Houston and Harvey. Florida and Irma. The West and the Wildfires. Hail in the Midwest. Floods in the South. Will 2017 set a new record for catastrophe claims?
According to the Insurance Information Institute (III), 2013/14/15 and the first 9 months of 2016 were welcome respites from insured disaster losses, totaling between $13 billion and $18 billion.
This is far lower than several other periods in recent history. These would include Sept. 11 in 2001 ($39.5 billion), Hurricane Katrina in 2005 ($77 billion) and 2011/2012, which were among the costliest years in U.S. history with $35 billion to $37 billion in losses. The Insurance Information Institute points out that the long-term trend is for more, not fewer, costly events. Preliminary estimates by AIR Worldwide have placed the low end of 2017 damages at over $115 billion accounting only for damage from Hurricanes Harvey and Irma.
When catastrophes hit, they hit insurers hard. They decimate the lives and livelihoods of individuals and families, but they can also wreak havoc on the systems and reputations of those who will be trying to assist in the restoration and rebuilding. Insurance executives are undoubtedly wondering if they are prepared enough, what they can do differently and what they can improve before the next natural disaster strikes. Customer service and marketing are worried about retention rates, service ratings and net promoter scores. Operations is concerned about scalability during claims events. Finance is (understandably) concerned over losses.
In my next three blogs, we will take a close look at holistic claims preparedness. How can we use catastrophe preparations to improve our customer value, save customers from additional loss and lessen claim impact on both the insured and the insurer?
Claims Pays Back
What is important to remember is that from a satisfaction standpoint, one claim or a tremendous number of catastrophic claims both have the potential to positively or negatively impact satisfaction, retention and recommendation. According to a 2016 J.D. Power post-claim survey of auto insurance customers, 84% of delighted claimants will definitely renew their policy and 83% will definitely recommend their insurer. Among displeased claimants, 12% will definitely renew and 7% will recommend their current insurer.
What does this tell us? It suggests that any effort aimed at improving the claims experience through catastrophic preparedness isn’t effort wasted if the catastrophes never come. These efforts will bear fruit in loyalty and recommendation — the positive results of a thoughtful, “rethought” claims value chain.
See also: Harvey: First Big Test for Insurtech
Adopting a Holistic View of Claims
What does a catastrophe-prepared insurer look like? How can we use our new knowledge of catastrophic events and our years with fewer claims to ready ourselves for those times when we will be inundated? What can we do to give customers a superior claims experience from pre-claim through restoration — anytime — even outside of catastrophic events? What new technologies can change and enhance the process?
Some years ago, customer-focused business practices came into vogue and most insurers started paying attention to every area of the organization and its relationship to the customer. What many didn’t realize was that this shift was never-ending, because shifting demographics and customer expectations would continually be in flux. Very few insurers realized quickly that claims is perhaps the most vital front-line touch point because of its overall power to drive loyalty. This caused their definition of the scope of the claims process to remain limited. (“People make a claim. We assess the damage and pay the claim. We use technology to quickly assess and pay.”)
In reality, claims has become a hotbed for opportunity, where a holistic vision of a technologically-advanced process can truly revolutionize everything from damage impact to efficient and effective replacement and restoration. In its depth and breadth, claims is no longer claims at all, but it encompasses everything that flows from prevention to protection to assessment and restoration.
Where Technology Intersects with Catastrophe
The process opportunities lie in the places where technology can be employed to achieve cost-savings and improve satisfaction. Just considering the possibilities can be overwhelming. Here is a tiny sample of places where technology can be employed to rethink the claims process.
- Global Information System (GIS) data to identify and predict impacted customers.
- Rules-based alert libraries, cross-referenced to policyholder property and contact data
- Drone views of property pre- and post-catastrophic events.
- Redundant and cloud-based operations and communications for reduced business impact
- Artificial Intelligence to predict likely post-catastrophe fraud scenarios.
- Adjuster mobilization, prioritizing and routing.
- Multi-touch communication plan and CRM that weaves human contact and digital contact into a cohesive approach (No claimant left untouched.)
- VR educational simulations to walk claimants through a process they may have never encountered.
- And there are so many more…
