Too many people, too much delay — the claims process is burdened with system delay issues much of the time, say two industry experts.
Insurers, themselves, may be to blame because some well-known carriers within the industry advertise warp speed claims handling, causing unreasonable consumer expectations.
The idea of changing the status quo may seem daunting, especially when costs, time, and training are taken into consideration; however, there are measurable benefits as pointed out by PLRB speakers Guy Hoffman, president and CEO of U.S. Home Team, and David Mitchell, regional claims supervisor of The Republic Group.
While the presentation titled “Innovative Approaches to Claims Management” illustrated suggestions directed to first party homeowner claims, the ideas can be applied to a variety of claims across several lines of business.
Consider the following typical claim reporting scenario involving a first party auto or homeowner claim:
Step 1: Insured notifies agent of the loss
Step 2: Agent either submits claim or advises insured to call carrier directly
Step 3: Insured speaks with initial carrier representative who confirms information and advises that someone will follow up to schedule an appointment
Step 4: Insured is contacted to schedule an inspection
Step 5: The inspection is completed
Step 6: A check is issued on the spot or insured is advised that they will hear back from someone regarding settlement
The more steps and file hand-offs, the more likely delays will occur. Since the length of time it takes to close a file is directly proportional to its costs, time delays raises both indemnity and claim costs, according to the experts.
Time for Change
During their presentation at the 2011 Property Loss Research Bureau/Liability Insurance Research Bureau (PLRB/LIRB) conference in Nashville, Hoffman and Mitchell suggested this outline, helpful when analyzing the efficiencies and inefficiencies of a carrier’s claims management process. In reviewing its process, Hoffman and Mitchell say it’s important for a claims department to consider four main factors:
• Analyze the common sources of friction and delays in the claims process
• Identify opportunities to streamline the claims process, to improve response times, and reduce claim costs
• Examine approaches to better align the interests of all stakeholders in the claims process
• Integrate – Explore new approaches to handling losses that streamline the process and reduce claim costs.
Sources of Friction
A recent study by the National Association of Insurance Commissioners found that the most common causes of an insured’s frustration with insurers (based on claims from 2008-2011) were delays, denials, and unfair settlement offers. Almost 39 percent of complaints relate to delays and unfair settlements.
Another survey conducted by J.D. Power & Associates, published in February 2011, found that the more people an insured speaks to, the lower the customer satisfaction.
To illustrate this, Hoffman and Mitchell outline potential sources of friction during the first party claims process:
The initial notice of loss
At this point, the insured expects immediate gratification while the insurer has potential to fumble the ball during hand-offs to agents, insurer, adjuster, outside adjuster or vendor thereby causing timeline delays.
Elapsed time from insured’s notice of loss to inspection can be three days or more, and the insured has been influenced by multiple people by this point. “The insured is expecting Superman but gets Clark Kent,” says Hoffman. The assigned adjuster may be interfacing directly or indirectly with one or more third party vendors acting in their own interests.
Clark Kent becomes Superman. The adjuster can move forward with coverage analysis, scope or estimate review, and negotiations.
The insured still has to find service providers and may still be waiting on a check which leads to further frustration.
Hoffman and Mitchell point out that time and vendor alignment represent opportunities for improvement in the claims management process where traditional approaches are already optimized, internal resources already strained, and outsourcing discreet functions only adds variables to the equation.
Carriers should think about condensing time, getting to the property or auto immediately, and offering mitigation solutions, such as products and vendors.
Ways to Improve Alignment
In evaluating the claims management process, carriers need to recognize and align multiple interests, according to the PLRB presenters. For instance, the carrier wants accuracy, efficiency, and customer satisfaction. The service provider, vendor or contractor wants to maximize revenue. The insured wants convenience, savings and speed.
Hoffman and Mitchell suggest innovative approaches such as co-sourcing and integrating optional repair services. They say co-sourcing leverages expertise and resources like process management, supplier management, technology, and flexibility. It represents a break from the past, and a step towards the future. This is also the time to consider audits or re-inspection, the cost of re-inspection, and reporting.
Ways to Improve Time
Carriers should strive to remove time delays within the claims process. Hoffman and Mitchell suggest that carriers should consolidate as many steps as possible. Claims processes should be reviewed by peril and carriers should determine whether all losses need adjusters. In addition, if direct repair programs are already established, carriers need to evaluate the necessity of an estimate or bid.
Carriers should leverage service partners that can deliver better outcomes and reporting based on their established technology.
According to Hoffman and Mitchell, in order to successfully implement new claims management processes, evaluation of measurable improvements is crucial. In measuring success, a carrier must consider the goals relative to company and industry performance. In addition, analytics must be compared against the goals. Carriers must consider how often to review analytics: weekly, monthly, quarterly or annually. The goals and analytics must be visible to all team members. Measuring every loss is vital because exceptions are critical.
In order to save money, and lessen the need for costly databases and consultants, carriers should consider obtaining measurements from co-sources, says Hoffman.
Farm Bureau Town & Country of Missouri is an example of a company that reviews its claim processes and direct repair programs for both auto and home. Nick Schollmeyer, regional claims supervisor, says there are multiple benefits to measuring customer satisfaction. “It’s a way of making sure the customer is knowledgeable about the entire claim. Because adjusters sometimes pay vendors directly, we want to make sure the customer is informed of the total amount paid,” Schollmeyer says. In order to measure success, Farm Bureau Town & Country sends a survey with its claims payments on all first party claims, according to Bruce Bruemmer, regional claims supervisor. “Every payment we send out, we send out a little survey card. The customer service response cards have five or six questions,” he says.
The questions relate to initial contact time, how the claim was handled, fairness of settlement, and whether the payment amount was correct.
Besides afterhours mitigation, having direct repair programs in place helps customer retention, according to Schollmeyer. “Some insureds don’t have the knowledge base for repairing a home or car. Our adjusters simply hand a list of prescreened, qualified contractors for the insured to choose from,” he says.
The bottom line, say the session presenters, is that improved customer service, efficiency and accuracy on the part of the carrier leads to increased customer satisfaction and value to the policyholder.
This is the second in a series of articles that focus on sessions from the 2011 PLRB/LIRB Conference held in Nashville this year. “How to Navigate Claims Negotiations” is the first article in the series.
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