Settling homeowner claims can be a real hassle for carriers and policyholders alike. It blends together a combustible mix of estimators, insurance adjusters and independent contractors who constantly tussle over the accuracy of estimates, completion times, uncertain labor and material expenses and profit margins."Just getting an estimate on smaller claims was becoming a problem for some of our policyholders," says Mark Stowers, associate director, property damage advisors, for Fireman's Fund Insurance Co. "Our customers wanted assistance in locating local contractors, and there was an inherent delay in locating estimators and contractors to do the work."
Prior to last year, Fireman's Fund worked with independent estimators who would go to the home, take photos, document the damage and prepare the loss estimate. In some cases, the Novato, Calif.-based carrier would wait up to 30 days after the first notice of loss before an adjuster received the estimator's report on a routine claim.
Hoping to douse increasing claims-handling costs and complaints from policyholders, Fireman's Fund last year began outsourcing portions of the process to Atlanta-based ptc-NET, a wholly owned subsidiary of Project Time & Cost, a provider of cost-estimating services for residential and commercial properties.
The decision has already paid handsome dividends for Fireman's Fund. Stowers estimates that the company's claims-handling expenses have been slashed by 25% due to the improved accuracy in estimating losses, lower fees paid to adjusters and quicker turnaround times.
"When we now get an estimate, it's for the price that a contractor has agreed to make the home repairs," Stowers says. "With the estimating programs that most carriers use, a contractor can arbitrarily change unit costs line by line, and more often than not, an adjuster won't catch that. However, with the ptc-NET program, those units costs are set."
Home on the Web
The ptc-NET program blends a network of 1,200 adjusters and contractors with such technology tools as its proprietary estimating software and the Web to automate how homeowner claims are evaluated and damages are repaired. The company has contracts with 20 financial services providers, including seven of the Top 20 carriers. Clients include Allstate, American Express and Travelers.
The process begins when a carrier logs on to ptc-NET's Web site and files a simple claim report that includes the insured's name, address, contact information and the policyholder's description of the damage. That information is then assigned on a rotating basis to ptc-NET's roster of contractors, who are grouped based on ZIP codes they are willing to work in. To expedite the process, contractors and adjusters are required to check the ptc-NET Web site three times a day for updates.
A contractor is required to contact the homeowner within 24 hours after the assignment has been made, and must conduct a site visit within 24 hours after access has been granted. The contractor conducts a room-to-room assessment of damages, which includes digital photographs and diagrams of the damaged rooms.
The Price Is Right
Contractors use ptc-NET's structural loss estimator software to determine the repair, replacement or restoration costs. The software includes a location-specific database of labor and material prices from 103 metropolitan regions, which is continually updated with data from suppliers such as The Home Depot. The contractor then has five days to submit the report, including digital photos and diagrams, back to ptc-NET.
"The claim is sent to an adjuster file that is set up on ptc-NET's Web site in a password-protected area," explains Stowers of Fireman's Fund. "The adjuster can then view the status of all claims that are open, and determine if a contractor has been assigned to a claim, if we're still waiting for the estimate, and which cases are overdue."
The online system also enables insurance adjusters to send and receive messages from contractors about specific questions related to a home repair.
Eliminating errors
Fireman's Fund began testing the program in late 1999 at its Greensboro, N.C., office and had some initial technical hurdles to overcome. For example, adjusters could not simultaneously review repair estimates with contractors via the Internet.
But Stowers says the company was pleased with the early results. "The quality of the estimates were much better than the estimates from independent fee adjusters," he explains. "And we're able to better manage the process. I can work from my home and pull up any estimate from anywhere in the U.S. and view the accompanying photographs."
More than 100 adjusters and other employees at Fireman's Fund regional offices now use the system for commercial and residential claims. The company pays an undisclosed flat monthly fee to ptc-NET for the service, which includes prescreening estimates to catch potential errors before the estimates are posted on the Web site.
"It's difficult to get an independent adjuster to scope a house for less than a couple hundred dollars, and we're paying 20% to 30% less than that with ptc-NET," he says. "An adjuster will spend two to three hours scoping a house, and four hours to write an estimate, and at $50 an hour, that becomes costly."
Stanton Long, president of ptc-NET, says the basic retail fee the company charges is about $100 per claim, but the price is adjusted when volume is factored in.
"What we give our customers is a written estimate from a contractor, the price that a contractor has agreed to do the work for," Long says. "We have credentialed contractors who have agreed to certain overhead expenses and profit margins before they get a job."
The greatest potential for carrier savings, Long says, is through lower indemnity payouts and lowering the loss adjusted expense.
"Most carriers experience a few cases of poorly handled claims in which 10% to 15% of the caseload represents 80% of the payout, and it's our mission to get rid of the bad exceptions," he adds.
Another area of potential savings is through better customer care. "When you have customers constantly calling your call center to inquire about home repairs, that can become extremely expensive," says Todd Eyler, a senior research analyst with Forrester Research Inc., Cambridge, Mass.
Eyler estimates that during the past five years, carriers lost 10 cents for every dollar collected in homeowners premiums because of the difficulty of estimating the cost of home-replacement coverage.
"Another area of huge savings is the ad hoc repair process, where there's no process to shop around for the best prices for labor and materials," he says.
