Grappling with indemnity spend
The British property insurance market is a sizable one, and is the second largest sector in general insurance, after motor, with a reported premium of £12.1 billion in 2008. In the last five years, claims and expenses for the sector have risen by 22%, while premium (commercial, household, and domestic) has only grown by 15%. Extrapolate these growth trends, and it’s clear that the sector will face serious profitability challenges in the coming years.
In addition, these are not benign times for property insurers— increased flooding, aggregators, and fraud all pose challenges. Insurers remain constrained by a financially challenged government with overwhelming budget pressures with regard to flood protection. If the motor market is anything to go by, it will be very difficult to stop the erosion of premium by the aggregators. Continued investment in fraud detection processes and technology will help keep the fraud contained.
It will become increasingly important for insurers to have control over indemnity spending to reverse this trend. Celent believes that there are solid technology options to support the insurer in doing just this. The application of estimation tools can improve fairness, accuracy, speed, and consistency of claims.
Using technology, an insurer can anchor the claim at the point of FNOL and improve fairness, accuracy, speed, and consistency of claims. The claim handler can make better decisions about fulfillment choices according to insurer strategies. Case studies show reductions in indemnity spending of 10%, and a reduction in adjuster review time of 50%. These are precisely the types of improvements insurers need to seek in the coming years to protect their property book.Estimation tools can help speed the process by providing quality data earlier in the process, and through automated assignments to field adjusters. The improved accuracy of the work required improves transparency for the policyholder and reduced overpayments by the insurer. These tools create a clear audit trail of how the claim has been handled, which can support an insurer’s efforts in TCF regulation.