Democratising Insurance Claims restores Trust for Consumers

Claims has a bad name, not bad people!

In my experience, the vast majority in an insurance claims team are good people. Contrary to popular opinion, they don’t start each day thinking about how they can screw their customers. Quite the opposite! The claims department tends to be intensely proud of their approach to customer service. They work hard to do right by their customers.

However, given that the claim is the moment of truth for insurers, why is this effort to do a good job not reflected in what customers think of the insurance industry?

In the annual Edelman Trust Barometer 2014 survey conducted across 27 countries and more than 33,000 respondents, Financial Services ranked the lowest of the 15 global industries tested. Within these results, it was the insurance and financial advisory segments that scored less than bank and credit cards/payments.

The 2016 results from Edelman show the Financial Services Trust Score on the rise, just. But the fact is that consumers trust banks and insurance companies less than just about any other industry. The 2016 survey reported “in 20 of the 28 countries surveyed, the general population do not trust CEOs in the financial services industry to do what is right.”

That may be unfair, but then perception is reality, right? So, how can it be that we have this disconnect between a well-intentioned claims function and a disappointed customer experience. IMHO, it’s a strategic issue and reflects the silo’ed nature of an insurers organizational model.

Claims treated as a cost not an investment

In the silo’ed organization, the claims function is often seen as a cost to be managed down. It is not treated as an investment opportunity to continuously improve the customer experience. It’s easier to cut costs (in claims, and IT for that matter) than it is to cut spending on sales, marketing and distribution, chasing the next fickle customer based on lowest price.

We all know that our behavior is driven by the way we are rewarded and measured. What does that tell you about the insurer’s attitude to claims when the industry KPI for measuring claims performance is cost/claim. Conversely, it is rare to find a customer service KPI in the balanced scorecard of the Claims Director!

Which is pretty dumb when you think about it, throwing good money after bad chasing the next new customer when the existing ones just want to get what they paid for.

To illustrate my point, take a look at the Google keyword “Insurance”. You’ll find it is one of the most expensive ad words to buy. But why is that? We all need it and rely on it. When insurance is the industry the whole world depends upon the most, why does it cost so much to sell it?

The answer lies in the broken relationship dynamic between insurer and the insured.  It comes down to trust and the alignment of interests on both sides. The result is low customer loyalty, which leads to high levels of churn, making the selling of insurance a massive cost. It is this conflict of interest that has fuelled the emergence of P2P insurers and the new entrant community insurers like Bought By Many and Lemonade.

Putting the customer first

To find out more, I turned to a personal friend, David Stubbs. Dave has spent a lifetime in motor insurance claims and in building his own businesses. The latest is InsurTech startup, RightIndem that he co-founded with Graham Blaney.

Chronologically, neither could be described as Millennials. But they have the edge over younger generations in terms of experience, maturity and, above all, a tenacity to succeed. Dave and I have mentored tech startups together and I would hold both Dave and Graham up as exemplary role-models for any first time wanna-be startup entrepreneur!

I wanted to know their secret and Dave told me,“The thing about (claims) customers is that they all want to feel like they are being treated as individual cases. Which immediately clashes with insurers who up to now need to treat them as units in a repeatable process.

“The platform we’ve built at RightIndem allows us to satisfy both sides of the equation. For us, it’s not about the tech or the software that we’ve built, it’s all about the focus on the customer. It’s about having a conversation with the customer about what they need to get them back on the road. But we do it in a digital way that gives the insurer what they want in terms of a repeatable, reliable and consistent process.”

This is the key to the RightIndem approach that defines them as a pure InsurTech and distinguishes them from the traditional, increasingly less relevant software vendors.

Dave and Graham have built a B2B2C software platform for insurers (the so-called “classic InsurTech” model).  The digital platform allows the end customer to communicate with the insurer in the way that they chose, which is predominantly digital these days.

Using a structured workflow chat with text and video, the RightIndem platform guides the customer through the data collecting process. From FNOL, the customer is in control of the insurance claims process as soon as they initiate it. Not only is this preferred by the customer, it is also a lower cost for the insurer. (For more on this theme, read this post on London InsurTech start-up Claimable and the rise of self-service in claims.)

RightIndem Changing the Paradigm

When managing an insurance claim, the insurer has to balance three, potentially conflicting, dynamics when giving the customer the service they have paid for, i.e, settling a claim.

• Providing a fair and accurate indemnity (as judged by all parties)
• Managing the cost of handling and settling the claim (for the benefit of everyone in the risk pool)
• Customer satisfaction (as determined by the customer)

With the RightIndem model, the claims paradigm shifts from being an Insurer Managed Claim to a Customer Managed claim. A model where the customer is in control.

