As the saying goes, there's only one chance to make a first impression. In the insurance business, oftentimes that chance happens when claims occur.

The good news is insurers not only understand this reality but do a decent job of creating a positive first impression.

“Whether it's home or auto, customers who are unlucky enough to find themselves having to file a claim are extremely pleased with the handling of that claim,” reports Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates.

In a 2009 study, J.D. Power and Associates found overall satisfaction averaged 842 on a 1,000-point scale for auto insurance claimants and 828 for homeowners–either of which is far higher than most other industries. Satisfaction also is important in retention: In the study, 68 percent of highly satisfied automobile customers would “definitely renew” as would 66 percent of highly satisfied homeowners claimants vs. 40 and 49 percent, respectively, among claimants with low satisfaction.

“Insurers refer to claims as the moment of truth,” says Bowler. “If you step up and take care of customers and make sure their concerns are addressed, they can become customers for life. In contrast, we find when customers start shopping because they are dissatisfied with their insurer, the motivation to switch is never higher.”

And customer satisfaction never has been more important than in today's market. “In order to grow today, insurers are trying to claim a bigger piece of a smaller pie,” says Celent senior analyst Michael Fitzgerald. “With soft pricing in P&C and the down economy, you're going to have to grow through winning customers from other companies.”

People deliver service in claims, and even in a high-tech world, the telephone remains the number-one way in which customers and claims personnel interact. However, technology needs to support the people and processes by which carriers deliver world-class claims service.

“Claim technology is becoming a leading enabler for supporting customer service,” says David Connolly, principal of financial services at Ernst & Young. “Particularly since claims technology has come so far so fast in recent years, companies have increased their focus on it as a key component of their overall customer service strategy.”

“The rise of core packages has given rise to the ability to do configuration around claims processes out of the box, rather than needing to do extensive customization of the core system,” says Chris Raimondo, senior manager of financial services at Ernst & Young.

“It has changed the landscape of claims technology,” he adds. “Whereas before, we saw runaway claims system transformation projects that took several years, today we're seeing those projects take less than a year. It's been a game changer–companies are jumping in with both feet to claims transformation projects that typically had been a black hole before.”

Roads Diverged

Insurers are following two different technology paths, often simultaneously, to improve customer service. The first path is improving the service provided by company reps to the customer.

“Insurers that still are handling claims data manually on paper or handling claims in systems that aren't integrated increasingly are at a competitive disadvantage” when it comes to customer service in claims, Fitzgerald says. “Those carriers are dealing with claims systems that still are on legacy platforms, which leads to issues related to inflexibility and a host of other challenges that impact service.”

Insurers' appetite for core claims admin replacement projects has continued into 2010 despite the market cycle and a down economy. As companies have pursued claims modernization to achieve greater flexibility and efficiency, they've seen the added bonus of enhanced automation in improving customer service.

“Today's core platforms come with integrated workflow management, integrated rules configuration, and embedded analytic capabilities,” says Karlyn T. Carnahan, principal in Novarica's insurance practice. “I have seen carriers buy time by putting workflow [systems] on top of their old green-screen platforms, but it's definitely not a long-term strategy because older systems are more rooted in financials, not customer service.”

BPM-based workflow is helping carriers ensure consistency of process–making sure claims reps are doing the right tasks at the right time. “A real cause of dissatisfaction in the claims processes is when claimants don't know what's coming next,” says Carnahan. “When it's left in the hands of purely manual processes, things fall through the cracks.”

Insurers also are leveraging the open architecture and easier integration of modern platforms to improve customer service. “When carriers implement new technology in claims, they have opportunities to integrate more seamlessly with some of their claim service providers, such as rental car companies and other suppliers and vendors,” says Connolly. “Integration allows them to remove a lot of manual steps from the internal handling of a claim as well as interface with service providers to achieve straight-through processing.”

Nationwide has achieved straight-through processing and increased claimant satisfaction through a recent integration initiative in its Nationwide Roadside Assistance program. The company introduced the program in 2008, but administering claims in the program initially included a number of manual steps.

Previously, when customers called Nationwide's call center, the call center rep performed a lookup of customer information, verified coverage, established a first notice of loss (FNOL) in the claims system, and transferred the call to the vendor responsible for providing assistance in the area where the caller was located. If additional information was needed, the vendor needed to reconnect with Nationwide's call center staff.

In early 2009, Nationwide created Java-based Web services to integrate different IVR and customer information systems involved in the process. Today, when a customer calls Nationwide's 1-800 number, the IVR system assesses customer responses in order to identify automatically roadside assistance claims.

