Commentary: 4 Reasons Why Insurers Should Incentivize Third Party Inventories

By Carrie Mitchell | April 6, 2015

As many insurers are well aware, few homeowners are fully prepared when disaster strikes. Jay Straughan, Enservio’s vice president of claims, was recently quoted as saying “almost none of the insureds he encounters have property inventory lists.” Even if these individuals hold the best, most robust policies the industry offers, few understand the difficulties they could encounter when they seek to recover their personal belongings following a natural disaster, or any type of loss, without a complete home inventory.

1. A third-party home inventory is an inventory you can trust.

Reports indicate that insurance fraud is on the rise. According to the National Insurance Crime Bureau, questionable claims to personal property covered under homeowners insurance rose almost 45 percent between 2011 and 2012. A 2013 survey found that one in three insurers does not feel adequately protected against fraud. A recent Accenture survey reported that property/casualty insurance companies stated 11 to 30 cents or more of every claim dollar is lost to “soft fraud,” costing the insurance industry billions of dollars every year.

To counter these fraudulent claims, industry leaders are proposing an incentive: Homeowners who conduct a third-party inventory from a reputable service can decrease their premiums.

Here’s why: With homeowners insurance, soft fraud can occur long before a consumer files a claim. Many insurers want to know that they can trust their policyholders’ home inventories to accurately reflect the property they are insuring. Reputable, accredited third-party home inventory services can provide benefits to both the industry and consumers as they specialize in creating accurate, complete, and professional home inventories.

Many insurers may require a homeowner to conduct a home inventory, and many homeowners may have been provided with every tool available, and have every intention to conduct one, but the facts are that customers just don’t do it. In fact, it is estimated that less than 20 percent of homeowners have a sufficient and complete home inventory.

2. Third-party inventories can save the industry other costs, too.

Because so few homeowners have a complete home inventory, homes without inventories are destroyed all the time. These types of claims set into motion countless additional adjustor man-hours and often rack up thousands of dollars in adjudication costs. Many of these additional costs could be avoided altogether if more consumers would conduct home inventories.

3. Third-party inventories make the insurer’s work easier.

The claims process as a whole would improve if more consumers conducted home inventories. Scaling these services up would create better, more objective valuation data for claims submission. It would also ease the claims process by standardizing claims data, and ensuring that claims are processed and disbursed in a timely manner. The added benefit of increasing client satisfaction with a more streamlined process of claims settlement and reduction in disputed claims decreases costs to the industry that may be passed on to the insured.

4. It works.

In 2005, Chubb formed the Masterpiece Protection Network, a referral service to recommend home inventory companies and other specialists to Chubb policyholders. To encourage their customers to access these services, Chubb offered its customers credits toward as much as 25 percent of their policy premiums.

Carrie Mitchell, is owner and founder of TWS Inventory and Asset Management Group, LLC

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