What makes the current claims environment so challenging?

A convergence of global factors will cause above-average levels of claims inflation for the foreseeable future.

Claims professionals who spoke with Canadian Underwriter said multiple market-dependent factors – including prolonged COVID-19 lockdowns in China, political instability, labour and materials shortages, rising goods and fuel prices, and still-troubled supply chains – have combined to create a challenging claims environment.

“Hefty cost pressures are seen across all business lines…affecting both the consumer and claims specialists,” Cortney Young, vice president of Contractor Connection, a division of Crawford & Co., told CU.

“Consumers are feeling COVID fatigue and notably their patience is wearing thin. When a claim occurs, there is an expectation of a quick turnaround to be reinstated to their pre-loss conditions. However, with labour shortages, supply chain challenges and increased storm activity claims, the life cycle has increased.”

Canada’s busy Cat season’s created problems on the restoration side, noted Janak Lally, assistant vice president at ClaimsPro for BC Lower Mainland & Interior.

“[When] you get a weather event…you operate the claims hoping for a cycle time of 60 days, which is pretty tight,” he said. “It’s hard to do that when everyone is so slammed.”

Following Hurricane Fiona, he added, some insurers looked at their review processes and opted to give some authority to try and get claims settled more quickly.

“We’re controlling the costs. That’s what this is about,” he told CU. “And then when you’re trying to settle it, you’re also waiting on various things that need to be looked at. So, cycle time definitely has been challenging and it’s not just for us on the [adjuster] side. We’re handling files but it’s on the company side as well that are dealing with large volumes of claims.”

Young noted her division has seen an increase of repair cycle times by an average of twenty days across Canada for jobs under $25,000.

“I do advise to all insurance personnel that communication is key – setting expectations and leading with transparency when delays present themselves is important to alleviate frustration,” she said.

For comparison, Young referenced a U.S. survey from earlier this year. JD Power’s Property Customer Satisfaction Survey showed one year of COVID lockdowns impacted U.S. policyholders and resulted in lower customer satisfaction scores. It also recorded the largest year-over-year customer satisfaction drop – 12 points – in the survey’s history.

Supply chain issues have certainly impacted claimants’ experiences.

“You’ve got a reduced workforce in certain industries and they’re just not able to manufacture products and that’s affected our industry as well in the insurance industry,” said Lally, who is also president of the Canadian Independent Adjusters’ Association.

“If you were looking for copper pipes, to re-pipe a home, there were delays in getting such materials. And the same is true for electrical supplies, insulation and [other materials].”

Young noted the scale of the May 21 derecho wind storm in Ontario and Quebec and Hurricane Fiona’s impact in the east will tax the industry and cause delays in the repair process.

“If claims are open for longer periods of time and scheduled dates are missed frequently, that will inevitably lead to more inquiries from the claims’ specialists and contractors,” she said.

Likewise, labour shortages impacting appliance and furniture manufacturers are slowing settlements for displaced homeowners who suffered contents damage.

“There have been back orders on many furniture items and appliances that were once available in a local warehouse and now have to be ordered direct from the manufacturer with significant delays” said Lally.

“How do you put [someone] back into their home when there are no appliances, no furniture? So now you have to extend the claim cycle.”

 

Feature image courtesy of iStock.com/onurdongel