Claims leaders face a multitude of challenges entering 2023. The pace of catastrophe events is quickening at a time when staffing levels are low and supply chains are creaky. That's leading to longer claims cycle times and higher costs, with pressure to reduce both. Alan Demers, a longtime claims executive and now head of Insurtech Consulting joins DI editor Nathan Golia to look at the landscape of claims and provide actionable insight for CCOs and other leaders.
Transcription:
Nathan Golia (00:08):
Morning everyone, and thanks for joining the first transformation form of the year here at Digital Insurance. I am Nathan Golia, editor in chief and we're going to be talking about claims today with Alan Demers. And actually I should start by saying that, Alan, you were so nice to ask me. Do you prefer Na? Nathan, I forgot to ask you if I was pronouncing your last
Alan Demers (00:24):
Name. You said it. Spot on. Okay,
Nathan Golia (00:27):
Great. Thank you so much Alan. We spoke last a couple weeks ago for as part of our setting the table for a claims in 2023. All of that content is up on in.com and I hope you all get a chance to check it out. And we're going to basically elaborate on some of the topics that we discussed, giving an overview of where the claims practice especially in PNC is at the moment at the outset of what should be a very interesting year after a year that was interesting probably in a different way to many of you out there. So let's start, Alan, why don't you just tell us a little about yourself and your history in
Alan Demers (01:05):
Claims? Yeah, glad to do that Nathan. Thanks for having me here today. It's such a important topic and great time to dive into it. So I'm excited for the chat. My background, I have 34 years working for a couple of top 10 insurance carriers and mostly in the claim space. So you can say that I started as a frontline claim adjuster and then worked my way climbing the corporate ladder had responsibility for some pretty large organizations throughout that career span personal lines, commercial lines, claims, some of the specialty claims like non-standard and commercial agribusiness. So feel like I've had a pretty well-rounded career working inside insurance companies. And then my last role really was to start up innovation for claims and that kind of introduced me to the whole idea of what was happening and where things were headed. So after 30 some odd years of a slow evolving process, I had this new opportunity to look at what was coming at us on the front end.
(02:05)
And so in 2019 I left and started my own consulting practice with that very thought in mind, I really wanted to be where things were headed. So I started in the consulting arena in 2019 short time after I was able to forge a partnership with a terrific business partners, Steven Applebaum. And we've kind of worked closely together for the last few years. And so what we do is we help companies grow and find their way into the insurance space. Typically what they have in common is they want to either establish or grow their business. So it's a lot of connecting and prioritization and learning the space that they're going after. And we help insurance companies vendors, startup companies and investors. So those are the four main areas.
Nathan Golia (02:53):
Yes Steven introduced us more formally. I think we have met a couple times very briefly in the past last month. And he's Mr. Claim and I called him and he is like, you got to talk to people, I'll talk to you. We also got to talk to Alan and here we're today. So yeah, thank you so much for joining us today. I think that that's sort of the claims journey that you were described through the insurance carriers up until and into the InsureTech era is something that we're follow that we've followed at digital insurance and that we're continuing to follow. Now I want to start off by setting the table a little bit about why I find claims to be so fascinating in general. A few years ago, actually before when I was at my previous stop before digital insurance I wrote an article, it was about cycle time and claims and I just was one of the earlier deeper dives I don on claims and I thought, oh, cycle time.
(03:52)
That's the most important metric. And I made that the headline and I don't always get mail email about articles, but I did get about that one people said, people were like, oh yes, you're a hundred percent people were like, what are you talking about? It's not that important, but what happened in 2022? But I've sort of always had that lens of, well, isn't the most important thing about a claim that it gets solved efficiently. Think about when you have an insurance claim and you're going through it, you really just want it to be done. It's nice that it's being taken care of and that part of it is great, but you really want to be over be back to normal. I'm thinking about times I've had, I had a windshield happen replaced and the only place I could take it was 20 miles away was the only the closest place I could get it.
