The pandemic has had a substantial impact on everything. P/C claims is no exception, as Novarica VP Deb Zawisza and I discussed during the P/C Claims Special Interest Group.
COVID-19 has increased the need for insurers to digitize the claims process, from intake through adjudication and payment. Novarica has seen fewer claims in areas like auto and increased claims in other areas like business interruption and workers’ compensation. The severity of auto claims, however, has increased—there may be fewer cars on the road due to the pandemic, but people end up driving faster due to lower traffic volumes.
For business interruption, some states are supporting the idea that state-mandated lockdowns are a valid reason to submit business interruption claims, even if physical business locations are unaffected. There is logic to these decisions. The pandemic is a circumstance beyond the control of businesses; insurers that pay out claims will reduce the impact of the pandemic on those businesses.
Novarica expects increased claims litigation as a result of the pandemic. Some states are overriding exclusion language for pandemics that policies may include, which renders initial loss reserve calculations inaccurate. Typical workers’ compensation policies, for example, only cover on-the-job injuries. However, no one can prove where individuals contracted COVID-19.
Digital FNOL and new IoT technologies can facilitate identifying a claim. Telematics data can determine if a car accident has occurred. Drone and satellite imagery can identify building or crop damage. Sensors can detect damage to items shipped over water and land or if industrial equipment has broken. Insurers used before and after satellite imagery to compare shades of green to estimate crop damage after the recent Midwest derecho.
Claims adjusting processes are evolving. One insurer in the group noted that they have been referring claims to adjusters even if they could do it internally to support their adjuster community. These adjusters are still performing in-person visits with proper precautions, including social distancing, masks, face shields, gowns, and other PPE. This adjuster is in the Northeast, where there are lower rates of infection. However, the carrier noted that this is also the case in Virginia, which has a higher virus transmission rate and more active cases.
Our snap polls of participants showed that a significant minority of firms did not have most of their claims adjustment process virtually deployed (less than 40%) before the pandemic. Many now have 40-75% of their process virtualized, and some have more than 75%, leveraging new technologies like machine visioning, IoT, and machine learning/AI.
The group discussed how an over-reliance on predictive models to estimate loss severity and claims reserving could be problematic. Many of these models have decayed due to changes in the way data correlates during the pandemic.
Insurers are increasing their use of predictive analytics in areas like claims fraud due to digitization, subrogation, and claims litigation. Law firms are using predictive models extensively.
The group then discussed business continuity planning and operational resilience. BCP used to mean that employees would work from home or an alternative office location. However, if everyone is already working from home, how do insurers handle business continuity if an event knocks out power or the internet over a large area? This was the case during Tropical Storm Isaias; many are still contending with the aftermath.
Operational resilience of the claims process will be vital for retention; it represents the most critical interaction that insurers have with policyholders. Paper-based processes are risky, but digitization will continue to increase over time, and customer experience will remain a key focus.
Our next virtual P/C Claims Special Interest Group Meeting for Novarica clients and Council members is scheduled for November 5. You can register now at https://register.gotowebinar.com/register/6960624791962086925.
Add new comment