Insurers Are Speeding Up Claims. Their Worry: More Mistakes
Aerial technology such as drones was used widely last year to evaluate damage amid back-to-back disasters
The Wall Street Journal
By Leslie Scism and Nicole Friedman
Property insurers are relying on more drones, small aircraft and artificial intelligence to accelerate claims during 2018’s hurricane season. There are signs this push for speed could pose new headaches for the industry.
Last year marked the first widespread use of aerial technology to pinpoint damages and evaluate losses quickly as insurers scrambled to keep up with back-to-back hurricanes and wildfires.
But some insurers have reopened claims from that period because initial repair estimates turned out to be too low, according to executives and regulators.
Everest Re Group Ltd. , which offers insurance coverage to other insurers, said last week it increased its estimated 2017 net catastrophe losses by $400 million partly because many customers had to reopen claims in Florida and Puerto Rico.
“Settling claims quickly was initially a sound strategy, but what we now know is that this approach left our clients vulnerable when the actual repair bills came in higher than at what they originally closed their claim,” Chief Executive Dominic Addesso said on a conference call last week.
Insurers are testing a number of new tools as they try to speed up what still can be a clunky, time-consuming claims process. That includes everything from drones and small airplanes to assess damage without the help of an on-site adjuster to smartphone apps that let consumers submit their own damage photos. Some insurers are identifying property damage before policyholders even reach out to report a claim.
It took 16.5 days on average in 2017 for policyholders to receive payments for residential property damage after notifying their insurers, according to a J.D. Power survey released this year. That was down from 17.4 days in 2016 but still longer than the average time earlier in the decade.
Several large insurers said they are using flights, drones and aerial imagery more frequently in 2018. Allstate Corp. settled 16,500 claims this way in the first half of this year, compared with 12,600 for all of 2017.
Allstate is also expanding its use of a program called “Virtual Assist” that reduces the need for an adjuster to visit a site in person. Instead a service provider will broadcast the damage to an office-based adjuster via streaming video. In the first half of 2018 Allstate resolved 47,500 claims this way, up from 6,100 in all of 2017.
Virtual Assist addresses a problem that surfaced last year: a shortage of adjusters, which contributed to claims delays. The program eliminates travel time for adjusters, according to Allstate, allowing them to be more efficient.
American International Group Inc., another property insurer, launched a system last year with data feeds, analytics and forecasting models, so loss-prevention specialists can monitor wildfires and storms and their proximity to policyholders. AIG can then dispatch teams to clear brush or transport valuables.
“The name of the game today is preparation and mitigation as much as claim response afterward,” said Jerry Hourihan, president of AIG’s Private Client Group.
Some customers, like Stephen Dunn in Houston, are pleased with the industry’s efforts to speed things up. He said a motion sensor installed on his doorbell alerted his phone to rising water levels during the 2017 arrival of Hurricane Harvey. He was able to take pictures remotely using the doorbell and send the photos to his insurer, USAA. Within two days USAA declared the cars in Mr. Dunn’s garage a total loss and deposited money in his bank account.
“I had no idea that they would resolve this so quickly,” he said.
Older policyholders have more reservations about some speed-enhancing tools, according to a 2017 study by J.D. Power. Policyholders older than 53 years who filed an auto claim via a photo app on a smartphone, tablet or computer were less satisfied than peers going the traditional route, according to J.D. Power. Younger customers, on the other hand, were more satisfied.
“Now the insurer is saying, ‘You need to do the work. Be sure you photograph the damage and send us a photo,’” said David Pieffer, a J.D. Power insurance practice leader.
Some insurers are wary of using photo apps for home damage, citing the possibility of more complexities.
“We’re cautious,” said Ross Buchmueller, chief executive of PURE Group of Insurance Cos., which focuses on the affluent. “You don’t want to find out you did an incomplete job and need to reopen the claim.”
In Texas, for the vast majority of homeowners who filed claims following Hurricane Harvey’s Aug. 25 landfall, it took an average of 24.5 days for resolution, according to state insurance-department data as of Oct. 31. In Florida, about half of complaints to an insurance hotline following Hurricane Irma involved claim delays.
In both states satisfaction with the handling of property claims fell last year, according to J.D. Power.
“We’re seeing some improvements in the way that insurers are working with their customers to get the benefits paid with as little hassle as possible,” said Amy Bach, executive director of consumer group United Policyholders. “But that is not all insurers and that is not in all regions.”
This article originally appeared in the Wall Street Journal.