The race to improve the insurance customer experience
In addition to tightening bonds with policyholders, customer-facing apps also bring benefits to other parts of the insurance business.
As it exists today, when a policyholder experiences a claim, they are immediately signed up to manage a 16-step claim process that they never knew existed the day before. On top of the emotional and financial toll that an insurance claim can create, a significant amount of time and mental energy now have to be invested in order to manage the claim through resolution.
For insurers, they are facing a competing set of challenges. For some, they have seen their loss ratios tick up to 95-120%. This is unsustainable, and so immediate steps need to be taken to bring either their underwriting practices and/or their claims handling processes back to a profitable level. This tension with loss ratio also causes significant price pressure, which doesn’t allow these carriers to be as competitive in the market, and so they can quickly lose money through both claims adjudication and lower retention rates. Those carriers that are more successful in optimizing their total insured loss costs are better able to artfully apply their leverage to the underwriting side and grab chunks of market share that they like.
More than 20 CPCU chapters have given rave reviews for a presentation titled “The Future of Claims & Technology,” which covers improving the customer experience in greater detail. It is currently an eight-step process that we all, as consumers of insurance, go through in order to make our coverage decisions:
When you think through how technology could enable carriers and agents to minimize those steps, you quickly see how the quote-to-bind process could be reduced to three steps or less:
In the event we have a claim, here is the 16-step process that we have been signed up for:
If a policyholder experiences a claim, then that process could be greatly reduced to about a six-step process:
As insurers think through the various parts of the claims process that can be improved, unfortunately, the answer becomes apparent that all areas of the claims process can be improved.
Self-service tools have exploded during the last year, along with a desire to do things remotely. Communication tools with insureds have been highly leveraged in order to facilitate multimodal communication channels, which is a fancy way of saying we can talk, text, email, zoom or chatbot with a policyholder, depending on their preference.
There are new and improved tools for fraud detection and subrogation identification, allowing us to finally make a dent in two areas of leakage the industry has significantly lacked in addressing appropriately. Claims triage, staff assignment and/or vendor management are still major issues for several insurers, as well as document-heavy processes including title release/lien release, and of course, payments.
With the rise of the internet of things, telematics and other connected devices, the opportunity for insurers to have a greater degree of transparency into risks exists like never before. Hartford Steam Boiler predicts that premiums could be impacted by 10-40% by the use of these connected devices. FM Global has led the market for a long time related to their combined loss ratio and the extensive use of their Risk Engineering team. It’s time for this same type of strategic and thoughtful approach to be dedicated to the small/midsize commercial and personal lines arena.
Risk prevention and first notice of loss (FNOL) are the major plays for the future. Faster contact of policyholders, increased control over the process, as well as delivering an enhanced policyholder experience that correlates directly to policyholder retention and lowers customer acquisition costs. With improved FNOL infrastructure and more data available immediately, it will directly translate to faster cycle time, fewer liability disputes, higher subrogation recoveries, and lower fraud losses. This translates to an excellent service differentiator for the distribution market to help acquire new accounts.
The end beneficiary to all of this innovation is the policyholder. Imagine being able to rate carriers on metrics such as:
- Return on invested capital.
- Percentage of mitigated/near claim events.
- Percentage of deductible recovery obtained through diligent subrogation actions.
- Percentage of premium dollar returned to policyholders through strict underwriting and tight claims control.
Those carriers that are agile enough to be able to pivot to this more efficient operating model will be the most competitive in the future.
Tim Christ, MBA, is a vice president at Claimatic, a SaaS intelligent decisioning software that serves several P&C insurers. He is the author of two books on insurance, business, and technology, a speaker at industry events and a frequent contributor to various insurance publications. Contact him at tchrist@claimatic.com.
Opinions expressed here are the author’s own.
Related: