3/19/2012

An Educated Consumer Can Be an Insurer’s Best Customer

Couldn’t insurers do more to help consumers understand and navigate the claims process, and reap tangible benefits by doing so?

By Sam Friedman

I was interviewed recently by a reporter from a national consumer publication who was very concerned about whether the sharp spike in catastrophe losses last year might have prompted insurers to drag out the adjustment process and maybe even stonewall payments to policyholders, all under the heading of “claims management.”

I reassured this journalist that claims management really means making the adjustment process faster and more efficient with better trained staff and additional tools, such as advanced analytics to help expose fraud (which if left unchecked ultimately raises insurance costs for policyholders). But he was still a bit skeptical, suggesting that many people are at a loss as to what their policies cover and how to handle a claim.

That got me thinking, whose fault is that? Shouldn’t people take the time to read their insurance policies and study up on claims procedures so they are fully prepared for the worst-case scenario? Of course they should.

But couldn’t insurers also do more to help consumers understand and navigate the claims process, and reap tangible benefits by doing so?

Here’s a thought. What if insurers took ownership of a policyholder’s claims management education from soup to nuts? What if they laid out how insurance actually works (spreading risk for relatively low premiums), why deductibles are an advantage (by helping keep the cost of coverage down and providing financial incentives to protect property), and exactly what is (and what is not) covered in their policy? Might this not preclude many claims disputes (and hard feelings) down the road?

At a minimum, what if insurers delivered with each policy a primer on how to file a claim and see it through the adjustment process, including a simple step-by-step checklist so policyholders have their ducks in a row if they suffer a loss?

I have yet to receive anything from my own insurers other than a fairly obtuse description of coverage and bills at renewal (always without an explanation of why a rate has gone up). I certainly haven’t been offered tips about how to prepare myself if a claim arises.

Perhaps these details are available on my insurers’ websites. But that means I have to think about needing this information, and it puts the burden on me to go look for it rather than making sure I have such useful material in my hands.

Are insurers afraid if they “educate” policyholders about these matters it will only perversely encourage them to file claims?

I would argue the contrary—that an educational initiative like this would create a lot of good will and ultimately improve the claims process by making sure consumers know what it takes to be prepared for a loss and how to follow through with their carrier.

Accepting the status quo and leaving many policyholders in the dark about claims will only serve to perpetuate the ignorance, suspicion and outright hostility that too many consumers harbor about the insurance industry today.

Where might insurers begin this public education initiative? What would be their curriculum?

They could start with the importance of documentation. Few of my friends keep an inventory of their personal possessions in case anything is lost, damaged or stolen. A paper version is better than nothing, but it’s even better if supplemented by a photographic or video inventory. (The Insurance Information Institute, iii.org, recently came out with a “Know Your Stuff” home inventory app that could be promoted by all insurers at point of sale or serve as an example for carriers to follow with their own apps.)

Do most people know to take whatever immediate steps are necessary to limit damage to their property after wind, water or fire damage but not to start any extensive (and expensive) renovations until the insurance adjuster has a chance to document the loss, estimate the repair cost and perhaps suggest a reliable contractor?

How many homeowners fully appreciate the need for flood insurance? Not enough, judging by the complaints of those who find themselves uninsured for such losses under their standard homeowners coverage.

Do most drivers know to keep a pen and paper in their glove compartment in case they need to write down details of an accident, as well as the insurance particulars of others involved in the claim? Do they have their own insurance information in the car or their wallet? Do they remember to use their smartphone to take a picture of the accident scene? Better yet, have they downloaded their insurer’s mobile app to help document and process their claim more quickly and accurately?

Do most people know what insurance adjusters do? More critically, do they understand the role public adjusters play and under what circumstances they might legitimately need one? Do they realize they must pay public adjusters out of any settlement they secure? And are they aware of the potential for fraud among some nefarious con artists posing as public adjusters?

Agents could play a crucial role here, if only because they already do. Those consumers who buy through an agent (whether independent or exclusive to one carrier) often turn to the person who sold them their policy if a loss occurs.

Indeed, one of the key reasons why personal lines policyholders still use agents is that they can be their advocate should a claims dispute arise, according to surveys of auto and home insurance buyers by Deloitte Research (the results of which will be released this spring).

One solution would be for carriers to routinely include more information about how to prepare for and manage the claims process when they deliver their policies, while agents drive home the importance of this message and handle any follow-up questions.

Beyond being the responsible thing to do, consumer education about claims and coverage is a sound business and marketing strategy. It dispels the mystery of insurance that still confounds too many policyholders, resulting in higher turnover (and expenses) for carriers.

Proactive insurers that take the lead in consumer claims education might earn a more user-friendly reputation for customer service and ultimately be rewarded with a stronger brand, higher market share, better retention rates and healthier profits.

The motto of one long-time men’s clothing retailer was that “an educated consumer is our best customer.” Insurers should live by the same credo. The more information carriers provide to policyholders about claims management, the better.  


Sam Friedman is insurance leader with Deloitte Research, part of Deloitte Services LP in the U.S. He has been a Fellow with CLM since 2011 and can be reached at samfriedman@deloitte.com.



Sam Friedman is insurance research leader with Deloitte’s Center for Financial Services in New York. He has been a Fellow with CLM since 2011, and can be reached at samfriedman@deloitte.com.

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