Read any current consultant report or white paper on the insurance industry, and terms like “innovation,” “transformation,” and “Big Data” are all too common. Clearly, carriers today are besieged by buzzwords aimed at defining the key to growth and success in a continually shifting marketplace. Despite all of the commentary about the latest trends, it’s clear that a primary differentiator is customer satisfaction, which leads to policyholder retention and more cross-selling opportunities. Studies have shown that how a claim is handled can have a dramatic effect on a policyholder’s decision to renew.
Most recently, J.D. Power released its “2014 Property Claims Satisfaction Study,” which includes a ranking of customer satisfaction among homeowners who suffered a noncatastrophic claim in 2013 by examining five factors: settlement; first notice of loss; estimation process; service interaction; and repair process.
According to the study, customer satisfaction was influenced largely by basic communication and speed of response. The study noted, “Compared with 2013, research findings in 2014 show that homeowners’ insurance customers who filed a noncatastrophic claim in the past year more often received a thorough explanation of their coverage when first reporting their loss; were more promptly notified of what damages were covered; and received their settlements nearly four days faster.”
Seeking to have greater control over the claims process, carriers have increasingly developed specific vendor programs with predefined requirements for service. Metrics such as a set timeframe for contacting the homeowner, arriving on-site, providing an estimate, and completing service all have become more commonplace. Faster response by insurance restoration service providers—whether the initial contact or arriving on-site—clearly is a leading influencer for policyholders and, as a result, has become a central component of carrier requirements. Speed of response will only continue to grow in importance when considering the generational and societal changes taking place. A large portion of today’s consumers live on their smartphones and are accustomed to having access to information anytime they want. This “always-on” and on-demand capability creates an expectation of instantaneous response—waiting hours, let alone days, simply isn’t acceptable. It’s important to note that perception is reality. What’s considered “fast” to the policyholder may differ from what the carrier considers acceptable.
Carriers also have turned to a growing number of third party administrators (TPAs) to manage vendors for them. In such cases, the TPA takes on the responsibility of identifying, credentialing, managing, and monitoring vendors. Over the past decade, the number of TPAs has grown substantially, and today, more than a dozen organizations have become viable resources for carriers to outsource vendor management.
In both cases, electronic timestamps are used as a way to ensure that what is expected gets done within the required timeframes. TPAs and highly professional service providers also have added dedicated staff to monitor service levels and serve as a backstop for work done on a local level.
Specific communication procedures and touch points are built into the defined program, ensuring that the policyholder is kept informed and that the adjuster is able to remain in control of the claim. According to the J.D. Power report, “When insurance companies effectively communicate with claimants, those claimants are less likely to escalate their claims to a supervisor. When a supervisor becomes involved, overall customer satisfaction drops by more than 160 index points.
“Timeliness of the communication also plays a role in whether or not a claim gets escalated,” continues the report. “For example, if the settlement terms are provided to the claimant within one day of first notice of loss, only six percent of customers escalate the claim. The rate of escalation increases to 13 percent if the claimant is informed within one week and increases to 18 percent if it takes more than one week.”
Here, too, generational differences play a role, as the study found that nearly 25 percent of Gen Y, or millennial, claimants (age 34 and younger) are likely to escalate their claims to a supervisor if they don’t perceive proper communication and service, compared with eight percent of baby boomers (49-67 years old). Also, keep in mind the increased tendency of today’s consumer to share everything online—positive and negative—and the implications this can have on a carrier’s brand.
Mitigation, roofing, and flooring were historically the initial claims categories addressed by carriers and TPAs alike. Over the past several years, textile restoration has been added to the mix, and with good reason, since garments and household fabric items comprise a large and fast-growing category of contents. In fact, in 2013, Americans spent $363 billion on clothing and shoes alone, according to the U.S. Department of Commerce’s Bureau of Economic Analysis (yes, that’s “billion” with a “b”). And this is on top of spending nearly $355 billion in 2012. With such spending being fairly consistent year to year, the implications for increased severity are significant and clear.
Textile restoration addresses one of the three basic needs when a homeowner experiences a loss. Initially, their thoughts are on the first two: food and shelter. Easily overlooked is the third: clothing. Understandably, a homeowner is concerned more with where they will sleep that night rather than what they will wear tomorrow or next week, but once this need is realized, it becomes just as important.
A textile restoration vendor serves as a crucial starting point in the restoration process. A contents restoration company cannot begin its job until items are removed from closets, dressers, windows, and beds. Structural repair companies cannot begin their jobs until the contents company has completed its role. As a result, a textile restorer often needs to be one of the first service providers on-site and should be considered at the first notice of loss just like a mitigation company. Since customer satisfaction is based partly on speed of response and overall completion of the claim, there is clear value in a restoration process done in the most logical order.
A true textile expert can provide a solution for immediate-need items, such as clothing and bedding if necessary. These items can be restored and returned in as little as 24 hours. Initially considered merely as a way to reduce additional living expenses (ALE), this service has come to be recognized for other value-added components. Specifically, such a service demonstrates action to the policyholder, which reflects positively on the carrier.
A successful return of immediate-need items also provides proof of concept in restoration, not only for soft goods but also for the entire restoration process. Some insureds tend to be skeptical about the likelihood of successful restoration; others simply might not understand restoration as an option, thinking everything should be replaced. The carrier’s responsibility is to return the policyholder’s property to preloss condition, and restoration can be much more cost effective compared to replacement.
Communication at the onset is vital. Whether it’s the adjuster or a service provider, the insured needs to hear confidence in the process and understand that restoration is a viable solution. Once that’s done, a homeowner is much more likely to accept restoration over replacement, and when they have a positive experience at the very onset of the claim, the rest of the claim is more likely to go smoothly.
A professional textile restoration expert also helps build the file for the adjuster. By documenting the loss with digital photos and conducting a room-by-room inventory on-site, the textile restorer helps serve as the “eyes and ears” for adjusters, alerting them to particularly challenging or unusual situations.
It oftentimes has been easy to overlook the role of a textile expert, due mainly to the fact that such companies are on-site on a limited basis. Once the inventory and pack-out are completed, the majority of the work is done off-site at a restoration facility customized to handle the contaminants found on a loss site that affect thousands of types of items and hundreds of types of materials.
This is where the major investment in equipment and staff comes into play. Specific cleaning equipment combined with years of experience leads to capabilities and processes designed to ensure the highest possible rate of restoration success. Here, too, customer satisfaction begins with an ability to quickly and efficiently start the restoration process. The sooner a textile restorer can be on-site, the lower the risk of potentially damaging effects such as dye migration, mildew growth, and irreversible damage caused by chemical reactions from soot and water.
Throughout the restoration process, proximity of the textile restorer is very important. Once the entire job has been restored, the textile expert becomes the homeowner’s closet, securely storing the items until the homeowner is ready for them to be returned. Again, it’s an investment in storage space to accommodate the items, and it’s important for the items to be close enough for the insured to visit the facility and retrieve any needed items in the interim. A secure, temperature-controlled, and easily accessed storage facility is an absolute requirement, both for the proper storing of items as well as for the convenience of the policyholder.
All of these factors point to the importance of textile restoration as a key component in the claims process, all of which create value for the carrier, particularly those that have identified the importance of customer satisfaction. This would seem to be a growing number when considering Ernst & Young’s “2014 U.S. Property-Casualty Insurance Outlook Report,” which states, “Many successful insurers are in various stages of implementing a customer-centric business model, as opposed to a product-centered model.”
Going forward, progressive carriers will continue to focus on customer satisfaction and policyholder retention, and the role of highly professional textile restoration experts will continue to be increasingly important and valuable.