(04:34)
And that was one of those things where it's like it was the case of the car and the part and this was the fastest way to do it, but that means I had to be thinking about being someone who had to drive me both to home after dropping it off or take an Uber or whatever it was. And yeah, just like, oh man, I just can't get this over and I have my car back and I to think about it. So 2022 happens and we've got a lot of things going on that really hanging over from the pandemic in 20 20, 20 21. We've got supply chain problems and that's possibly what impacted that experience that I had. We've got staffing crunch, we've got the people leaving the insurance industry and then the replacements happen to come in. We've got customer demands that are still more around a lot of as much self-service, get it done as fast as possible, efficiently as possible have answers to my questions when I'm reaching out on my phone or whatever.
(05:31)
Not just sending you emails or letters and all those things are sort of coing to produce longer claims cycle times. And so coming into the year I was like, well what do you do when you're a claims manager? And you've worked on all these ways over the years of the up 2020 to be more efficient and get these things solved faster and suddenly you've got all these macro factors. So where I want to start, maybe you could tell us a little bit how you're taking the temperature of PNC claims right now and what you think that those challenges are.
Alan Demers (05:59):
Yeah, I think it teed up real well. I mean cycle time like many things in insurance and especially claims, there's some general rules and then there's always exceptions to them. So I think it always makes for really spirited conversations when you get different claim people and different claim executives in the room together on any particular topic. But one thing I think they'd all agree on is we're kind of in that what some would call the perfect storm moment. And it's not that carriers haven't dealt with catastrophes before, they haven't dealt with staffing challenges or even some of the inflation cycles it's just that all of them are probably the most pronounced and coming at the same time. So I think the inflationary piece, the supply chain and the repair process since that's what insurance companies are hugely in the business of helping do those areas are impacted tremendously.
(06:47)
So it's higher premiums, it's longer repair times, longer repair times can lead to more litigation, they can lead to more supplements, higher costs and just dissatisfaction for customers that are already paying for higher premiums may also mean they have more out-of-pocket expenses too, limits on rental and so forth. So it, it's kind of hitting everyone, but it's not only inflation there, there's social inflation which we should talk about, which is what's maybe happening on the litigation side and these cat cycles. I think even though this is not a new scenario for this year or last year, but the frequency of storms the magnitude of them, the more responses that companies have to provide is another one. Actually there's so many perf elements of the perfect storm, I had to write 'em down, but the hybrid, hybrid and remote work staff, I think that's still somewhat new.
(07:40)
And then you add on top of that a couple things, the pressure to automate or digitize your claim process this pursuit of straight through processing, although I think that's getting reshaped in the marketplace. And then depending where you stand, you may also be going through or just finished up a core system transformation. And those are just some of the pressures. So I think it disrupts this balancing act that claim leaders have, which is you're constantly trying to balance the customer service experience with the loss costs and the loss adjustment expense, those three main things. And it's really when those start to get out of balance, it just makes it more challenging across the board.
Nathan Golia (08:23):
I do actually, cause I didn't mention the actual cat events and viewers of this series will remember that a few months ago we had scientists in from Munichre who was talking about, well why are the storms, why does it seem worse? And it was really interesting, he was explaining that if in a warming cycle the air can hold more precipitation so you it be as cold or as there might not be brutal cold, but when it does precipitate there's going to be a huge dumping effect. And I've talked about my family living in Buffalo had that happen, has had these sort of generational storms twice in the past eight months six to eight months. And that also goes to rain events in other places around the country. The time at the time we had had that interview there, we had just been the flooding events in Kentucky were just a massive amount amount of ranges, washes of tentley towns away that had never had a flood event like that or was a hundred year flood. Exactly. And so yeah,
Alan Demers (09:27):
I was just going to say, or just some events and places that haven't been accustomed to. So the freeze up and Dallas a couple years ago or the recent reason that the beginning of the year around Christmas time, even though they're northern states, a lot of 'em didn't fare very well because it was such a extreme temperature drop. So a lot of freeze up claims that companies are still dealing with.
