The P&C industry is struggling with profitability in relation to losses and expenses. Mastering loss ratios is essential for P&C insurers to balance risk and profitability in a volatile market, as noted by AM Best[1]. Despite the challenges, there’s a glimmer of hope. In 2023, US P&C carriers managed to reduce their losses by almost $26 billion, marking a 17% improvement over the previous year. Personal lines, including homeowners and automobiles, also saw a significant underwriting loss reduction of $7.2 Billion. This progress, despite a combined ratio of 106.7 against an 11.7% premium growth, suggests that profitability is within reach. Carriers have the potential to turn the tide and bring their losses to a more manageable level.
Many carriers have taken a first step by tightening underwriting rules and increasing premiums to align with specific higher-risk property and automobile risks. This must be carefully managed to ensure the company remains competitive and does not reject or non-renew loyal customers, which could lead to shrinking premiums and an unfavorable brand reputation. While loss ratios may decrease, there are also opportunities to reduce loss costs, improve services, and enhance customer satisfaction, which may offset premium increases.
Large personal lines and commercial lines carriers moved to a straight-through process (STP) to automate claims payments and settlements for automobile and property claims for both personal and commercial lines. The STP approach for low-severity property-only losses is a proven strategy to achieve this. STP leverages technology and analytics to streamline claims handling, reducing costs and improving efficiency by eliminating the need for adjusters to review small claims. STP claims processing is obtainable for carriers of all sizes.
Here are three reasons why going with the STP approach can dramatically change your business.
The STP Approach
1. Efficient Claim Intake
The success of a STP strategy relies on accurate and expedient claim intake. Policyholders have the convenience to file claims using a variety of methods that include mobile applications and websites, complemented by the assistance of AI-driven chatbots, ensuring prompt and precise submission of claims. Various channels facilitate claim initiation, from mobile apps that enable on-the-spot documentation through pictures and immediate detail provision, to call centers and traditional phone reporting systems that cater to those preferring or requiring personal guidance. Websites provide dedicated policyholder portals for direct claim lodgment, while insurance agents are instrumental in ensuring comprehensive data collection during the claim filing process.
Artificial intelligence chatbots offer step-by-step support in gathering initial information and resolving frequently asked questions at the beginning of the claims procedure. After submission, claims undergo a rigorous triage process that uses analytical models to gauge the likelihood of significant loss, categorizing them by their frequency and potential severity, such as common minor collisions versus rare severe injury incidents. This systematic categorization permits insurers to prioritize claims handling and optimize resource distribution.
2. Automated Damage Assessment
Automated damage assessment, a crucial element of the STP approach, utilizes advanced image recognition to analyze policyholder-submitted photos or videos, providing swift and precise repair cost estimates. This process is enhanced by historical data and algorithms, ensuring accuracy within set tolerance thresholds. Claimants receive timely updates and guidance through chatbots or dedicated apps.
Another important aspect of the STP strategy is the use of AI-driven damage assessment applications that inspects uploaded images or videos of damage by policyholders. This software uses image recognition to gauge the extent of property damage and provides repair cost estimates. AI-driven STP processing uses the information from the damage assessment software alongside historical loss data alongside and algorithms to determine the loss estimates are within a customer-defined threshold of tolerance. Communication with claimants is streamlined through chatbots or claims applications, offering updates on the claims’ progress and assistance with subsequent steps.
When damages are within the tolerance limit, the claims process can be expedited even further. The system can approve the claim and triggering electronic payment transfers quickly, sometimes before the arrival of a tow truck. This efficiency in assessing and approving claims drastically cuts down the time and manual workload normally associated with straightforward claims.
3. Rapid Payments
The STP approach’s rapid payment system ensures immediate electronic settlements for reinsured claimants, bypassing adjuster involvement. This efficiency not only accelerates claim resolution but also optimizes resource allocation, elevating customer satisfaction and loyalty through seamless experiences.
Benefits of the STP Approach
The STP approach significantly enhances insurers’ efficiency and scalability. It automates routine tasks, uses analytics for precise claim processing, and minimizes adjuster involvement, yielding cost savings and improved resource allocation. Its scalability ensures robust claim management, even during peak periods like natural disasters. Examples include:
- Efficient Claim Intake: The STP approach allows claims to be initiated through multiple channels, including mobile apps and websites, with AI-powered chatbots assisting in the process. This leads to quick and accurate claim submissions, which is essential for efficient claim handling.
- Automated Damage Assessment: Utilizing advanced image recognition, the STP approach provides swift and precise repair cost estimates from policyholder-submitted photos or videos. This process is further enhanced by historical data and algorithms, ensuring accuracy within set tolerance thresholds.
- Rapid Payments: The STP approach ensures immediate electronic settlements for reinsured claimants, bypassing adjuster involvement. This accelerates claim resolution and optimizes resource allocation, thereby elevating customer satisfaction and loyalty through seamless experiences.
- Operational Efficiency: By automating the claims process, insurers can drastically reduce the time spent on each claim, allowing them to handle a higher volume of claims efficiently. This also reduces administrative expenses by minimizing the involvement of adjusters in low-severity claims, freeing up resources for more complex claims.
- Scalability: The STP approach is highly scalable, making it easier for insurers to manage increased claim volumes during peak times, such as natural disasters. This ensures robust claim management and maintains a healthy balance between risk and profitability.
Is Your Org Ready to Ensure Long-Term Success with STP?
Effective loss ratio management hinges on strategic decisions and innovative technology. The STP approach exemplifies this by automating and analyzing low-severity property-only losses, streamlining claims, cutting costs, and boosting efficiency. With efficient claim intake, automated assessments, and swift payments, insurers strike a balance between risk, profitability, and customer delight.
As the insurance industry continues to evolve, adopting advanced technologies and refining operational processes will be crucial for insurers aiming to stay competitive and deliver superior service to their policyholders. The STP approach offers a proven framework for achieving these goals, helping insurers navigate the complexities of a volatile market with confidence and precision.
[1] Special Report: 2023 P/C Snapshot: Personal Auto and Homeowners Results Continue To Dampen P/C Underwriting Performance