In the Customer Managed Claim model, the three opposing forces all move. Customer satisfaction goes up, cost of handling the claims process goes down and the amounts paid out in claims are reduced.

That’s a win-win in anyone’s book!

And, coming back to my opening point about cost of sales, higher customer satisfaction leads to reduced churn and lower distribution costs. Only Google could be upset at that!

Digitizing the insurance claims process

RightIndem is a Software-as-a-Service tech platform. There’s no costly software implementation projects and no major change programme to go with it.  Simply, the insurer includes a link on their website for customers to go to when they have a problem. Behind the link is RightIndem.

When a customer first notifies the insurer of their loss through the webpage, RightIndem initiate a digital engagement that will assess the loss, quantify the indemnity cost and initiate remedial actions.

This starts with the customer being guided through a digital dialogue to assess the damage. The software will direct the customer to take the relevant images so that an automated assessment of the cost of repair can be made. If the RightIndem system identifies that the damage can be repaired without a more costly trip to a repair shop, the software will arrange for a Smart Repair, where a mobile qualified repairer will complete the job on the customer’s driveway, often the next day.

The customer is happy because the job is done straight away without the inconvenience of being without their motor. And the insurer is happy because they’d just saved themselves a chunk of costs.

For the larger auto insurance claims, there are tech solutions that can automate the estimating of repair costs simply from images uploaded to the claims file.

One example is the deep learning tech solution from London based Tractable, who recently announced they had entered the US auto insurance market. Tractable use AI and machine learning technology to automate the audit and repair cost estimating process.

By supplying a series of images of the damaged vehicle, Tractable can estimate the cost of repair without human intervention.

Early results from POC’s with UK and US insurers report a 14% reduction in auto repair costs using Tractable.

The customer gets what they really want…and the insurer benefits!

Dave explained the Outside In approach they’ve taken at RightIndem, “When the customer gets in touch online, they do so because they need help. We’ve built the software with that in mind. Imagine if you were with your mates at the pub or in the office just after an accident. They wouldn’t give you a 15-page questionnaire to fill out. They’d ask you what happened, do you have any pictures, what’s the extent of the damage, are you ok?

“Remember, this is all online. Our software asks the customer to tell us about the accident and it will guide the customer to take some images of the damage. We’ll ask questions like, is the glass ok, or did the airbags go off.

“At the end, we have enough information to start the repair process. And if the car is un-drivable, we will have initiated a hire car process and recovery pick-up.”

The secret to this model is that RightIndem puts the customer in control of their insurance claim.

Everyday, the repair shop can upload a simple status report so that the customer can see that progress is being made. It also manages their expectations of when they will get their vehicle back.

Democratizing the insurance claims process

Which leads us to the point of this article on digital claims. Sure, the tech is pretty impressive and RightIndem are not alone in building a digital solution to improve the customer experience (you’ll find others I’ve written about here). The point is that RightIndem are absolutely putting the customer first and have a coherent end-to-end journey.

Every insurance claim is reviewed against a “How Well Did We Do?” score from the customer, just as the travel industry leader Trivago does.

Dave explained,“its no longer simply a matter of cost and price, it’s about behaviors. It’s important to customers that they know exactly what is happening with their car.

“For example, the customer might be offered the choice of 3 different repair shops for the work to be done. The customer can choose the one they want using the feedback of other customers – effectively insurers can recruit their customers as both claims handlers and quality champions . Once chosen, the RightIndem platform makes it easy for the repair shop to upload a picture everyday and let the customer see where they are in the repair cycle.

“If the repair shop doesn’t want to do that, then this will be reflected in the customer reviews, and they won’t get chosen so often!”

Everyone’s a winner

This is democratizing the insurance claims process and everyone’s a winner. Insurers see a lower cost of indemnity by shortening cycle times and reduced claims payouts. They also have lower admin costs because the heavy lifting has been automated.

Dave explained, “Best of all, insurers now have access to the world’s best claims experience designer…their customers! Every insurance claim is scored and the insurer gets feedback on how they’ve done. And so do the 3rd parties. It’s all about joining up groups of people who are usually at loggerheads. “

Maybe one answer to rising auto premiums lies in the carriers taking a different approach to paying out on insurance claims. Putting the customer in control and trusting them with settling the claim may just turn out to be more effective than ever increasing levels of fraud prevention. Food for thought!

The author,Rick Huckstep, is an InsurTech thought leader, public speaker and Chairman, The Digital Insurer.