Once identified, the call is transferred automatically to the roadside assistance fulfillment vendor, avoiding unnecessary steps or conversations in the Nationwide call center. B2B integration allows the vendor to pull information from any of Nationwide's numerous back-end policy administration systems to validate customer and policy information and then enter the FNOL into Nationwide's claims systems.

Nationwide further expanded functionality in mid-2009 by automating the payment process. Previously, the fulfillment vendor provided Nationwide a spreadsheet with thousands of line items that needed to be manually reconciled before payment. Today, claims are automatically opened, reconciled, paid, and closed.

“Our goal was to provide a 'first time final' experience,” says Mimi Chizever, vice president of claims solutions at Nationwide. “Additionally, when customers need roadside assistance, it's important to provide a quick response and assure them someone is going to help them. The automated process we enabled using Web services allows us to provide that experience consistently.”

Bowler asserts for customers, the FNOL experience is particularly important. “How well you handle a claims report is the initial driver of satisfaction. On average, it accounts for more than 20 percent of a customer's overall rating of the claims process,” he says. That is second only to the last interaction around claims–the settlement process, which affects 37 percent of the impression of service in auto claims and 41 percent in homeowners.

And in the first notice process, faster definitely is better. “One of the critical key performance indicators for insurers is taking care of a loss report in less than 15 minutes,” Bowler reports. “Over 15 minutes, and people are considerably less satisfied with their experience.”

Nationwide measures customer satisfaction in the roadside assistance program at more than 98 percent. “We've been receiving outstanding feedback on both sides of it–streamlining the experience of our customers as well as our internal operating efficiency,” Chizever says.

To date, more than 100,000 claims have been initiated and handled through the automated system. Additionally, more than 26,000 payments have passed through the automated payment system, with a mere 0.1 percent requiring manual intervention.

Nationwide also plans to use the Web services it developed to extend automation to other internal processes and external business partners. “Within claims, there are a number of outside integration points that are part of claims processing. Having these new B2B services sets the stage to reuse common ones, such as customer and policy lookup, with other vendor relationships,” Chizever says.

That's a key value proposition SOA-based integration brings to legacy rehab projects. “The continued implementation of service-oriented architectures, open architectures, and standards-based messaging is really helping break those legacy systems apart,” says Fitzgerald.

Nationwide's ability to identify callers automatically and provide personalized service is a valuable feature of claim system integration, Carnahan says. “What you are able to do is automatically identify and extract important characteristics of a claimant and match them up to a specific service that meets those characteristics,” she explains.

Combined with analytics, that integration is enabling insurers not only to provide responsive service but also anticipate claim developments and be proactive. “Insurers are using sophisticated analytics for claim triage, adjuster assignment, and subrogation,” Carnahan says. “They also are increasing their use of GIS and spatial mapping to determine not only where to deploy adjusters in catastrophes but to identify potential claims and reach out to policyholders before claims occur.”

Additionally, along the lines of early intervention, companies are turning to social networking as both a push and pull mechanism to detect and prevent problems.

“Companies are using Web 2.0 to target customer service in claims. They are monitoring Twitter, blogs, and other sites to look for areas where they can reach out to customers and provide better information to see whether a problem did occur and resolve that quickly. We are seeing more and more of that being done today,” says Carnahan.

For instance, Progressive has a team of employees that monitors social media sites to see where the company is being mentioned, and the insurer has established internal processes to capture, assess, and respond to that information. Progressive also uses social media for catastrophe claim response, using Twitter to communicate messages to customers in advance of major weather events.

“Whether it's hail storms in New Mexico or flooding in South Dakota, Twitter has proven to be an effective means of quickly and concisely disseminating catastrophe-related information,” says Matt Lehman, Web experience director at Progressive. “We are pulling in or reaching out to people at the same time we are using this media to push out content that is relevant and timely.”

Self-Service

Technology path number two involves expanding and improving the avenues for self-service. That's a path taken by the aforementioned Nationwide, which has rolled out claimant self-service applications such as Nationwide AutoWatch, a Web-based repair tracking system, and the “Nationwide Mobile” iPhone app for documenting and reporting auto claims.

Nationwide's customer surveys reveal policyholders who use AutoWatch have a 12 percent higher rate of satisfaction related to how they were kept informed about their vehicle's progress in the repair shop. In addition, users have a 23 percent higher rate of satisfaction related to timely delivery of their repairs than those who don't use AutoWatch.

Allstate has had Web-based self-service capabilities available in claims since the mid-2000s; however, those capabilities had been limited to claim reporting and inquiry and were disconnected from the real-time claim process.

“We wanted to connect Web self-service to the same business processes and technologies that are utilized when you call into one of our claims offices,” says Chetan Phadnis, assistant vice president, Allstate Technology Operations.

