Measuring claims cycle time from a customer perspective
New technologies could be used to improve the customer service experience when it comes to how quickly insurance claims are handled.
As we wind down the year coming into the holidays and start to plan for 2022, a few questions plague me. One, in particular, is since we as an industry talk about focusing very heavily on customer experience, don’t we have to examine some standards that we have used for decades and update them to reflect this new reality? One of these standards is cycle time in claims.
Historically, cycle time was measured from the time of first notice of loss (FNOL) until the claim file was closed. FNOL only happens when the policyholder initiates contact with the carrier. When a homeowner wakes up to a leaky pipe at 2 a.m., scrambles around for the first few hours trying to figure out where to shut off their water, figures out who they can call to help mitigate their loss and tries to salvage as much of their personal contents as possible, you can see how the time gets away from them and the loss might not be reported until that afternoon. Possibly worse, the policyholder calls into the carrier at 3 a.m. but gets the after-hours call center that can only take information, not provide any guidance, and then the homeowner waits hours for a call back from the actual adjuster.
Once a covered claim was completed, the adjuster would have a final conversation with the policyholder, explain that they are making a payment to them and then close the claim file. The policyholder would likely not receive the payment for another 7-10 business days because it was usually in the form of a paper check. In the case of a hail loss, once they get a check, they are still managing the roofing contractor, making sure they get the roof installed properly, getting the trash cleaned up and settling the retention.
Does it make sense to ask the homeowner to manage a $20,000 roofing project or an $84,000 water loss event with only a check and no real-time guidance? Adjusters are expert project managers at claims events, and not giving them the ability to guide the homeowner through this process as it unfolds is simply untenable. In the commercial arena, it gets even worse. There are additional considerations for commercial policyholders because they should consider future market strategies when re-building after major loss events.
Instead, should we measure cycle time from the actual moment of loss to the date the policyholder is restored to pre-loss condition? Given 24-hour news cycles, the proliferation of IoT/telematics devices that now exist in the marketplace and other early notification services, carriers know exactly when a loss occurs and, perhaps more importantly, have the opportunity to respond.
An article from McKinsey shows that claims recoveries are crucial to delivering a five-point improvement in combined ratio. There are many claim instances when determining the actual time and date of loss are critically important to the determination of whether there is coverage for that event. Having the ability to bring that date of loss closer to the first notice of loss is extremely beneficial in terms of overall carrier profitability, as you have better chances for fraud reduction, loss mitigation, appropriate indemnity payouts and minimal loss adjustment expense (LAE). Time lapses from the date of loss to FNOL always create additional costs to the carrier because you have to research and attempt to reconstruct a historical timeline of events as opposed to simply reacting in real-time.
This change in cycle time measurement creates a commercial differentiation opportunity for the carriers. Companies that offer consistently best-in-class customer experiences tend to grow faster and more profitably. Given that many of these statistics will be publicized, carriers and their distribution partners can talk about response timeliness and the various strategies that carriers have put in place to provide real-time information at the time of loss, when policyholders need it most. KPMG’s recent article talks about how the claims organization will continue to play an even larger role in helping define customer sentiment and brand loyalty.
We know many national water mitigation firms have 24-hour manned crisis operations centers where they monitor weather events and police/fire channels in real-time so that in the event of a reported fire loss, they can immediately dispatch personnel to the site, attempt to make contact with the building owner and be able to sell, at a minimum, temporary fencing and, at a maximum, full building reconstruction services. Carriers don’t have to necessarily replicate that existing infrastructure or cost. The value of integrated technologies means that these national mitigation vendors can be plugged into the policy administration systems and in the event of a loss at an address of the policyholder, the carrier will receive an automated notification from the vendor, which could initiate the FNOL process. Perhaps in the future simply having multiple FNOL notifications by disparate, yet connected data points will provide both confirmation of a covered loss event as well as being a negative indicator of a fraud event.
Tim Christ 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.