In working with our insurance carriers of all tiers, many clients ask me which key performance indicators (KPIs) are the most measured in the P&C industry. While there are several that are widely used and accepted, frankly, they are outdated. I can confidently say that both the measures and emphasis are changing for the better, though.
For many years, the industry focused on paint and parts (specifically the ongoing repair vs. replace debate). Even though the parts metric has been the industry standard for many years, it is flawed. The parts metric measures the "percentage of parts dollars," which on the surface seems logical, but any time you measure a percentage of something, it can lead to unexpected results.
Take alternate parts for instance, the prime example of why this metric is ineffective. Let's say you have a $2,000 estimate in which $1,000 is spent on parts. Of that $1,000, $200 is for a used door.
According to the old metric, your used-part use would stand at 20 percent. If you found a cheaper door for $100, your used parts use would dip to a mere 11 percent. Unfortunately, this promotes selection of the most expensive alternate part to increase the percentage of dollars, not exactly an optimal approach.
The sole reason for tracking KPIs is to control costs as best as possible, which is obviously not happening here. Better to measure the number of parts by type and the delta "savings" between the alternate part and the original, new OEM part.
Another dated mantra? The estimate is king. Not anymore.
Today's most-tracked measurement has nothing to do with estimate writing at all. By far the most important measurement is customer satisfaction with the claims and repair process. Insurers have realized that it is far more cost effective to retain current customers than to obtain new ones. Policyholders see the claim as the "moment of truth" because it is the fulfillment of the promise the carrier made when the policy was sold.
Interestingly, insurers trust much of this experience to outside partners. According to JD Power and Associates, a customer's satisfaction points in the auto claims process are 62 percent related to the estimation process and 36 percent related to repair experience, with the remaining two percent pertaining to the rental car. If a policy holder chooses to use a Direct Repair Program body shop, 98 percent of their potential satisfaction is based on the shop's performance. No wonder DRP shops are being so closely monitored!
So the question is, what KPIs do you most value?
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