In today's economy, consumers are looking for more value than ever before, whether they are buying a car, dining out or choosing personal lines insurance. At the same time, insurers are pushing hard to reduce costs and improve loss ratios without compromising underwriting standards or service.

This is particularly important in the homeowners segment. Carriers face a smaller addressable market due to the number of foreclosures and a reduction in the number of new homes being built, combined with a continued soft market and lower investment income.

The challenge is how to deliver more value to policyholders while reducing costs without compromising service–indeed, ideally while improving service.

One opportunity is to take a closer look at the approach in the homeowners segment to direct repair programs.

In other parts of the insurance industry, direct-care programs have successfully reduced indemnity and improved the claims process. For example:

o In health care, consumers and carriers have saved money by adopting usual and customary fees combined with program discounts while enjoying a streamlined claims process.

o In workers' compensation, carefully managed provider networks have improved cost controls for carriers while saving policyholders money and overhead in processing claims.

o In auto, glass and direct repair programs have reduced indemnity, claims costs and cycle-time for carriers while significantly reducing out-of-pocket expenses and streamlining the claims and repair process for policyholders.

In all of these cases, innovation has led to improved customer service for policyholders while reducing claims costs for carriers. So why has this not yet taken place in the homeowners segment?

The data suggest that services provided through carefully screened, actively managed and highly professional provider networks paid directly by carriers are a win-win-win proposition:

o Policyholders like the savings, enhanced service and convenience.

o Carriers reduce their indemnity and loss-adjusting costs, while looking like heroes to their policyholders.

o Service providers get more business and eliminate consumer credit risk.

Today there are plenty of proven business models for both carrier-built and third-party-managed programs, including preferred-provider networks, concierge claims services and direct repair programs. Homeowners carriers can learn from these models in deploying their own successful programs.

For example, in 2008, a homeowners carrier in Texas began offering policyholders several incentives to take advantage of a third-party-managed concierge claims and direct repair programs. Benefits to the consumer included a promise of contact within 15 minutes to schedule an initial inspection within four hours of the initial notice of loss and service available 24 hours a day, seven days a week.

In addition, the service partner provided a carrier-approved discounted deductible that reduced the policyholder's out-of-pocket expenses.

Because the carrier paid the service provider directly, the insured didn't have to wait for checks payable to both themselves and their lien holders–nor did they have to obtain the required endorsements in order to cash the checks and begin repairs. Nor did the policyholder have to submit additional paperwork and wait to obtain any recoverable depreciation. Nor did the carrier have to allocate internal resources to process these requests.

An added benefit to policyholders is they don't have to pay contractors in advance to receive the full indemnity in accordance with their policy.

Finally, the policyholder didn't have to locate, contact and manage the service providers–a time-consuming and often frustrating task during what usually is a very stressful period in the policyholder's life.

Meanwhile, the carrier realized a 14 percent reduction in indemnity and external loss-adjusting expenses for customers who elected to use these services.

Additional soft benefits included a measurable reduction in cycle time and elimination of resources for processing recoverable depreciation. The carrier also eliminated the need to negotiate with contractors, who submitted estimates that exceeded the indemnity provided in accordance with the policy–a waste of time and a common cause of customer dissatisfaction.

The homeowners insurance market is ripe for such programs, which can dramatically reduce the time and cost of restoring a home to its original condition.

For the policyholder, there is less stress, no more large cash outlays and fewer missed business meetings or soccer games while juggling multiple vendors and wrangling estimates. For the carrier, the claims process is vastly streamlined and the outcomes more predictable.

Guy Hoffman is president & CEO of U.S. Home Team Inc. (www.us-hometeam.com) and Service247 Inc (www.service247.com), a concierge claims and direct repair service.

Special Reports /

Service Provider Makes The Case For Direct Repair Homeowners Option

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