Historically, the insurance claims process for property damage starts with a claims professional assessing damage on-site and ends by giving a homeowner a check for fixing the damage. This old model places the responsibility on the property owner to research and vet qualified contractors to start the restoration process, a particularly heavy burden to bear in moments of crisis.
When extreme weather events such as hurricanes or wildfires devastate policyholders’ homes and surrounding communities, victims who need extensive repairs often don’t have the luxury of time or the necessary resources to shop around for the most reliable contractor. Recognizing this, the property insurance sector is catching up to how auto claims have integrated the restoration process for more than two decades.
When it comes to auto claims, about half are funneled through a direct repair channel, which improves an insurer’s ability to accurately settle losses. The reason for the delay in this approach in the property space is partly because it is easier to manage a network of auto body shops, where the majority of work happens behind the scenes and customers can’t witness mistakes. By contrast, when contractors enter someone’s home to make repairs after a claim is filed, they also invite factors that impact customer satisfaction, like punctuality and precision. When contractors arrive late, create a mess, or make a mistake, homeowners justifiably complain, which increases turnover within the industry.
To combat these issues, there is increased support from insurance companies to work with third parties to manage the cumbersome process of identifying good contractors, training them, and ensuring that they deliver on promises. This niche market of managed repair programs will continue growing in 2019, especially as the industry adapts to an increased volume of claims, talent gaps, and new technologies.
Reflections on 2018
In the past year, we saw an uptick in storm losses in the property space from Hurricanes Florence and Michael, which hit as the industry was still reeling from the aftermath of Hurricane Irma in 2017. These combined events within a two-year span exceeded the total volume of hurricane losses from the past decade. For Hurricane Michael alone, estimated insured losses are close to $4.53 billion, with more than 88,000 claims involving residential property damage, according to the Florida Office of Insurance Regulation. This tested underwriting performance, stretched resources when it came to restoring disrupted supply chains, and impacted timelines for estimating losses and rebuilding infrastructures. It also created a massive challenge for the restoration industry with respect to finding quality contractors in affected states like Florida, North Carolina, and Georgia.
When this occurred, it created delays in restoration projects because local contractors were both overwhelmed with work and personally affected by the events. Many were unable to help others or respond to jobs due to severe flooding that spanned hundreds of miles. The industry was forced to look outside the local market to find reputable contractors, and that is particularly difficult in the context of a major storm due to “storm chasers,” a troubling trend where fake or unreliable contractors take advantage of vulnerable homeowners to get big advance payments without doing quality work or the necessary follow-up repairs.
There is a big push within the industry to find other resources that can come into a market and do quality work not only for emergency services like tarping, boarding and tree removal, but also for actual rebuilds.
The rebuild is a challenge because several states like Florida require a state contractor’s license to do the restoration work. This underscored the need to train more contractors outside traditional hurricane-impacted areas to become licensed in states that require them, and to ensure they have the ability to mobilize and set up long-term locations to complete the work. It also highlighted the value of leveraging networks to manage the vetting process and pre-certify contractors, including conducting background checks and verifying proper licenses, certifications, and insurance.
Another advantage of utilizing a network versus an individual contractor is that many managed repair networks provide an additional warranty on the repairs, even if the original contractor is no longer in business. This can be a valuable safety net, as contractors going out of business or changing legal names is a significantly larger issue in property than it is in the auto repair industry.
Addressing Talent Gaps
In addition to the increased volume of claims from catastrophic events, low unemployment rates have also contributed to a shortage in the workforce that is able to do restoration work. According to the Bureau of Labor Statistics, the insurance industry unemployment rate is 1.2 percent, compared to the national average of 3.7 percent. Still, the property industry is grappling with how to attract and retain new talent in a tightening labor market for both claims professionals and contractors. A study from The Jacobson Group and Aon’s Ward Group found that 63 percent of insurance companies planned to increase staff during 2018, but filling vacant roles is becoming increasingly difficult as more industry veterans retire and younger generations choose other career paths. This past year, the Bureau of Labor Statistics estimated that 25 percent of the current workforce was expected to retire.
Also tightening supply for workers in the market is the level of education needed to fill certain occupations. For instance, there are more certifications required today for handling mold, water damage, and other hazardous materials. As we get smarter about mitigating specific types of damage, we must provide the corresponding training. Companies that fail to do this advanced planning will also fail at responding to major restoration events because they will not have enough pre-certified people. This comes with serious implications for succeeding in customer service, and for a company’s reputation of being reliable in a crisis.
One way the industry is bridging the talent gap is by leveraging technology to reallocate resources across occupations. It is an expensive luxury to have a robust network of technically skilled claims professionals available for in-person visits, especially when the area is still recovering from a catastrophic event. Rather than hire more workers in this high-skill role, the industry has responded by having contractors assist in the on-site support. Thanks to technology, contractors are able to collaborate with claims professionals who are working remotely and can provide the necessary expertise. This streamlines the process for claims professionals, enabling them to provide estimates for a greater volume of claims. In the past, claims professionals typically resolved two-to-four claims a day, but this new approach allows them to tackle 10-to-15 claims per day.
In addition, the remote work option removes the burden of having to hire from a specific geographic talent pool. This is critical as the industry tries to attract younger generations that typically cluster in metropolitan areas to live, play, and work. It also provides the veteran class of insurance professionals nearing retirement age a flexible option to continue their careers without the physical constraint of an office. The industry is constantly evolving to refine how we link technical skills with customer needs, and virtual guidance from off-site experts is sure to grow in 2019.
Speeding Up the Process
With the current shortage of talent in the claims industry, having an app with geo-location capabilities will also be essential for efficiently using available resources. This technology helps keep available claims professionals busy when and where they are needed, and supports quick activation of temporary additions to the workforce. While there are different versions of apps, in general they function the same by showing assignments in a map-like manner, and then assigning professionals based on location and availability. Not only does the technology enable the fast and easy assignment of new losses, but also it helps claims professionals in the field to report back quickly for accurate reserving and payments.
This solution is more than an app, and simplifies the process of finding someone qualified and willing to look at a loss. Having the right experts vetted in advance with the appropriate industry expertise and training is also essential. Ultimately, the goal is to help clients move past a difficult situation and get back to business. An easy-to-access app can even be shared with customers and policyholders to help them self-triage and document property and liability claims by taking videos or photos of the damage using a smartphone and sharing it with a remote desk claims professional.
Looking Ahead
Extreme weather events continue to grow more frequent and severe, but there is no way to predict what damage might occur in 2019. Still, the insurance industry is preparing for the year ahead by changing the infrastructure of catastrophe plans. In prior years, many insurance companies were hesitant to partner with repair networks, but today the majority of the top 100 firms are collaborating with third-party managed repair networks to find solutions for repairs.
The claims process is evolving, and no longer ends with giving the property owner a check. Collaboration between restoration experts and insurance claims professionals are helping homeowners answer the “What now?” question. As the workforce shortage intensifies competition for talent, technology and firms that can identify qualified workers will be vital tools for assessing how to distribute resources.