Despite widely touted claims that technology and greater access to information will improve decision-making for the property claim industry, a significant disconnect still exists, leading to the potential for excessive and unnecessary costs. This gap is clearly exemplified by the garment and textile portion of contents claims.
With increasing pressure on insurance carriers to reduce severity, the contents restoration segment has gained in importance, and the garment and textile niche offers a substantial opportunity for carriers to achieve their objectives.
Standard operating procedures for textile restoration services have been designed to mirror those commonly accepted practices of mitigation contractors, where 24/7 access and response are required. Then a detailed on-site, room-by-room inventory is conducted for fabric items damaged by the loss, just like a contents company would do for TVs, furniture, toys, and tools. An itemized inventory tracks what items are removed from a house for restoration, and electronic tracking ensures that everything is accounted for upon completion. In turn, this protects all involved with the claim and reduces discrepancies about the quantity and brand of items. Finally, the garments and other fabric items are placed in secure storage until the policyholder is ready for delivery back to the home.
In the early stage of this process, a professional textile restorer will provide an update, along with an initial cost estimate for garments and fabric items, based upon a scope of the loss. Once the restoration process has been completed, a final invoice is submitted, usually within five to seven days, concluding the textile restoration portion of the claim. But here's where the disconnect occurs. Textile items that were deemed non-salvageable on-site, or after a thorough attempt at restoration, need to be replaced and settled either at actual cash value or at replacement cost value. Even with the advent of online resources and third-party pricing specialists, the replacement component of the settlement can occur weeks after the restoration invoice has been finalized. As a result, while both replacement and restoration contribute to the overall severity of the loss, they rarely are considered in relation to the total textile cost, the combined amount of garment replacement and restoration.
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Considering that on average, textile restoration costs represent only about 20 percent of the cost to replace those items, it is clear that the more that can be restored, the greater the cost savings. Importantly, an insurance company is only obligated contractually to bring the insured's items to pre-loss condition. A professional textile restorer will not charge for soft goods that cannot be successfully restored, making restoration a risk-free option.
Controlling scope creep is a major factor in controlling costs. In a situation involving garments and textiles, which typically account for nearly one-quarter of the number of items in a home, an on-site inventory is essential. This ensures accuracy in the quantities involved and prevents any discrepancies later in the process. From a cost standpoint, an accurate and verifiable accounting of item quantities is the first step toward an equitable evaluation of pricing. For example, if one vendor charges $5 for a particular item while another textile restorer charges $7, then the first option may seem less expensive. If, however, the first vendor does not provide a tightly controlled inventory, then there is no verifiable record for the quantity on the invoice—no check-and-balance for the adjuster to know how many items were involved. This creates the potential for an increase in total cost.
Another disparity in this specialty service provider category stems from the tendency to view garment restoration in the same light as retail dry cleaning. For generations, retail dry cleaning has been based on a simple concept: customers bring items to a store counter for cleaning and are told when the items will be ready. This reactive service model is in stark contrast to today's textile restoration, where proactive and highly customized procedures are required.
Textile restoration entails a comprehensive set of on-site services, as well as specialized cleaning techniques that include implementing the use of ozone, pre-spotting treatment, specially-formulated solutions, pre- and post-cleaning inspection, and storage as the insured's "closet." When insurance textile restoration is erroneously considered on par with retail dry cleaning, the resulting commoditization threatens to erode a professional provider's focus on results and enhanced customer service. This is because of the prevailing sentiment that the most important consideration is providing service at the lowest cost possible.
The value and importance of exceptional claim service related to customer satisfaction and policyholder renewal was noted in a recent J.D. Power and Associates report. In "The 2010 U.S. Home Claims Satisfaction Study," which was based on surveys conducted between November 2008 and April 2010, the company reported that insurers that provide the most satisfying claim experiences are the ones that are most likely to receive policy renewals from customers. J.D. Power's team evaluated five aspects of the claim process: settlement, first notice of loss (FNOL), appraisal, service interaction, and the repair process. According to the study, 71 percent of respondents said they would renew their policies, and 67 percent indicated they would recommend their company to others, based on highly satisfying claim experiences.
There is no doubt that claim satisfaction is directly tied to a carrier's ability to implement solutions for its policyholders. Today's professional textile restoration offers a proven and viable solution that not only enhances customer satisfaction but also reduces severity. Clearly, a better understanding of the total textile cost of a claim—both restoration and replacement—is the key to helping insurance carriers achieve their overall objectives.
