Insurers facing customer satisfaction challenge

In the decade preceding the recession, new-vehicle sales averaged 16.7 million units per year. That figure plummeted in 2008, and remained below the prior 10-year average until 2015, resulting in approximately 22 million fewer new vehicles hitting the road during that time. As consumers delayed new-vehicle purchases, the average age of the vehicle population naturally increased. This metric currently sits at 11.5 years, and IHS Automotive predicts it will increase to 11.7 years by 2018.

Why does this matter? According to CCC, total loss frequency increases as the vehicle population ages. From 2011 through 2015, more than 70% of all total loss valuations were attributed to vehicles older than seven years. During that span, the percentage of all claims declared a total loss increased from 14.7 percent in 2011 to 15.4 percent in 2015. As the pool of claims increases, so does the need for keeping customers and employees satisfied and engaged.

Volume isn't the only metric trending up that affects the satisfaction and retention of these two groups. Given the rise in total loss frequency, it's no surprise that average length of rental — a proxy for average length of repair — has also increased.

According to Enterprise Holdings Inc., average length of rental rose to 11.5 days in the fourth quarter of 2015, up 0.3 days year-over-year. Assuming a daily rental charge of $31, this would equate to approximately $356.50 per claim. With claims departments facing constant pressure to reduce cycle time and costs, a higher average length of rental is certainly unwelcome news.

One metric that no industry likes to see trending downward is customer satisfaction. Unfortunately this is a figure that Property & Casualty claims departments are struggling to boost in a significant way. According to Capgemini's World Insurance Report 2015, throughout the insurance lifecycle, claims servicing has the lowest percentage of customers with a positive experience. The report also demonstrates that customers who file an insurance claim tend to have lower positive customer experience levels than those who do not.

In North America in 2014, 37% of the customers surveyed by Capgemini reported a positive experience with auto insurance if they made a claim in the past year, versus 46% of customers who made no claim during that same period. This is natural given the stressful nature of an auto insurance claim, but still indicates a problem area for Property & Casualty carriers to address.

When looking at the raw data, it can seem as if claims departments are in an impossible situation. They are tasked with gaining efficiency and reducing costs, while simultaneously supporting customer retention in the face of rising volume and length of repair. Stress is nothing new for claims departments, but if it leads to reduced employee engagement, problems can begin to snowball. But rather than focusing on the problem, let's take a look at some solutions.

Total loss determination

Seeking efficiency begins with identifying redundancies. Anyone involved with the Auto insurance industry knows that there are plenty to choose from, but focusing your attention on the beginning of the process can help identify minor delays that could become major bottlenecks.

Take, for instance, adjuster dispatching. The work these individuals perform is indispensable, but the process of actually getting them to the scene of a damaged vehicle to conduct an appraisal can be time-consuming. If a follow-up inspection is required, cycle times can grow even longer.

Some carriers have launched mobile apps that allow policyholders to submit photos of damage and expedite the estimate process, and though these efforts have vetted the technology, many organizations are unable to justify the expense of developing their own version of such a tool. Some auto auction services are able to provide high-resolution imagery to the carrier's specifications, enabling fast and accurate desk appraisals without the need for a carrier to develop or purchase new technology. Integrating existing data and appraisal partners into these efforts can helping reduce cycle times and improve customer satisfaction and retention.

Title procurement

From a cycle time perspective, title procurement often has the greatest influence on overall efficiency. One of the most formidable barriers to reducing cycle times has been securing power of attorney from the claimant, a process which can also drive customer experience. Claimants often submit power of attorney paperwork incorrectly, which adds time to the total process because of follow-up communications.

While this is occurring, claims departments may also be managing the auction process — assigning vehicles, setting and monitoring minimum bids, agreeing to final sale prices and more — through a separate system.

Some companies are able to combine the title procurement and auction management functions in one cohesive system. With all of the necessary information in one location, carriers can avoid costly errors and more effectively manage their claims. In some cases, an auction company can also handle the document packaging and management aspect of a claim on behalf of its customers. Once the vehicle is declared a total loss, every step of the process could be managed through one platform, allowing carriers to focus on value-adding tasks that keep their employees engaged.

Customer self-service

Even under the best of circumstances, managing an insurance claim can be a trying experience for policyholders. Communicating with the necessary parties, properly submitting paperwork and managing claim status are only a few of the challenges they face during the process. Add to this the difficulty of accomplishing these tasks outside of their normal work day — on top of a long list of life's other responsibilities — and the whole claims process becomes even more daunting to customers.

This is where the application of customer self-service technology can be tremendously beneficial. By offering a web-based, self-service tool, carriers can give policyholders the freedom to manage claims from any internet-connected device, at their discretion and at any time of day. From downloading and submitting paperwork to facilitating efficient communication, the self-service approach provides better access to information, reduces documentation problems and ultimately enhances customer satisfaction.

In many cases, a carrier's claims department is its primary point of contact with policyholders. If engagement and morale suffer here, it will likely be felt throughout the organization, eventually trickling down to customer retention. But by applying a few forward-thinking techniques, carriers can put in place processes and tools that will both satisfy customer expectations and maximize employee engagement. There may not be many win-win situations in life, but this can be one of them.

Pat Walsh is a senior vice president for Westchester, Ill.-based Insurance Auto Auctions Inc. E-mail him at pwalsh@iaai.com.