It’s certainly ironic that an industry that revolves around customer satisfaction as its most important performance metric has been forced into price gouging as a bargaining chip to attract and retain customers. As insurers are forced to reduce the cost of insurance products due to the commoditization of the industry, their margins for profitability decrease. Thus, insurers have placed their primary focus on cost containment as a means to remain competitive and grow profitably.
We know for a fact expense reduction is an industry priority. We hear it from our customers every day. And in fact, it was a theme at Uniglobal’s 5th Annual Insurance Claims Management Conference, recently held in Prague. Its website stated: “Insurers can’t control the weather, but they can control other impacts on claims management costs.”
The fact is, the commoditization of the P&C insurance industry has created an environment where product pricing has become the primary decision factor when consumers are policy shopping. And after getting the best deal for an insurance policy, a policyholder will likely not be mindful of their insurance company until they need to file a claim. Then and only then does customer satisfaction come into play, when the insurer is graded based upon the experience it provides. While the claims process is the basis for generating customer satisfaction, it’s also where the greatest opportunity for expense reduction exists.
Significant opportunities for cost containment within the claims department are available by better managing the associated costs of the third parties that are critical to the claims process, i.e. vendors such as independent adjusters, public adjusters, engineering firms, contractors and litigators, among others. For instance, extraneous expenses like mileage can quickly add up to hundreds of thousands of dollars per year; and they are often paid out without a closer look, often because the personnel resources don’t exist to perform the auditing job function. An automated invoice reconciliation process can solve this problem and tell you whether your vendor bills match the contracted field fees and the approved estimates, or whether they contain overages.
Detailed reporting of the claims operation can also identify where cost leakage is occurring as well as where the opportunities for savings exist. Many insurers we talk to don’t necessarily understand the comprehensive costs associated with their vendor networks, with the previous example of mileage just scratching the surface. With detailed reporting around vendor expenses and performance, insurers can conquer two objectives: cut costs to remain profitable, and evaluate and improve the customer experience to retain policies.