones), borrowed (AI) or tested (cloud) before diving into full use. In other cases, digital capabilities will be fully-integrated into operations at the outset. In all cases technology will add a valuable layer to protection and service.
In our next blog in this series, we’ll be looking at these layers through the lens of Operations. How will our tech decisions move us toward the optimal claims value chain? How do we need to rethink the holistic process – possibly extending beyond where we have traditionally been? Can these external disruptions positively impact our internal use of disruptive technologies? How will our internal catastrophe preparations not only create an innovative claims process, but also create a consistent claims experience that will foster loyalty and lift us above the competition? I hope you’ll join me in this relevant and rewarding conversation.