As a light turns green, a driver, whom we'll call Bob,proceeds into the intersection. Moments later, Bob is broadsided byanother car, becoming one of the more than 5 million trafficaccidents reported in the U.S. each year, according to NationalHighway Traffic Safety Administration (NHTSA) data.

Fortunately, both Bob and the other driver carry automobileinsurance. They exchange information, and each begins the processof filing a claim. This article, the first in a series of three,follows the path that Bob's claim will take during the initialphase.

Now Bob's first step is to contact his insurer,thereby creating a first notification of loss (FNOL). In thiscase, he reaches a call center. The information he providesand the evidence the call center representative gathers will have adirect impact on the outcome of the loss. For Bob's insurer toresolve his claim, the representative must complete theinvestigation by ascertaining proper coverage, as well as theextent of the damages and liability. The representative asks Bob afew questions, adding that an adjuster will be in touch.

Everything that happens, from the FNOL onward, will determinehow quickly and cost-effectively Bob's claim issettled and how satisfied Bob is with his insurancecarrier. Although this should be a straightforwardprocess, it is precisely at this point that a number of costlythings can—and often do—go wrong.

What Can Go Wrong?

One of the key problems in the FNOL process is that not enoughinformation is gathered. Typically, the call center rep merelytakes the facts of the loss and hands off the claim to an adjuster.By failing to complete the proper triage, the rep may makeinaccurate assumptions. In Bob's case, the assumption has been madethat his car can be repaired. As a result, it has been misrouted toa body shop. In fact, his air bag deployed, and the vehicle isa total loss.

In a different scenario, failure to conduct the propertriage process might result in the wrong personnelbeing deployed to the scene of the accident. For example, abilingual field appraiser or an expert in truck or RVappraisal could be required, or the claim might be misroutedto a property damage adjuster instead of a bodily injury (BI)adjuster. Improper triage can also cause a delay in getting theclaim to a salvage or a total loss representative, postponing settlementand increasing claim costs because of storage and car rentals.

Other delays affecting claims severity include improper ordelayed identification of fraud/recovery potential. Delays ininvestigation of an injury caused by misrouting can affect medicalpayments, timely bill review, and individual medical exams(IMEs).

Of course, all of these delays result in very unhappycustomers.

What is the Impact to the P&C Carrier?

Time is money, and whenever a claim is mishandledduring the initiation phase, it wastes human resources, producesextra or unnecessary fees and causes costly delays in thesatisfactory settlement of the claim.

How costly? Based on a 2,000 hour work-year and assuming annualsalaries for a claims adjuster at $50,000 and claims customerservice rep at $30,000, an additional 30 minutes added to handle a20-percent misdirected or suboptimal claim routing can mean$400,000 in wasted salaries alone. Now tack on one unnecessary $30rental per day, and you could be looking at a combined $1 millionlost per 100,000 claims!

Worse, a mishandled claim risks an adversarial customerrelationship that can be far more damaging in the long run. Whereonce an unhappy customer would relate his or her bad experience toa handful of acquaintances, today dissatisfaction can becommunicated to hundreds, even thousands of people via social mediaoutlets. That can create a reputation management problem withlasting…and far-reaching consequences.

How Can the Initiation Phase Be Improved?

Research from J.D. Power and Associates indicates that elevatingthe level and number of services provided during FNOL can have apositive impact on customer satisfaction. Those can includeoffering to arrange a car rental, notifying the body shop,providing contact information, arranging the tow and scheduling theappraisal. According to the J.D. Power research, the more servicesoffered, the higher the customer satisfaction rating.

Implementing and following a claims triage process thatcorrectly identifies claim severity and preferred routing andresource assignments is critical to improving the initiation phaseof a claim, especially when several people are providing input.Even better, what if everyone's input could be reviewed in onecentral, integrated system? That level of advanced integrationwould mean greater visibility, with less toggling between programsand fewer opportunities for miscommunication. Advanced integrationwould result in a number of time and cost saving benefits:

• Claims could be placed on a fast track so that low-value claimsare sent quickly for settlement, bypassing the need for costlyphysical reviews.
• Total losses could be identified upfront.
• It would be easier to allocate the appropriate resources and toascertain which types of assignments could be sent directly to abody shop for estimating and which would require a staffappraiser.
• Voluntary provider networks (VPNs) could be included toensure access and assignment to in-network providers.
• Customers would enjoy a faster claim resolution and a moresatisfying experience.

Fortunately, advanced integration is not a pipe dream. Companiessuch as Mitchell International are working to streamline andexpedite the claim's lifecycle, developing products that will makeintegration with a larger claims management system easier. Whenfully implemented, advanced integration will make initiating aclaim faster and more accurate, saving carriers both time andmoney—benefits they can extend to policyholders.