Viewpoint: Effective Accident Management Can Reduce Claim Severity

By Mubbin Rabbani | September 12, 2019

Over the past several years high auto collision claims severity has challenged claims organizations and driven a trend of higher premiums, to the detriment of customer retention in an increasingly competitive market. To reign in the escalation, savvy claims organizations should consider proven tools beyond appraisal and repair, including the value and impact of effective accident management, to help combat claims severity

Mubbin Rabbani

Accident management centralizes handling of a policyholder’s claim, including on-scene management, vehicle release and crash assistance, to reduce repair and claim cycle time. Effective accident management practices can benefit both the policyholder and insurer by bringing order, efficiency, safety – and savings – to accidents, turning a stressful touchpoint into a positive brand experience.

Accident management presents carriers with a unique opportunity to build customer loyalty by helping the insured deal with the aftermath of an accident. Demonstrating empathy for policyholders during this stressful time is critical to minimizing churn and maximizing customers’ lifetime value to the insurer. Second, an expeditious and efficient accident management process can accelerate claim cycle time and allow insurers to lower loss costs by as much as $500 – $800 per claim – creating a potential $3 billion savings industry-wide.

Accident management also represents a chance to improve customer satisfaction. According to a CCC Information Services study, the “keys to keys” cycle for non-drivable events (from drop-off to repaired vehicle pick-up) averaged 17.4 days. This claim cycle time bears directly on customer satisfaction: according to J.D. Power, the two-thirds of customers whose vehicles were fixed and returned within 14 days have a satisfaction average of 843 on a 1,000-point scale. However, satisfaction with the claims process declined by 71 points among the 36 percent of customers who had to wait longer than two weeks for repair.

Managing an accident scene is complex and coordinating the recovery, storage and delivery of a non-drivable vehicle requires specific expertise and thoughtful consideration. Key to this service are the ability to obtain accident details and data, a scalable, well-equipped and knowledgeable tow operator network to safely transport the vehicle, and the measures and controls to ensure efficient processing of the vehicle quickly and accurately for repairs.

Step 1: Notification

The first step in an optimized accident management process is first notice of loss (FNOL). Obtaining this can be a challenge. Following an accident, if the policyholder is hurt, shaken or unsure who’s at fault, they are unlikely to contact their insurer while on-scene and it can typically takes three to five days after an accident for the insurers’ claims department to be notified of the loss. At scale, this issue is significant: just 13 percent of the roughly 10 million drivers involved in an accident who file a claim provide first notice of loss (FNOL) from the scene of the accident, according to Agero’s internal research.

However, capturing on-scene FNOL is critical – it allows the insurer to better expediate the entire repair processes from the moment of first call. This includes the ability to (depending on the time of day) send the vehicle straight to a direct repair shop (DRP). Increasing usage of a DRP can result in an additional $50-200 in savings, according to CCC Information Services. Although just one challenge in a complex process, finding ways to increase the frequency of this on-scene FNOL has the potential to significantly improve insurers’ loss cost ratio and the customer experience.

Using FNOL automation technology can accurately detect an accident has occurred and contact the insurer directly, eliminating dependence on the policyholder. Tools that can provide this include embedded telematics and in-vehicle sensors offered by connected vehicles. Aftermarket On-Board Diagnostics II (OBDII) devices in vehicles, which leverage a combination of engine codes and the in-device gyroscope and accelerometer to detect an accident, can also be considered. A third, emerging approach is the use of smartphones which contain sensors that, combined with optimized algorithms available through an appropriate mobile telematics app, can detect accidents in which an airbag deployed or the vehicle was non-drivable, and alert the insurance carrier.

Step 2: Timing

Beyond FNOL, the unpredictable timing and nature of accidents can make it difficult for claims professionals to manage post-event processes, such as facilitating a tow from the scene, coordinating with the repair shop, and navigating vehicle storage hurdles without the right partner. Each of these steps contribute to additional time and costs for insurers. In all, the downstream costs associated with these processes represents approximately 15-23 percent of the average collision claim. Efficient accident scene management therefore represents a sizeable opportunity to reduce claim severity.

The typical repair shop, for example, is open from 8:00 a.m. to 6:00 p.m. Monday through Friday. Extensive analysis of accident data, however, shows 55 percent of accidents happen outside of these hours, meaning that vehicles must be removed from the scene and secured for some period of time before the repair shop can receive them. In fact, in nearly one out of five cases, the vehicle requires storage for 24 hours or more before moving to a repair facility.

Step 3: Tow-Store-Tow & Release

The resulting tow-store-tow process comes with its own set of challenges. First is the scheduling, management and dispatch of multiple tows to and from the storage lot, often from different operators. Second is the vehicle release. “Non-standard” releases – representing nearly two-thirds of all incidents – require specific types of payments, involve significant paperwork, often involve negotiations and must follow stringent city, county or state regulations.

For example, vehicle release management in Texas is particularly difficult because, in addition to state-specific forms, officials also impose certain license requirements for release of the vehicle. To further complicate matters, payment for storage release in Texas is cash only.

Step 4: Working with an Expert

To truly manage and impact auto claims severity, and to help reduce cost and unlock opportunities in the claims value stream, selecting the right accident management partner is critical. This relationship is one of partnership, and it’s important to choose the partner that understands your claim objective and processes, and your desired policyholder experience.

In the quest to find that partner, it’s important to remember that accident scene recoveries are more complex than typical roadside events, since policyholders must provide the right details – like the precise location of the vehicle – during FNOL so that information is accurately relayed to the tow dispatcher. One key characteristic to look for is a qualified partner will have the right tools and processes to obtain this information and relay it effectively to avoid missing capture of the vehicle.

In non-drivable accidents, for example, a broken vehicle axle will result in a non-rolling scenario 14 percent of the time, requiring tow operators to come equipped with dollies. A partner with the right insight into accident data will understand when, and at what frequency, tow providers require this type of specialized equipment to control costs.

It’s also important that partners have measures and controls – such as specific workflows or data entry interfaces – to ensure consistent delivery of the captured vehicle to a preferred shop in the insurer’s network. Additionally, because accidents happen 24/7/365, the right partner must manage the process in a manner that helps the insurer manage loss cost even when the shop is not open, for instance by controlling destination changes and confirming delivery of each vehicle at the approved destination.

Lastly, partners must have scale to support claims frequency demands across the insurer’s geographic regions. Similarly, the capability to service the broad base of policyholder vehicles (e.g., the ability to coordinate light, medium and heavy-duty primary tows for a truck-heavy book of business) is another key characteristic for an accident management partner.

Effective accident management practices enable a better and more valuable experience to customers in need while providing insurers with a considerable opportunity to reduce auto claims severity by hundreds of dollars per event and improve customer satisfaction with a reduced cycle time that results from capturing the vehicle at the accident scene.

About Mubbin Rabbani

Mubbin Rabbani is senior director of product management for Agero, which provides accident management and roadside assistance services to the insurance industry.

Was this article valuable?

Here are more articles you may enjoy.