Nathan Golia (09:49):
And one of the things that I think from the claims perspective is well, I can say I have a bunch of tall trees in this yard now this is a new house. Oh, I guess this is the first one of the transformation forums I've done in my new house. So I relocated from Texas, South Carolina and I've got big differences, a bunch of tall trees. Well there was also some bunch of storms rolling through and suddenly my wife and I look at each other like, huh, we haven't had tall trees like this before. What happened? And it's one of those things where it's like if you're a person who you're a homeowner or you're a driver, which most almost everyone, that's almost everyone, you're starting to think, man, if I have to have an insurance claim and know it's going to take a long time and it's going to be an unpleasant thing and that's going to impact my life. And I think that that's one of the interesting corollas here is should the claims organization is going to be thinking about well do we communicate out to our customers to try and prepare better because we know the claims are going to be worse, do we not want to put that in their head just thinking about that.
Alan Demers (10:58):
And I think that, well those are the kinds of things I think can really help. I mean it's something as simple as communication and I think that's an area that carriers have been challenged with, especially on the repair process because if your mindset is you take the claim in and you make payment on it and it's closed, which is pretty traditional, there's still that repair time that is often overlooked from the consumer lens. And so if that usually take 30 days and now it's taking 90 days or longer, there's probably some open questions and some unresolved issues. And so really trying to think about how do you communicate and update customers along that way until the repairs are done or at least keep those channels open if a question does arise. So there's no perfect answer, but certainly preparing people up front today when they do have a loss, and I'm sure carriers are doing that really well, they're saying it may take much longer to get into a body shop or have a contractor out or deploying their own networks and leveraging what they do have to try to make as a bad situation as good as possible.
Nathan Golia (12:01):
Yeah, I think that I wanted to talk a little bit about staffing levels and people in the clay organization first before diving, I was debating whether or not to start with this or with the concept of automation. I think we should start with staffing because I think it's going to feed into the next part which is going to be about actual digital strategy. A member of the chief claims officers I spoke to for our reporting on claims this month was the first thing out of their mouths was staffing. Staffing. We need people, we need claims adjusters, but we also need data analysts and data scientists. We're hiring for a various roles in the claims organization, but we are hiring there was an article in Bloomberg not long ago about Allstate who Allstate was basically saying, if you were laid off from a tech company, come apply here, we've got jobs for you to do. And I'm sure at least some of 'em are in claims. I'm just curious about your thoughts about the claims organization. Have we had people aging out and retiring now to be those roles have to be filled and they're also going to be filled in a different digital technological environment than the person who's retiring at 30 years was in. So you know, talk a little bit about how you would look at that as a
Alan Demers (13:13):
Claims leader. Yeah, I see three different areas getting coming together at the same time. And I'm a believer a lot of these trends were probably happening before the pandemic. They just became more amplified and exposed. And one of 'em was the loss of kind of brain drain or the knowledge transfer of the top long-term adjusters and managers. And the industry's been I guess blessed to have people that stay in their careers tw 20, 30 years and have a lot of talent and experience that's been changing with different generationals hires. And then so the siphon off the top and then the bottom of your foundation I suppose is your entry level where you're trying to bring people in. So that's always been difficult because it's a bit of an apprenticeship from hiring to getting adjusters to a level that they can contribute at a optimal level sometimes takes years.
(14:11)
And that's typically done in an environment where they're learning from other people, they're learning from other more experienced adjusters. And so even though carriers have had remote workforces and claims, it just makes that job that much more challenging and even to retain them. I was talking to a claim leader a few months ago and he said, we've had to promise all our new hires that they'll be able to work from home within 12 months in order to attract them. But he said, in all honesty, we're probably going to have to do that sooner not than later. So there's that. And then I think just again, the developmental piece is the third part in the middle, which I think there's the two sides of it's the hybrid workforce really works well for flexibility and people want it and it's become a lifestyle. But for that apprenticeship I mentioned for the development, the career pathing, the mentorships, all those other important pieces I think most had some struggles with.
(15:09)
So really kind of hit 'em for all sides. And I think you kind of add that other wrinkle where different kinds of roles, so more technology but at the core of what's being done in claims is handling claims and customer service, but you also need people that can help deploy digital claims or can bring in the data that's going to make the claim systems work more efficiently. So data scientists and so forth. But the best we can do is be good ambassadors to attract as many people as we can to this industry. It's a terrific area and it's a great way to grow a career in, I'm a believer after my years of doing it.