Allstate had completed an SOA-based claims system rebuilding project, called Next Generation Claim Systems, or Next Gen, in 2008. The project consolidated dozens of disparate claim systems into a single application. Using Web services, Allstate then began a project to extend the Next Gen functionality provided to its adjusters to its customers and agents, as well, through a new Next Gen Self-Service interface. The goal was to create functionality that was not just “do it yourself” but fully integrated into Allstate's new Next Gen claim platform.

“This project was not technology driven; it was driven from the customer point of view,” says Shawn Broadfield, assistant vice president, Allstate Claims. “In today's business climate, consumers are accustomed to the ability to pick and book their own airline seats and any number of other self-service functions online. We wanted to allow our customers to work with us any time, anywhere, and our technology could enable that.”

Rolled out in mid-2009 after just six months of development, Next Gen Self-Service allows customers to enter loss information for non-injury automobile and homeowners claims. Once the loss report is submitted, customers receive an e-mail that includes the contact information of the claim rep handling their claim.

The system is easy and intuitive for customers, Broadfield says, illustrating that with an example from an auto claim. “Customers simply can click on a picture of a car to indicate the areas of damage and answer a few questions. From there, they can schedule a repair appointment online. They can set up direct deposit for final claim payment. In some cases, and if they choose, they can have their claim handled from start to finish without talking to a person.”

Even though customers have a self-directed service option, the system is highly interactive. “The interaction with customers is important for us,” says Broadfield. “So, we have built in two-way, online communication. Customers can 'park' comments and questions we answer, and we park and share documents with customers that are relevant to the claim process. They get notifications to see how their claim is progressing. We want the online experience to mirror the high-touch approach of the traditional claim process.”

Thus far, more than 100,000 claims have been processed through the Next Gen Self-Service claim system. The response of customers to the system has been “very positive,” according to Broadfield.

“We use an online survey to ask customers how they feel about the process, and we have a space for filling in free-form information. We find customers actually give more information when typing than they would over the phone,” he reports.

“We take that feedback and put it through the iteration of [Next Gen system] releases to make improvements to the site and changes to the flow and function customers might want to see. It's part of our 'test and learn' approach for developing the application,” Broadfield explains.

Allstate will be expanding Next Gen Self-Service options through 2010, including enabling access for smartphones, real-time access to support through “click to talk” or “click to chat” functions, and e-signatures. “We're looking at more two-way, contextual information-sharing opportunities with our customers. We're also enhancing our catastrophe response by making greater use of online tools and e-mail,” says Broadfield.

“It's all about choice and increased customer satisfaction,” Broadfield adds. “It's a win-win-win: a win for the customer who wants control and an easier way of doing business with us; a win for agencies that can service our customers in the customers' most important time of need; and a win for us in terms of reusing technology investments, reducing expenses, and developing more powerful capabilities.”

Phadnis sees the opportunity for reuse by extending the SOA-based capabilities of the core Next Gen claim system to other applications. “We have built components for the automation of certain tasks that definitely can be leveraged in other areas of claims,” he says. “Some of them might even be leveraged in other areas of the company if they represent [processes] that are central to our business.”

Allstate's work in its Next Gen Self-Service project reflects a growing trend among insurers. “More and more companies have extended first notice capabilities to the Web. The Web and phone apps that allow you to upload pictures we've seen come online in the past year are an extension of that,” Fitzgerald observes.

“Now, we are seeing some companies taking self-service to a deeper level, where the customer is doing more of the work and is able to control more of the process. Self-service is going to evolve and develop,” he predicts.

However, not all carriers have a high comfort level with giving customers greater control. “The Achilles heel of self-service technology is it puts the customer, not the insurer, in charge of the interaction,” says Bowler. “Self-service technology is not a 'silver bullet' to guaranteeing high customer satisfaction.”

And while Web-based self-service capabilities continue to expand, the use of them by policyholders remains relatively low. For instance, J.D. Power and Associates found when carriers offer Web-based reporting, just three percent of claims on average are reported online. The highest usage of online reporting was seen at Progressive and USAA, both at eight percent.

“Most of our claims still are taken via the phone, where our agents or staff members help with the claim process,” Phadnis says. “But for customers who want to handle noncomplex claims on their own time, we want to provide that option.”

Perhaps the bottom line is technology will never replace the claims professional in providing world-class service.

“Technology is useful, but in the case of a claim, the customer often wants to have a dialog with a person,” Bowler says. “Having a personal and proactive interaction with the customer still has the biggest impact on claim satisfaction.”

Special Reports /

Using High Tech to Be High Touch

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