Extensive damage resulted from the Kentucky tornado that struck on December 10, 2021. Generally, tornadoes do not produce extensive catastrophe-type responses from the insurance industry because the extent of damage is limited to such a small location. However, in this instance, the supercell that created this tornado traveled nearly 600 miles from Arkansas to Ohio.
As we have seen in the last several years regarding the California wildfires, there was a problem with claims re-assignment to multiple, subsequent adjusters. California amended its Insurance Code so that if a carrier assigns more than two adjusters to work the same residential property claim within a six-month period resulting from a state of emergency, they are required to provide a primary point of contact that will oversee that file until the claim is closed or litigation is filed. Now Colorado has experienced a $1 billion wildfire as well.
Lexis Nexis’ 2021 Future of Claims Study reports that 76% of policyholders that have experienced a claim still talk to more than one person at their carrier. With self-service and other technological tools available, you would expect that the number of “one person touch claims” from 2019 to 2021 should increase. However, the number of “one person touch claims” decreased from 34% in 2019 to 24% in 2021.
Legislating better service
In Florida, Senate Bill 1598 passed now gives carriers 14 days instead of 10 to begin investigating a claim. With Lemonade advertising claim processing rates measured in seconds, it seems diametrically opposed given today’s focus on customer experience to lengthen the time required for an initial response. Given how watered-down other recent legislation was regarding notice of loss deadlines and capping attorney’s fees, it’s interesting that this line item got through both houses of the Florida legislature.
An easy example in auto is if you have a collision that involves bodily injury and property damage (PD). Generally, the car will be repaired within a month or so, but the bodily injury claim might not be completed for a year or more. Since bodily injury adjusters require a different skillset from property adjusters, it’s historically been viewed as an inefficient use of resources within the carrier to keep the PD adjuster involved to act as the point-of-contact.
As we saw in Jay Feinman’s research paper on The Regulation of Insurance Claim Practices, there are two key findings relevant to the earlier topic:
- Administrative regulation currently does not achieve enough regulatory intervention in the market to ensure that insurers engage in an optimal level of observance of claim practice standards.
- The industry’s reaction was strongly negative to the NAIC’s market conduct committee draft rule allowing data from MCAS to also provide information to consumers on which to select an insurer.
There are multiple initiatives within carriers to modernize their technology infrastructure and to speed up processing, whether that be in underwriting or claims, and to leverage emerging technologies to assist with either greater data collection, analysis or both.
However, these are long, multi-year efforts. Being able to explain to a consumer that our claims process will be faster in 2025 than it is in 2022 doesn’t excite them. However, for those folks who experience a claim in 2025 and perhaps had one back in 2015, the anticipated reaction is hoped to be “wow, that was a lot faster and easier than I remember.”
The unknown question is – will the increased number of large-scale weather events or the education of “the art of the possible” to the various departments of insurance create momentum for them to act with additional regulation that gets more granular in terms of claims practice? Perhaps even to the point of legislating the use of certain technologies that are believed to be in the consumers’ best interest?
What if it was mandated to have an easy-to-use phone app for first notice of loss (FNOL), multi-channel communication to include video/text/phone/email or self-service tools such as providing video or photo documentation of the loss?
What about the idea that if a total loss can be determined through publicly available technologies, such as the GIS photos, policy limit payments are required to be paid within 24 hours of confirmation of the total loss? Or even simpler and more immediate issues like the policyholder and claimant are contacted within 24 hours of FNOL and provided with a primary point-of-contact for the life of the claim file?
The possibilities are truly endless.
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 [email protected].