Nathan Golia (15:53):
And I'm curious as to your thoughts about the sort of double impact of a workforce's aging of workers' aging out. Because the way I see it, there's a couple things going on. What is that? Obviously you're going to have to replace raw manpower, but a lot of the times or over the past several years I should say that we've been reporting on things like change management and implementation of technology into workforce processes. And often we hear a lot of people who've been here for a long time don't want to change, they don't want to change their process, they're looking at their retirement. They got 2, 3, 5, even if it's fucked up, five years left. And there's an opportunity with a younger workforce to also from those new processes, but it's almost double the work you want to automate and you want to have automation, you want to have more digital capabilities within the claims organization, but you also, you're got to concentrate building that at the same time you have the concentrate just running the shift day to day and getting those roles, then
Alan Demers (16:59):
Yeah, it's another one of those balance areas. So it's not always the folks that have been around the longest, although they probably have the most to lose of technology where to take their jobs. So there is certainly those elements in play but newer workers that come in, I think they have higher expectations for technology. And so I think most of us would all agree technology's great as so long as it works. And I think in insurance claims you're still dealing with a lot of technology and the use of that technology that's still fairly new now it's, there's been a lot of progress and a lot of good breakthroughs that have happened, but we're in the growing pain cycle of or phases of introducing technology that's going to automate claims. So seldom does it plug in and work perfectly. There's other byproducts that are certainly sometimes overlooked. They may not make it into the I ROI calculation on when you're going to apply technology so you push the work somewhere else or you change the skill. So I think that's one of the best things that can be addressed is create an environment where you can introduce the technology and know that you're going to be trying to perfect it over a period of time. Not necessarily carve out people and say the technology's going to do all the heavy lifting. It just doesn't work quite that way. But yeah,
Nathan Golia (18:16):
I'm
Alan Demers (18:16):
Sorry. I was going to just say that of course the overarching pressure is to take that expense and make your organization more efficient so you don't always have that luxury.
Nathan Golia (18:26):
You a couple times, and we've spoken in the past couple weeks, you said it's not a process that's meant to be automated. I was wondering if you could talk about what you
Alan Demers (18:33):
Mean. Yeah, I think sometimes when we step back and look at what happens in the process, the claims come in, information's taken at a contact center or now digitally that it gets assigned to someone they call back and they start the same series of questions or maybe go a bit deeper and then it gets to the next person and they do a little bit more information gathering. So that process was really built at a time where things could happen a little more slowly. Claim notifications were mailed in on a cord forms or <laugh>, then they went to fax machines. And so even in a context center environment, there's a typical 24 hour buffer from the time that the information's gathered to the time the customer might expect a call to initiate the claim. So it's a bit of a forgiving process, but that was hugely made as an internal one and it was mostly made to control loss cost.
(19:29)
It really, you're making a claim against the company and then they have to evaluate it, does investigate it and does it fit the coverage and so forth. It's still a pretty good mechanism, but it was never designed to become a customer self-service model. And so I think that's where some of the barnacles show up <laugh> on when you don't expect them to. So if you were rethinking the process, which is difficult, probably you would compress that reporting of a claim and investigating the claim and identifying the damages maybe all in one big step. And that's starting to happen with digital but we have a long way to go. There's still a lot of evidence of work claim is taken in digitally, but it's hand off onto a manual track for example.
Nathan Golia (20:15):
And that's where I want to start because I was thinking we're going to go through some of these innovations and we're, we're going to start with photo estimating. And I think actually it's interesting, when I just moved into this house, it was the first time I had done a sort of self-service home inspection where I went around and I, there was no one came out to do it. I took all the pictures and uploaded them myself and everything. And that was for under underwriting, not even for claims. And I know that that is something that I think there's promise there, but like you said, it's going to be handed off to a person. One thing that obviously it's like, look, yes, theoretically, if they really to, they could say, Nate, my company could say, Nate, go take a nap and we'll just have AI write all the articles, right?
