Maximizing Auto Claims

Auto physical damage claims (APDs) represent a significant portion of claim costs for most insurers dealing in personal lines business. But, should this area of claims management be simply seen as the “dark evil” of being in the business, or rather an opportunity to improve profitability and gain a competitive edge.

If you believe APD claims are an area where results can be improved, then look to technology for the answer — electronic estimating software, imaging, communication technology, management tools, paperless document administration and the Internet — these solutions are all available today. Combined, they provide the necessary tools to “re-engineer” what may once have been a “cost center” of operations to become a competitive marketing advantage.

The bottom-line

As an example, an extra 20,000 policies at an average premium of $1000 — and a modest 5% return — translates into an extra $1 million. If you could save an average of $100 in the way of severity and expense reduction on each of 10,000 APD claims, you could add an additional $1 million to your company’s bottom-line. A cost-saving of $100 per claim may seem large — but when comparing the collision severity and average cost per claim of the industry the results are surprising. Industry figures reported to the Insurance Information Centre of Canada (IICC) show that the average cost in Ontario in 1998 was $3630. In contrast, a survey of a few companies’ figures for the same year shows the following: $3812, $3084, $3675 and $2629.

The variance in company-to-company costs can be partly attributed to their different book of business. However, it would be fair to say that some of the variances are likely due to a slip of control on the claim process — namely longer cycle times, excessive paper handling and excessive claim settlements.

Look to your own operations

Where do you stand? If you don’t believe such a large variance exists, take the time to examine your company’s statistics. A comparison can be easily drawn against industry numbers available through the IICC or Groupement des assureurs automobiles (GAA).

Once you have an idea of where you stand, find out what solutions are available. Electronic estimating systems have come a long way. Sophisticated Windows-based applications incorporate all the information found for over 50 years in the industry-standard Mitchell manuals, information such as part prices, labour times and repair procedures. An electronic estimating system improves the accuracy of every estimate by doing a lot of the work for the estimator — nothing is left out.

And, combining the use of imaging and communication applications with paperless document storage and access solutions can greatly improve cycle time and costs. Imagine this simple scenario: An accident occurs. The consumer calls the agent (either the broker or claims call center). The agent takes the relevant information and creates an electronic claim folder. All the relevant data is entered into the electronic folder where additional data retrieval applications are automatically launched, such as retrieving vehicle pre-insurance inspection photos and reports, and theft/salvaged information. The information is stored and dispatched to the regional claims office or the appraiser/repair facility. Once the folder is opened, the electronic estimating system is launched with all the pre-populated administrative information. The estimate is created with digital photos taken and stored. Additional documents such as tow-bills are scanned and incorporated and sent back to the adjuster to review and authorize the repairs. The folder also records a log of all activities performed in the settlement of the claim, which can prove invaluable in litigation matters. In addition, an automated task list can be incorporated to ensure standard procedure is followed in the settlement of each claim.

Obviously this is a very simplistic view of the process, but it is possible in reality. Think of the savings involved on each claim processed this way — is the saving of $100 per claim really an unrealistic target?

The weakened financial results of property and casualty insurers for 1999 has shaken many a senior industry executive awake. The subsequent call for a broad hardening of rates and greater focus on operating efficiency in the personal lines auto market can only be lauded. However, with market competition remaining intense, the companies that succeed in this environment will be those applying new technological advances in claim administration and handling procedures. Put simply, do not turn a “blind eye” to the future.