Insurers are looking for lower cost, innovative and personalized on-demand solutions for their insureds

Remember when we were kids and TV was free? There was an antenna on the roof and we had, if we were lucky, a half dozen channels. Times have certainly changed, and we, as consumers have adapted, with hundreds of channels available to us, for a fee. Only recently, and with much reluctance, have I agreed to get rid of 300 channels available to me through cable and switched to Roku.

While I miss the experience of channel flipping, I continue to be amazed at the level of personalization these entertainment streaming services have provided. Trading channel flipping for binge-watching has provided tremendous freedom, especially thanks to the headphones on the remote that let me watch all night without waking up my wife. Lower cost, innovative personalized experience, on-demand; the value proposition insurance is looking for.

With more than 40 years of collective claims experience between us, largely in the area of subrogation, over the past 18 months, we have spent much of our time discussing this topic with many insurance executives who express a renewed desire to increase outcomes and reduce costs. The real difference is the focus at the line of business level and the availability of artificial intelligence and technology to change the game. It could also involve some very different thinking.

Insights into auto subrogation

In a recent meeting, an insurance executive was questioning why he didn’t just drive down the road and write a check to three companies that solve 40% of the problem. If you think about the collective market share of the top three auto carriers, this makes perfect sense.

Fundamentally, this was a simple and smart thought-provoking observation. This approach makes even more sense when you consider the 80%+ market share of the top 20 auto carriers. While there are other considerations, such as assigning liability and issuing deductibles, there is certainly enough data to support this approach as 90% of recovery comes from carrier to carrier interactions.

There are existing and emerging solutions in the market that are transactional and focus on the interaction between carriers. In the U.S., there is a solution currently in place to exchange demands and move files to arbitration automatically, with many carriers using this platform today.

However, many alternative platforms are evolving. Some involve technologies like Blockchain and portal technology, and utilizing rules for automatic settlement. In the U.K., it is reported that more than 40% of the claims are not negotiated, just paid. Australia uses a similar approach largely because the country has legislated the damages negotiation is only allowed in the most extreme circumstances. In the U.S., that number is closer to 15-20%, and the process is not automated.

We have found that the approach is largely driven based on the carrier’s competitive position and current capability, and their view of subrogation as a strategic priority.

It is clear that data is king. Transparency is critical and many claims leaders are seeing subrogation as a place to test out new technologies and approaches, with less risk than applying them with their insureds.

The key to success for any of these solutions is the digitization of the subrogation demand and response process. While most carriers in the U.S. are reluctant to auto settle, with a deeper set of data, segmentation becomes much more reliable.

We see that segmentation as step one to automated settlement. Liability is just an accumulation of data points, and so are damages, especially with digital images and photos. If it is good enough to settle a claim, it should be good enough for subrogation. The information is all there, it just needs to be used differently. A bit of an oversimplification but achievable.

Our long-term focus for carriers is to eliminate 75% of the expense in auto demand and response processing and reduce cycle time to 5-10 days on 60% of the claims, without taking away their autonomy to decide. Lower cost, innovative personalized experience, on-demand; as we said earlier, the value proposition insurance is looking for. Achieving this level of success does not require upsetting the existing systems, it is additive. The journey is not daunting when building off previous accomplishments.

Insights into property subrogation

Property subrogation presents a different set of challenges, primarily because the data set is usually less structured and time plays such a critical role in the process. Many carriers aggregate fire losses and partner with highly-skilled attorneys to reduce evidence gathering costs and drive better outcomes. However, those battles have only been won with sophisticated data gathering techniques. Data is still king.

While many carriers have won the battle of identifying subrogation in auto, it has not been solved in property, where it takes more advanced techniques to win. Nonetheless, with a recovery rate of 3-4%, it is truly a numbers game. Data is the critical driver in deciding in one early step what to pursue to create the right return. The key to success in property is early identification with lost evidence being the single biggest reason for missed subrogation.

We believe a clearinghouse approach for property makes a lot of sense. The idea is to get in early, work with the insured and get the information needed to pursue the claim. Sometimes carriers resist this concept because they do not want additional people contacting the insured. However, the flip side is that this type of call is almost always welcomed when you are helping them get back their deductible. The use of analytics models to focus on those claims with potential will make it worthwhile for the insured. The key is volumes and volumes of data to drive better analytics and more precise efforts.

Ecosystems and partners

It is tough to go at this alone and figuring out the totality of the ecosystem can be challenging. Success requires a good set of partners and the capability to make it all work. An eco-system with capable experts, technology and analytics frameworks (AI) will help to achieve those results. This approach enables a group of smart subrogation experts who have the special skills to drive the direction.

In the end, this approach will accelerate results in a world that is aggressively requiring AI to simply keep up with the constant changes. It does not have to be scary or painful, but can be extremely rewarding. Lower cost, innovative personalized experience, on-demand; the value proposition today’s insurers seek.

Chris Tidball
VP Claims Transformation, Property & Casualty Insurance

Christopher Tidball’s career has spanned 25 years, from field adjuster to claims executive with leading insurers AIG and Progressive Insurance. Chris is the author of multiple books, both fiction and non-fiction, including Re-Adjusted: Taking Your Claims Organization from Ordinary to Extraordinary! He is a graduate of Arizona State University, a Senior Claims Law Associate and Six Sigma Black Belt. He can be reached at Christopher.Tidball@exlservice.com.

 

 

Reprinted with permission from the October 2019 issue of Claims Magazine. @2019 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.

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