(20:56)
But you're going to put what you're going to input into the chat G P T, oh, what's, what are some trends InsureTech? And you're still going to have to read it and evaluate it and make sure it's worth putting on the sign. It's still an editor's job. It's really not. It's that it's not something you can just take away. And I think that's the same thing with something like that. It's like, yeah, it's great that we're going to get this picture taken and it's going to be uploaded and then the computer's going to apply something to it and put the big blue polygons around the damage and estimated out there. But every insurance company still wants it to be reviewed by a person to make sure it's all those other things you talk about that matches the coverage that it is being adjusted accurately. And so it's not even really about technology replacing people, it's about creating, you're going to create some efficiencies and then the upshot is what do you do with those efficiencies?
Alan Demers (21:46):
Yeah, and I think there's the two sides to that. One photo estimating for auto claims for example, it's probably one of the more advanced areas that's rapidly went from just a small trickle to some companies. 50, 60% of the claims are handled that way at least on the front end. So from a customer standpoint, I think the efficiency gain of, hey, I just was able to take some images, send them in, and I have my first estimate, you've already taken out a number of steps in time, which could take sometimes days or longer to get that all done. So that's a thumbs up. The unintended consequence of course is if you've done photo estimating without the quality control checks you may be leading that to the body shop or someone else to do down the chain. So the estimate gets to the repair facility and it turns out they can only see the visible damage.
(22:39)
And so now there's supplements and supplements typically mean longer cycle times in more payout, and that's something that happens. So I think you're right. I think the way to do this is to, and I think most companies still have people checking those estimates and they'll need to for some time and the technology will continue to improve to a point where there's much more reliance on at least being able to identify what's damaged, maybe proactively start to order parts and put repair blueprint forward. And that's kind of the future of what's going to happen in the repair business. So you're agreeing on what's damage or the scope of the repairs and then you can reconcile it on the back end. That's a great example.
Nathan Golia (23:24):
Well, I think that the photo as of anything, the other thing that I always thought about while I was doing it, well actually, actually it wasn't for my house, it was for my car. But before I moved, we, a hailstorm had to be damage and it was least we had to get it fixed, but I couldn't do the photo estimating because with the limitations of my device and the sun, there's no way they're, there's no way you're actually going to get this correct. So we're going to have to send someone out. And my insurance company was pretty good about someone out pretty quickly. The estimate was done pretty fast, it was taken care of, wasn't a big deal. But there is still those limitations. And I started, and I always think it have this job. It's like, okay, well yeah, it's great that we're going to do photo estimating, but an insurance company can't control, for example, what kind of camera phone, what kind of phone the person has or how good their internet connection is when they're uploading it.
(24:18)
If there's some setting on their phone, don't, they're not aware of that was set as setting lower res images or they're not photographers who know the angles or the light or all that kind of stuff. All those little things that insurance company doesn't want to just be getting pictures. Well, I can kind of see how this thing looks like it's got to be good. They want to know and they're going to kick it back and ask them to do it again or they're going to send someone out anyway. So it's one of those interesting things where it's like I think that we as an industry, there's obviously obviously some good promise in that it's not that hard for some of them, but not for all of 'em. And there's still going to have to be someone there's still have to be intervention in that process where what someone's like, I think I can do this claim remotely and then someone's going to get like, no, actually we really need to have this double checked. I think that's right.
Alan Demers (25:06):
Yeah. Yeah. It's back to my opening comment where there's some general rules, but a whole lot of exceptions. So no two claims are alike. And I think we all fall into that habit of saying claims, and it could be something really complex. It could be commercial, it could be a hail damage versus a collision, which is entirely different. So you're right on there. But that technology continues to get better. There's actual companies that are focused on trying to make those images more usable for light conditions or reflection in those kinds of capabilities. We'll eventually see them.
