In the context of persistent claims inflation, and a year which has broken records for named storms, it’s not an easy time to be a home insurer, but it’s that much harder for customers when a property damage claim arises.
For the customer whose house has just been damaged, the situation can be bewildering, and it’s important that insurers are providing the right level of support, in terms of both meeting claims and the personal aspects of the service they deliver. There is no doubt that insurers step up to the challenge of helping customers during large-scale events, but in general the process and level of communication with the insurer can be a source of significant additional stress for the customer.
It is broadly accepted across the sector, that the household property damage claims process is out of line with customer expectations for financial services, with some key areas requiring improvement. The introduction of the Consumer Duty will start to have an impact in this area, as whilst there will be recognition that some complexity and inconvenience is inherent to property repairs, insurers should still be striving to provide a service that is as accessible and simple to engage with as the journey for purchasing the policy.
The process for loss notification may be straightforward, sometimes through a simple online channel, but there will typically be a need for some in-depth conversations and site visits before things really get underway. And this is where some of the challenges begin, with the introduction of multiple third-party suppliers – the loss adjusters, structural surveyors, and then onto the construction project managers and contractors appointed to review, manage, tear down, and re-build over various stages of the work.
It is extremely difficult to keep a single, coherent view of what is happening, both for the insurer and the customer, with the result being that both parties spend their time somewhat in the dark, and needing to chase updates and outcomes to keep the claim progressing.
Whilst there is no single solution to this problem, technology could become a more significant factor, as we see a number of claims-focused solutions start to reach a level of maturity. Ultimately, insurers and their supply chains often lack the flexibility and integration capabilities to centralise and surface the right information at the right time, and therefore cannot deliver two fundamental elements of a customer-focused claims process: Transparency and Customer Control.
With this in mind, what should modernisation look like for Household Claims?
There are various drivers for technology change within Claims, but typically this is driven by legacy systems coming out of support, or starting to become a significant constraint or risk to the business. The answer to this problem is typically to look at the replacement of the core claims platform.
Whilst the constraints of a legacy architecture, or a burning platform, may well mean that a new system is necessary to deliver on a Claims modernisation strategy, insurers can become overly focused on the core platform. This can lead to an awkward middle ground, with a tension between those who want to utilise the new platform’s (existing or potential) capabilities to fix every problem faced by the business, and those who simply want to migrate in the easiest way possible from the old tech to the new.
The fix-everything objective is not easily achievable, as it will typically involve bending the configuration and code of the platform to the company’s unique processes and operating model. This adds significantly to the time required to implement the platform, and ultimately creates an overhead in maintaining the system, whether by an in-house IT team, ongoing support from the platform provider or through third party developers.
On the other hand, the just-get-off-the-burning-platform approach, driven by challenges around cost and complexity, risks missing the fundamental point – which is that any major technology change is an opportunity to deliver real improvements to business processes and the customer experience. There is unlikely to be significant investment for a “Day 2” claims programme, once the costs of a platform implementation have been fully accounted for. Things will move into a model of “continuous improvement”, but arguably without the right baseline for this to have a meaningful impact on how claims are managed.
It is therefore important to ensure that the strategy and the exam question are defined correctly at the outset. This should not be about technology, but rather what the business is trying to achieve. There will be different priorities across the market, but in broad terms home insurers will need to consider the following when looking at how to deliver better customer outcomes:
1) The design of an operating model around the needs and expectations of the customer, with a focus on supplier challenges. Insurers need to look at every aspect of the claims journey from the customer perspective. There is likely to be an increasing demand for regular and proactive communication, access to up-to-date information regarding claim progress, and where possible some control over the process. Customers may want to choose when an adjuster or contractor visits their property, and for some elements of their claim they may want to determine the appropriate form of settlement (including the use of Faster Payments and virtual cards for some loss types). To achieve this, insurers will need to look at how to enhance their communication and data management capabilities, and implement a level of real-time exchange of data with their suppliers, to ensure that information is available to all parties (insurer, customer and suppliers), and that it is accurate and complete. This will enable each party to plan effectively and to discuss and agree on decisions quickly.
2) An alignment of key suppliers and technological solutions to the claims strategy and revised operating model. Once there is clarity as to the parts of the as-is claims operation that need to change, insurers will need to assess whether this can be delivered through internal process changes, claims supplier changes or the introduction of new technology solutions. There has been a proliferation of claims-focused Insurtech vendors in recent years, with solutions enabling optimised capabilities such as remote damage assessment, intelligent supplier selection and AI augmented claims decision-making. A targeted approach to selecting, onboarding and integrating multiple suppliers will be needed to deliver on ambitions, whilst avoiding the creation of an overly complex estate.
3) A roadmap for modernisation. Whilst it is unlikely that a new core platform can be delivered alongside a range of other technology solutions and supplier related changes overnight, a plan should be developed with transition states leading to a more modern, transparent claims process. Decisions may be needed as to whether the claims platform should be prioritised, or if developing the surrounding architecture and integration capabilities will create the agility the business needs, and ultimately define and simplify the requirements for any future platform change. This will all need to be considered as part of the wider claims and business strategy, depending on the other lines of business the insurer operates in.
Visual from recent Infographic: Modernising Your Claims Operation
We looked at some of the themes more broadly across GI Claims as part of our free whitepaper, which you can download here: Service Disruption – Next Stop For Claims.
