As a light turns green, a driver, whom we'll call Bob, proceeds into the intersection. Moments later, Bob is broadsided by another car, becoming one of the more than 5 million traffic accidents reported in the U.S. each year, according to National Highway Traffic Safety Administration (NHTSA) data.

Fortunately, both Bob and the other driver carry automobile insurance. They exchange information, and each begins the process of filing a claim. This article, the first in a series of three, follows the path that Bob's claim will take during the initial phase.

Now Bob's first step is to contact his insurer, thereby creating a first notification of loss (FNOL). In this case, he reaches a call center. The information he provides and the evidence the call center representative gathers will have a direct impact on the outcome of the loss. For Bob's insurer to resolve his claim, the representative must complete the investigation by ascertaining proper coverage, as well as the extent of the damages and liability. The representative asks Bob a few questions, adding that an adjuster will be in touch.

Everything that happens, from the FNOL onward, will determine how quickly and cost-effectively Bob's claim is settled and how satisfied Bob is with his insurance carrier. Although this should be a straightforward process, it is precisely at this point that a number of costly things can—and often do—go wrong.

What Can Go Wrong?

One of the key problems in the FNOL process is that not enough information is gathered. Typically, the call center rep merely takes the facts of the loss and hands off the claim to an adjuster. By failing to complete the proper triage, the rep may make inaccurate assumptions. In Bob's case, the assumption has been made that his car can be repaired. As a result, it has been misrouted to a body shop. In fact, his air bag deployed, and the vehicle is a total loss.

In a different scenario, failure to conduct the proper triage process might result in the wrong personnel being deployed to the scene of the accident. For example, a bilingual field appraiser or an expert in truck or RV appraisal could be required, or the claim might be misrouted to a property damage adjuster instead of a bodily injury (BI) adjuster. Improper triage can also cause a delay in getting the claim to a salvage or a total loss representative, postponing settlement and increasing claim costs because of storage and car rentals.

Other delays affecting claims severity include improper or delayed identification of fraud/recovery potential. Delays in investigation of an injury caused by misrouting can affect medical payments, timely bill review, and individual medical exams (IMEs).

Of course, all of these delays result in very unhappy customers.

What is the Impact to the P&C Carrier?

Time is money, and whenever a claim is mishandled during the initiation phase, it wastes human resources, produces extra or unnecessary fees and causes costly delays in the satisfactory settlement of the claim.

How costly? Based on a 2,000 hour work-year and assuming annual salaries for a claims adjuster at $50,000 and claims customer service rep at $30,000, an additional 30 minutes added to handle a 20-percent misdirected or suboptimal claim routing can mean $400,000 in wasted salaries alone. Now tack on one unnecessary $30 rental per day, and you could be looking at a combined $1 million lost per 100,000 claims!

Worse, a mishandled claim risks an adversarial customer relationship that can be far more damaging in the long run. Where once an unhappy customer would relate his or her bad experience to a handful of acquaintances, today dissatisfaction can be communicated to hundreds, even thousands of people via social media outlets. That can create a reputation management problem with lasting…and far-reaching consequences.

How Can the Initiation Phase Be Improved?

Research from J.D. Power and Associates indicates that elevating the level and number of services provided during FNOL can have a positive impact on customer satisfaction. Those can include offering to arrange a car rental, notifying the body shop, providing contact information, arranging the tow and scheduling the appraisal. According to the J.D. Power research, the more services offered, the higher the customer satisfaction rating.

Implementing and following a claims triage process that correctly identifies claim severity and preferred routing and resource assignments is critical to improving the initiation phase of a claim, especially when several people are providing input. Even better, what if everyone's input could be reviewed in one central, integrated system? That level of advanced integration would mean greater visibility, with less toggling between programs and fewer opportunities for miscommunication. Advanced integration would result in a number of time and cost saving benefits:

  • Claims could be placed on a fast track so that low-value claims are sent quickly for settlement, bypassing the need for costly physical reviews.
  • Total losses could be identified upfront.
  • It would be easier to allocate the appropriate resources and to ascertain which types of assignments could be sent directly to a body shop for estimating and which would require a staff appraiser.
  • Voluntary provider networks (VPNs) could be included to ensure access and assignment to in-network providers.
  • Customers would enjoy a faster claim resolution and a more satisfying experience.

Fortunately, advanced integration is not a pipe dream. Companies such as Mitchell International are working to streamline and expedite the claim's lifecycle, developing products that will make integration with a larger claims management system easier. When fully implemented, advanced integration will make initiating a claim faster and more accurate, saving carriers both time and money—benefits they can extend to policyholders.

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