With loss ratios on property claims hovering around 70% of premiums, how they are managed has a huge impact on the profitability of general insurers. While keeping costs low is important, there are hidden disadvantages in driving them down too much, something insurers may not fully appreciate.
A claim can be seen as an opportunity to reinforce brand values and demonstrate strong customer service. Bearing in mind that each dissatisfied customer will typically tell seven friends about their poor experience and, equally, a happy customer will relate their good experiences, it's worth putting some effort into making sure they are looked after properly. The costs of poor service are hidden in the customer acquisition costs and are not therefore as readily understood as pure claims costs, which arrive on invoices from repair networks.
The internet has a key role to play in improving the claims experience and reducing costs. This is because many claims rely on a great deal of communication between several parties, all of whom need to be kept informed of a claim's progress.
Traditionally, most of this communication is phone-based. This is what is called synchronous communication – the two parties (for example, claimant and repair network) need to interact together in real time. With fragmented repair networks, it is often difficult for customers to get the relevant other party on the line, resulting in frequent call-backs, telephone tag and the associated frustrations. In many cases, one party is simply looking for an update on progress and the other party is simply reading an update off a system.
The internet makes asynchronous communication a practical reality. All information relating to a claim is held centrally in one place and accessed by each interested party. Very quickly, one can add the facility to update information, and with the power of automated email, you can alert others that these updates have taken place. Suddenly, a mass of phone calls disappear – and with it a whole lot of customer aggravation.
Improveline recently launched an internet-based system for dealing with property claims, which we estimate can save the insurance industry more than £100m a year in reduced call centre costs alone. The system enables all parties involved in the claim to communicate – from the claims inspectors to the repair network, to the insurance company and insured.
The other benefit of internet-based claims handling is the increased speed of processing. The principal time saving occurs because one can set up work baskets for the various parties that are involved, which can be processed with standard response times.
The waiting game
The majority of elapsed time in traditional claims handling processes result from people waiting for messages to be returned before the claim can be moved on. It is also worth noting that when dealing with claims, there is a direct relationship between settlement speed and ultimate cost, since the longer they go unresolved, the larger the damage will usually be. This form of leakage can increase the cost of repairs and it can also lead to more fraud. Research shows that claimants do not immediately develop the idea of making a fraudulent claim after an accident or burglary, but rather in the few days following, once the insurance form has arrived.
One insurer that has started making effective use of the internet in claims processing is Direct Line. For example, Direct Line's 2.8 million motor customers can now use its online service to register their motor accident claims, receive immediate approval and track their claims on the web. It anticipates that 10% of its claims will come from the internet by 2003. The service allows claimants to keep up to date with each stage of their claim on a 24-hour basis and it is integrated with its claims call centres.
As more insurers begin to offer e-claims, there will be a snowball effect on the industry, with this service soon becoming the norm rather than the exception for property and motor claims.