OK, contents claims might not beat out Jennifer Aniston or Hangover II
, but following contents insurance trends might be exceedingly gratifying, especially if accurate adjusting is something you find "del.icio.us."
Benchmarking, or measuring against some kind of defined standard, is pretty complicated for contents claims due to the seemingly infinite variety, quality and value of each item. Each household, especially across income brackets, has unique items with sometimes widely varying values. When you get to the ultra-wealthy stratum, you are often dealing with one-of-a-kind pieces of art or custom-made jewelry and tailored clothing.
The challenge has been to identify general trends in loss along with detailed lists of contents claimed so as to alert carriers to issues such as fraud, risk management and the opportunity to schedule additional items. It's not really enough to say, "Jewelry claims are up." The immediate questions that arise are where, what kind of jewelry and how the loss occurred. What has been needed is a combination of aggregated general data and collated specifics in subcategories, such as region, types of items (e.g., mountain bike, diamond pendant, cassette tapes), claimed values, actual values, and causes of loss.
Contents claims indexing offers a solution that can aid insurers in response preparation and ongoing vendor relations. For example, in 2010, claims for electronics topped the list in terms of aggregate dollar value, followed closely by jewelry losses, according to a new contents claims index from Enservio. The index peels back the layers of the top-level categories and allows a deeper look at, say, what kinds of electronics were claimed as well as the cause of loss. The 2010 statistics show that claims for laptop computers were more than double those of desktops. If theft is shown to be the main peril, insurers may be alerted to look at risk management programs and incentives. If it turns out that smoke or water is a primary cause of loss, carriers might develop a deeper relationship with restoration vendors that have expertise in saving electronics damaged by those contaminants.
On the fraud-detection side, anecdotal evidence and institutional knowledge have been the basis of trending analysis for decades. With indexing, insurers can see actual numbers—evidence—to support (or contest) what industry analysts think. For instance, Enservio's index shows a significant increase in jewelry claims during the past two years of the recession. It may be simply that jewelry theft rises substantially during hard economic times, but at least an insurer can now look at a theft claim and benchmark it against the index to check for indicators of fraud.
Crunching the data in various ways can highlight inconsistencies in claimed losses, alerting the adjuster to potential fraud. The adjuster may find that a jewelry claim stands out as odd because other commonly stolen items, like electronics, bicycles and golf clubs, were left behind. The index could determine in what percentage of claims jewelry was stolen while other contents were left, thereby raising or lowering the red flag.
Indexing can also help with strategic planning. For widespread regional disasters, processing claims speedily is a primary goal, but no insurer wants to trade out accuracy for a quick response. Using the regional and income-bracket subcategories in a contents claims index, an insurer can contrive a generally applicable set of contents valuations for homes that don't claim high-end items. This can be of particular value in widespread damage from tornadoes, hurricanes or other regional disasters.
Claims vendors that use these indexes can more aptly target their technology. A soft-contents restoration company will benefit from knowing what kind of apparel or household fabric subcategories are most claimed and why. An ultrasound cleaning provider will be able to look into the data and find what percentage of claims are for watches, computers, collectibles or medical devices and build its marketing and work plan off of actual data. A dry cleaning vendor could use the data to decide if it wants to focus on the high-end commercial niche or broad-based residential losses.
"The observations that you can pull out of a contents claims database that grows by millions of lines each year are astounding," says Rob Halpern, Enservio's marketing director. "Any one claim is not going to be that illuminating, but in the aggregate, we see some really interesting and revealing trends."
"We keep hearing it at all the conferences we go to: 'It's all about the data,'" says Ellen Carney, senior analyst at Forrester Research. "Fourteen million data points can be sliced and diced to answer millions of different questions that insurers have, anything from claims trends to performance comparisons against industry peers."
Using indexing, carriers can combine rich data—millions of combinations, in fact—with analytics to produce highly detailed reports on contents claims. Regional trends, fraud red flags, preferred vendor contracts, and loss containment programs are just some of the areas that can be served through indexing. With artificial intelligence coming into its own, carriers and vendors can expect this to be a major growth area for contents claims analysis.
Maureen Latimer is managing editor of Claims Advisor.