As the effects of climate change are evolving, the number of catastrophic events is growing. According to the Insurance Information Institute, the 2020 hurricane season produced 30 named storms, breaking the previous record of 28 storms in 2005.
It’s not only people who are impacted by the rise in natural disasters – the insurance industry has been majorly disrupted by catastrophes as well. Annual operating plans, cash flow management of all carriers get impacted, new product launches are halted to be able to meet up with present conditions.
The insured loss numbers, or the amount of money to be settled as claims from carriers, create a huge impact on the business cycle. The Swiss Re Institute estimates a total of $83 billion loss to the industry from catastrophes in 2020, making it the fifth-costliest year since 1970 – with 2021 trending similarly as well. According to Fitch Ratings, the extremely cold weather of February in Texas, Louisiana, and other states could alone drive insured losses to a range of $10 billion to $20 billion.
What Is a Catastrophe Claim?
Catastrophe claims are contractual obligations to be fulfilled by property & casualty insurers to their policyholders in the event of loss or damage to a home or property as the result of disasters such as hurricanes, tornados, floods, or other natural disasters.
Apart from business disruption, the biggest challenge P&C carriers face today is meeting rising customer expectations, along with the surge in claims after a catastrophe. With digital giants such as Amazon, Uber, Stripe, etc in other service industries providing excellent levels of customer support, insurance customers expect similar levels of quick and agile service levels from their providers. As this trend continues, carriers will need to implement the right tools & processes to improve customer experience or face customer retention issues.
How can a carrier’s improvement in handling catastrophe claims contribute to a better customer experience? From the customer’s perspective, catastrophic events result in a major disruption of their day-to-day routine, property damage, and potentially loss of life. They expect a lightning-fast response from insurance service providers to provide due compensation so that they can restart life. Along with speed, customers also look at alert & responsive communication and seamless compliance & payments processing as acts that help relieve them after a disaster.
3 Reasons Insurance Providers Are Failing at Catastrophe Claims Processing
Here are a few reasons why carriers aren’t rising to the challenge for their customers and what they can do to achieve a better customer experience.
1. They use legacy technology and systems
By “legacy systems”, we refer to systems running on outdated software technologies. These legacy systems were deployed decades ago and need to be replaced to support innovation, speed-to-market, and meeting customer experience expectations. In recent years, new software vendors have emerged for insurance companies such as Guidewire, Duck Creek, Vertafore, and more – all offering modern technology solutions to help bring insurance companies into the SaaS world.
For insurance carriers, modern insurance technology systems not only provide solutions to modern problems, but also look to the future by leveraging emerging technologies and ecosystem benefits from IoT & Blockchain technologies, cloud-hosted architectures, and external APIs support. This way the incumbents can bring agility in their claims architecture, compete with emerging digital players in the Insurance space, and continue maintaining their strong relations with agencies & customers.
2. They use manual processes & outdated workflows
In the process of settling catastrophe claims, adjusters are often required to feed in repetitive data manually in different areas of their legacy applications. As per estimates, about 40% of the claims processing time can be saved by adopting automation & AI-based guidance, nudges, and tips inside claims processing solutions.
Along with automation of existing tasks, insurers will also need to re-look at their processes – and create a more customer-centric model with a value engineering mindset. Insurance companies should invest in digital claims analytics for making their existing processes more efficient, creating new processes, or sharing adequate communication at each step of the process to train their agents.
3. They lack scalable training tools & practices for processing catastrophe claims
With a sudden spike in claims, carriers resort to different strategies for accommodating the spike in processing claims. They hire inexperienced adjusters and pull in resources from other business units such as the customer support & underwriting departments to process the claims.
This results in inadequate training and the inability to handle catastrophe claims efficiently – resulting in a terrible customer experience. Even in instances of modern technology deployments, carriers face stagnant returns on investments because of poor software adoption by the new pool of adjusters.
Old training tools & techniques such as classroom-type training, Zoom sessions, and quizzes are not designed to train new adjusters quickly when a disaster happens – and don’t provide in-depth claims processing tutorials that require knowledge of internal company resources, state regulations, and overview of customer data. These older methods of training have longer adoption periods & poor retention of training content. As a result, the new pool of adjusters makes errors that cost the carriers.
To deliver a seamless policyholder experience in times of distaster, carriers can now deploy innovative training tools & methods supported by technology that help achieve a world-class experience for customers. Insurers stand to benefit from employee training software that provides the tools to author, publish and facilitate custom-made agent training & development programs.
7 Tips for Insurance Providers and Agents to Improve the Catastrophe Claims Process
- Create a self-service online portal for policyholders and agents to submit and manage catastrophe claims online.
- Provide in-portal, interactive guidance to policyholders and customers on how to navigate your online claims processing portal before the storm season arrives.
- Keep customers notified and informed of all updates to the claims process by sharing all claims-related information in this portal.
- Use SMS notifications and email alerts to notify customers of new updates to their catastrophe claim.
- Create a tier system that assigns priority based upon the severity of a claim to get to policyholders that are in the most difficult situations processed first.
- Create direct lines of communication between agents and customers
- Be over-communicative in regards to all details of the claims check including how it will be paid, the deductible, how and when the check will arrive, and more.