2 weeks Ago
Some readers, mainly from insurance companies, criticised my two recent articles about the industry’s slow adoption of technology to speed up the motor claims settlement process. The articles were said to be “unfair and damaged the industry’s reputation”. Counter-narratives, a popular phrase in the hyper partisan world of United States presidential politics, or alternative arguments that showed claimants were being paid faster, were not offered.
Even though insurance companies operate in data-rich environments, my critics provided no information about the industry’s efficiency rate in claims management and whether it had declined, improved, or remained the same during the last decade. Policyholders were not being put at the centre of the problem. One reader also shared his 2014 experiences with the motor claim system.
His vehicle was wrecked in a single car collision while a friend was driving. A settlement offer was made two weeks after the accident was reported. Was this a fluke? Insurers red flag collisions like these and investigate them to rule out fraud.
Since this column strives for accuracy and balance, it is inviting additional feedback from readers, including insurance providers and intermediaries, with relevant data to support positive experiences with the process and where claims were settled within reasonable periods. Another reader argued that claims settlement delays are often contributed to by processes and procedures that insurers implement to combat fraud. This comprises attempts by consumers to exploit insurance contracts, even though insurance “is meant to protect against risks, not serve as a vehicle to enrich”, according to Investopedia, It continues: “To be fair, insurance fraud is also committed by insurers, although the majority of cases involve the policyholder attempting to receive more money by exaggerating a claim or seeking a benefit for which he or she is not entitled.
One of the downsides of insurance fraud is that the heightened cost of dealing with such problems is passed along by insurers to their customers in the form of higher premiums.” Local insurers often behave as though other industries are inoculated against fraud and corruption and that their industry is the only one at risk. This is clearly not the case.
Commercial banks and electricity provider Jamaica Public Service Company, for example, have made substantial investments in technology and other tools over the years, to manage these risks. It remains business as usual in the insurance industry. About 10 years ago, a global tech giant made the industry an offer it believed local insurers would not refuse: A tech investment with a three-year pay-back period, with financing for capital expenditure, a world-class counterfraud detection and management system, and faster settlement times for motor claims.
The offer was rejected. Insurers continue to jack up policyholders’ premiums to provide for fraud. Meanwhile, the regulator does not have a clue whether consumers are being treated fairly.
Tech tools require trained staff and/or artificial intelligence to diagnose and solve customers’ claims and other problems. For example, in September, I submitted a digital claim for the reimbursement of prescription drugs for expenses incurred under a health insurance plan. The completed claim form and original receipts were converted to PDF files by way of a flatbed scanner and submitted to the insurer.
The company informed me nearly four weeks later that “original receipts should be submitted before the claim could be processed” (code 68). This response clearly shows that the insurer’s employee did not know about the existence and purpose of the Electronic Transactions Act 2006, and that the reason offered for the non-payment of the claim was wrong. Further, he or she should have been aware that the company reimburses expenses incurred by claimants and other parties digitally by way of the local banking system’s Automated Clearing House and that it operates an online portal designed to facilitate digital customer-insurer interactions.
Researchers from the IBM Institute for Business Value wrote a pamphlet in 2020, ‘Elevating the Insurance Customer Experience’, that is relevant to the Jamaican situation and responds directly to the comments of my critics. “Traditionally, insurers did not need to be overly concerned about how they were perceived by their customers. Whether insurance was mandatory, such as auto or health insurance in many countries, or a necessity to secure financial health, in case of personal catastrophes, the industry focused more on selling the coverage than providing great customer service afterwards.
Insurers thrived on the fact that they had vastly more knowledge about risks, its causes, and effects than their customers. As a basis for their business models, this worked well for centuries,” the pamphlet stated. “But times have changed.
In the digital age, information asymmetry is harder to come by. Due to the proliferation of the internet and social media, customers can easily exchange information about the brands they do business with, their products, and the quality of customer service those brands provide after the deal has closed. Market power has shifted to the consumer; in essence, insurance has moved away from being a product that is sold to one that is bought, and the right customer experience drives that purchasing decision,” it said.
Motor insurance is required by law in Jamaica. Motor insurers who continue to operate as though times have not changed, and fail to understand that customer experiences are shaped mainly by how claims are managed, are in for a rude awakening. The writing is already on the wall.
Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: aegis@flowja.
com or [email protected].
