Delivering a consumer-centric experience
Insurers must balance innovation with customer trust and satisfaction.
The pace of digital innovation in the insurance space demands companies adopt an innovation agenda, seeking ways to disrupt themselves before being disrupted. But for some, hypersensitivity around protecting the policyholder experience is holding them back, and for a good reason — consumer trust is easy to lose.
It’s no secret that consumers lack trust in insurance companies. Just 29% of consumers say they trust insurers, according to the Accenture Trust Index. When insurers experience trust incidents, such as a data breach, policyholders’ trust in the company erodes — and this comes with a cost. Among 25,000 consumers across industries who switched companies in the past year, 46% did so because they lost trust in the company.
The desire to protect policyholders’ trust, combined with the challenges of digital transformation and the cybersecurity threats that leave insurers vulnerable to big-dollar losses, makes most auto insurers hesitate to make big plays around digital experience. While many insurers have attractive user interfaces, a J.D. Power survey found most insurance companies’ digital offerings fall short when it comes to delivering basic insurance capabilities, like processing claims and enabling consumers to shop for and service their policies. As industry leaders set the bar for digital customer service, some companies are hesitant to introduce digital touchpoints, especially when it comes to the first notice of loss.
But auto insurance companies that are slow to move toward digital leave themselves open to disruption from startups with little insurance experience, but lots of digital bang for consumers’ buck. They also risk not giving policyholders’ the type of experience they crave — especially those who have grown used to the conveniences of Amazon, Uber and Netflix.
How can auto insurers build out a more robust digital approach with minimal disruption to policyholders? Here are four strategies to consider.
Strategy No. 1: Look for ways to transition policyholders to digital claims reporting.
Satisfaction with the auto claim reporting process is at an all-time high, driven primarily by increased satisfaction with first notice of loss, a J.D. Power survey found. This makes auto insurers understandably nervous when it comes to moving the first notice of loss to a digital platform.
But given that increases in auto claim severity are outpacing claims frequency, the need for increased efficiency in auto claims processing is critical. It’s one area where digital holds strong potential to bolster not only operational productivity but also policyholder satisfaction.
Enable policyholders to use mobile apps not only to share photos or videos of the damage to their vehicles but also connect with service representatives immediately afterward. The survey also found that while 42% of auto claimants use mobile apps to upload photos or videos to supplement their claim, some insurers that offer this service don’t actually use the images. These companies still end up using an adjuster to review the damage — and this can pummel policyholder satisfaction. It’s a situation that occurs with 47% of policyholder-submitted photos or videos, according to the survey.
When auto insurers invite policyholders to use their mobile app for critical claim functions, they make a “trust pact” with policyholders: “Use this app, and we’ll provide a faster, more seamless claim experience.” Mobile apps are an easy and fairly inexpensive digital innovation for auto insurers. If your company has made this investment, make sure customer service representatives and claim adjusters understand the importance of integrating policyholder-provided information from the app into all other aspects of the claim experience.
Strategy No. 2: Streamline claims payments — including multiparty payment — with an electronic approach.
Most auto insurance companies continue to cling to check-based claim payment. However, paper-based payment adds unnecessary administrative costs, decreases efficiency, and leads to long wait times. It results in policyholder frustration when policyholders have multiparty payments and must wait for physical checks to be paid and physically endorsed before regaining access to their automobile. Paper payment also leaves auto insurers vulnerable to trust erosion: 78% of organizations were hit with payment fraud in 2017, according to a 2018 Association for Financial Professionals (AFP) survey.
Moving from checks to electronic payment could boost policyholder satisfaction while delivering significant cost savings for auto insurers. According to the AFP, check-based payments are 10 times more expensive than electronic payments. They are also five times more expensive for policyholders to receive. Here are two approaches to consider:
- Enable policyholders and service providers to select their preferred form of payment. For policyholders, this could be completed via the insurance company’s mobile app or via a text or email alerting the policyholder that the claim payment is ready to be disbursed. For service providers, this could be completed via email. Options for payment could include automated clearinghouse (ACH), push-to-debit and check, or, for service providers, ACH, virtual card payments or checks. Once a service provider indicates payment preference, this method could be applied to all future payments, increasing service provider satisfaction as well.
- Make sure the electronic claim payment provider offers same-day electronic remittance. This supports faster reconciliation and reduces administrative time for staff.
Strategy No. 3: Explore opportunities to automate claims processing.
A McKinsey study found digital claims transformation has the potential to reduce claims expenses by 25-30% through improved efficiency. It’s also a move that could elevate policyholder satisfaction by 20% while increasing claims effectiveness.
An example would be sending reimbursement automatically as soon as the repair invoice has been verified, using the service provider’s preferred method of payment, which increases service provider satisfaction.
Strategy No. 4: Make sure digital security keeps pace with digital adoption.
Digital security should be a foundational component of new digital products or services, not merely an add-on feature. This is especially critical at a time when nearly half of insurance companies have uncovered significant cybersecurity events in their organization.
The Insurance Data Security Model Law puts the responsibility on insurance companies to ensure third-party service providers are compliant with information security standards. Before contracting with a third party for digital support, be sure the provider maintains the following credentials, which demonstrate a commitment to data security:
- Payment Card Industry (PCI) Security Standards certification, which supports protections for sensitive payment card information;
- Service Organization Control (SOC) 1 and 2 compliance, with SOC 1 focusing on financial audit controls and SOC 2 centering on operations and compliance controls; and
- Nacha Certified, a voluntary accreditation program for third-party senders and those that send ACH payments.
It’s clear that auto insurers cannot afford to be timid in their approach to digital innovation. Taking the time to develop an innovation agenda, determine priority areas of focus, and invest in the staff and infrastructure to support quick wins around policyholder experience is key to success in an era of transformation.
Jeffrey W. Brown (jbrown@vpayusa.com) is president of VPay, a claim payments platform focused on the property and casualty, workers’ compensation, healthcare and warranty industries.
To learn more about claims-related topics like this, join us at the America’s Claims Executive Leadership Forum & Expo in New Orleans, April 20-22, 2020.
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