As property insurers embrace remote work in response to the coronavirus pandemic and deal with an overactive Atlantic hurricane season—and the volumes of claims accompanying it—they may elect to look closer at a new trend: on-demand claims adjusting services.
Various claims organizations offer some form of technology-enabled inspection or adjusting services. These differ somewhat, but in general, the offerings utilize a mobile application that guides and prompts users through the damage inspection and speeds up the estimating process. The underlying value of on-demand claims services is their ability to make more efficient use of limited claims resources and reduce cycle times through consistent data-gathering processes.
The typical on-demand claims solution works like this: Once a claim is reported, first-notice-of-loss data is run through an algorithm that assigns the claim to an appropriate resource. On a non-complex property claim, such as simple exterior or roof damage, a field inspector uses an app to gather data needed to create an estimate of the loss. An experienced claims adjuster reviews the field inspection data, and a completed claim file is then transmitted to the insurer.
Several developments over the past five years or so have made on-demand claims services attractive to insurance companies:
Technology innovation. The proliferation of internet-connected mobile devices and wireless communications networks have essentially made it possible to replicate a productive office environment almost anywhere. As the coronavirus pandemic demonstrated, millions of workers in different industries have been able to log in and work remotely, keeping service businesses operating. In a claims context, field and desk adjusters have more digital tools at their fingertips than ever before, and they can perform their work from virtually any location.
Higher loss and loss adjusting expenses (LLAE). According to the Insurance Information Institute, since 2013 the U.S. property/casualty insurance industry has seen loss and loss adjustment expenses grow by an average of 5.7% per year. In 2019, LLAE reached $442.11 billion. Insurers are continuing to spend more on claims, and they are searching for technologies to manage expense growth. An obvious place to explore that is in how claims are handled.
Shrinking pool of experienced claims professionals. Despite strong overall employment numbers in 2019, growth in the field of claims adjusting remains relatively static. As of May 2019, according to the Bureau of Labor Statistics, there were 287,960 claims adjusters, examiners and investigators. That is a mere 0.38% increase over the number of such professionals in 2015. To put it simply, not enough new adjusters are choosing this occupation to offset attrition in experienced adjusters.
A Steady Workload in Claims
Year-over-year catastrophe activity in the United States generates millions of claims. For example, between 2015 and 2019, the number of insured property claims averaged 3.1 million annually, according to the Insurance Information Institute. In particular, 2017 was an exceptionally intense year for catastrophes, with 5.3 million claims—largely as a result of Hurricanes Harvey, Irma and Maria.
In 2019, however, it was a relatively quiet year for catastrophe events. As we have seen, and as was predicted, 2020 has proven to be an above-average year, so insurers will struggle to deploy enough adjusters to handle the claims volume for both catastrophe and non-catastrophe claims.
Consolidation among claims companies over the past decade is not increasing the availability of qualified adjusters. Coupled with slow employment growth in claims, the labor supply to handle claims is limited. As the economy recovers from the COVID-19 pandemic, loss exposures will increase and more claims will arise. This will create more opportunities, both for traditional claims handling and technology-enabled approaches, such as on-demand adjusting.
Insurance companies will need to engage in strategic planning, particularly given the significant number of catastrophes lately. A return to the frequency and severity of hurricanes in 2004 and 2005—the last time the National Oceanic and Atmospheric Administration ran out of English names for storms and had to resort to the Greek alphabet—means a shortage of adjusting resources is likely, and is making on-demand adjusting even more valuable.
Evaluating On-Demand Services
On-demand claims adjusting services work best on non-complex property claims—for example, simple damage to exterior siding or windows, or roof damage caused by hail or debris. Complex claims, whether they occur from a catastrophe or human origin, call for experienced adjusters with specialized expertise.
Hurricanes, however, can cause both simple and complex claims. Coastal properties often are hit hardest and suffer extensive wind and water damage, while miles inland, heavy rains and strong but slower winds typically generate less-severe claims. For these different types of claims, it doesn’t make financial or logistical sense to assign experienced adjusters to less-complex claims when their expertise will be needed to sort out the more-difficult claims.
Insurers that are considering on-demand claims adjusting solutions should know that these services are not all the same. To obtain the best claims service, insurers should look for the following features:
- Consistency in inspections and estimates. The fastest way to short-circuit an efficient claims process is to have to reopen the claim or keep it open longer to gather missing data. Quality inspections are thorough and follow a consistent process, and accurate estimates should be written by experienced estimators.
- Third-party data. Trusted third-party sources, such as a building code database accessed by the on-demand system, can reduce the need to reopen claims and fill in missing code data. The most straightforward way to connect with such data sources is through application programming interfaces, or APIs.
- Additional inspection tools. Some roofing materials, such as tile, are prone to breakage, while a steep pitch can be dangerous for an inspector to walk on. Having the ability to deploy drones and other tools can ensure the appropriate data is collected at the time of the inspection.
- Annotation of images. An effective on-demand claims app allows inspectors not only to capture many images of a given property, but also to label and classify those images for easier review by the estimator and insurer.
- Access to full-task adjusters. Claims that appear to be simple sometimes turn out to be more complex than at first glance. In these situations, the ability to quickly shift the file to a full-task adjuster helps keep cycle times low.
- Integration with existing systems. An on-demand claims solution should work seamlessly with an insurer’s existing claims system.
- Configurability to align with in-house standards. Every insurer has its own standards and practices, which an on-demand solution should be able to accommodate. For example, some insurers insist on physical inspection in all cases, or require adjusters to enter the attic on every roofing claim to check for leakage. Litigation trends in prior claims also may lead insurers to require specific types of data, such as photographs. An on-demand service should tailor the inspection process to each insurer’s own requirements.
- Customizable services. A flexible on-demand service can provide insurers with just an inspection or other reports, if needed.
In addition to shaving loss adjustment expenses and reducing cycle times, quality on-demand claims adjusting services can contribute to greater customer satisfaction. The impression an insurer makes on a customer through its claims process can mean the difference between a dissatisfied and vocal critic, and a renewed account that enthusiastically refers others to the company. Insurance claims continue to be volatile, and scalable capacity to handle claims is a significant advantage at any time of year.