Nathan Golia (25:41):
Yeah. Well I think we got a couple minutes here. We do want to go through these top six claims wave claims have already transformed on dig.com. I hope you all go check it out. We've gone through Photoing. I think a little bit in this. We've touched on artificial intelligence. It's like, yes, it's a thing that is out there but not ready to take over and it's not going to take over all your adjuster jobs digital payments, mostly on the back end. I said, I guess you both said this, that's kicking up a lot more and it's good to see. I actually feel like we have some reporting coming out on that soon. I was just talking to our reporter who was trying to line up a chat with a couple of the payments companies. So interesting to see. Interesting thing that, yeah, while we were all getting your ACH deployed you're getting a H payments for your claim on the backend. They were still sending checks back and forth.
Alan Demers (26:31):
Yeah. And again, I think that's another good example if something is working well in the marketplace, but there's still much more to do around payments. So direct to debit may be better than ach. You have to look at your process and say, how much are you asking your adjusters to do? How much are you asking the customer to do? I know a lot of focus goes to privacy and security and it should go but there's customers that are saying, Hey, pay me through Venmo or some other platform. And so there's still a ways to go on that technology, but that one's really taking off too.
Nathan Golia (27:04):
Telematics you talked about crash detection, accident reconstruction. I actually think that's really interesting but I do have to say that I forget my wife, one of my wife's friends dropped her phone in the car. She was as a passenger, she dropped her phone and the phone said, have you've been in the car crashed? So probably just a little bit of work to do there if you're leaning on that.
Alan Demers (27:29):
Yeah, it depends what you're relying on. Although that's coming a long way too. There are some companies that do mobile only crash detection with pretty high fidelity, but different from maybe the Apple commercial that's on the I 14. They had some problems earlier. And then even in the messaging, they talk about severe accidents and what we're probably also interested in those minor or moderate accidents that may have happened. But that's very promising because when we think of the whole period of time it takes for someone to think about making their claim in a minor accident, there's like a five day delay from the accident itself to the time it's reported. And I think there's a big opportunity that to help guide customers and give them services that they are already getting from maybe attorneys or paying clinics or body shops. So there's something there, but that'll continue to improve.
(28:21)
I think a lot of it really is about getting that data because again, the claim process is mostly about gathering information to make decisions. And the longer that takes, the longer the claim's open. And so if there's this idea of pre-filling the information with data that comes from the crash itself or the alert itself, it really accelerates. And then I think we all dream of the possibility where companies are proactively contacting customers and asking if they need help. And so those things are happening, but they're mostly linked to telematics programs. But again, what's coming around the corner is crash detection without reliance on a telematics program. So we we'll see more of that.
Nathan Golia (29:04):
Quick minute to wrap up. I just want to say the other two that were on there after photo estimating, artificial intelligence, digital payments, telematics remote work. I always think about this as like, yeah, it is good to be able to answer phone calls from home because if there's a catastrophe in your area, you probably can't get to the office. <laugh> probably very helpful in some ways. And also vendor consolidation at the repair and at the repairing contractor level having a lot of impact. But Alan, anything you wanted to say to wrap up our conversation today? Anything?
Alan Demers (29:34):
Well, I think through this period of the perfect storm, and we only scratched the surface, but I think the key here is we're at a pricing moment. So pricing sophistication, pricing accuracy is going to win in the marketplace. So those companies that have accurate reserves, they have good communication from their claims organizations to identify what's happening on the front end. Those becoming more demand than ever. We already talked about communicating with the customer and making sure they're updated on the back end. It's going to be those carriers that are really good about their subrogation and salvage because those tails are going to be that much longer or they recovering everything that they should. And then I think there's also a role for clients to play in insurance to value. That's another area where the inflation has not only hit the repair costs, but the insurance to value on property. And so as adjusters are out there, they making sure they're keeping the eyes and ears open for any additions or modifications and keeping up with enough coverage for their policy holders. So to me that's what's going to get us through that and adding in the technology where it makes sense. And again, we've only scratched the surface, but we'll talk about that at another time. For sure.
Nathan Golia (30:53):
Well, thank you for joining us today, Allen. Thank you to everyone who's watching live or watching on the B O d Nathan. Golly. We'll see you next month with tech priorities.
