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Cycle Time: The Most Important Metric in Claims

J.D. Power & Associates' latest homeowners claims satisfaction numbers indicate that the carriers with the lowest cycle times fare the best.

It's the 21st century, and consumers crave one thing: Speed. Insurers find evidence of it in their acquisition efforts, but it's perhaps even more important at the "moment of truth" for carrier-policyholder relationships: the moment of claim.

J.D. Power & Associates' 2014 Property Claims Satisfaction Study, which polled 5,500 homeowners that filed a claim in 2013, found that cycle time within a claim was the biggest indicator of satisfaction. The No. 1 ranked insurer, Amica, is far ahead of industry averages, according to Jeremy Bowler, senior director of the insurance practice at J.D. Power.

"Pne of the things we see on our claims survey, both property and automotive. is that it comes down to expediency," Bowler says. "An Amica claim gets paid in 11 days, which is a measurably faster process than the industry average."

It starts at the beginning: Amica adjusters return first notice of loss calls in about two days, compared to the industry average of about three days, Bowler explains.

"Then when it comes to getting out there to take a look at what happened, the industry averages 7.7 days and Amica averages 5.5 days," he continues. "They're calling you back quicker, they're getting the estimate drawn up faster."

[Read how advanced mapping technologies help Amica respond faster to claims]

J.D. Power identified cycle time as the leading factor in satisfaction through its interviews with customers, Bowler explained.

"We're asking each person who reported who had a claim to describe it, then rate it, and the people who rate the claims experience favorable, we look at how they described their claim," he says. "Three weeks is the breaking point -- you take longer than that and satisfaction tumbles tremendously, and the industry basically just barely scrapes in on average."

Amica's overall score of 898 on J.D. Power's 1,000-point scale topped Erie Insurance with 877 and Nationwide with 858. After a dip in satisfaction related to Sandy claims, the industry rebounded overall -- but the average score was 843, still well below the top insurers. However, compared to the industry performance in the Hurricane Katrina season of 2005, carriers are much more adept at responding to major events with empathy and understanding for their customers' situations now.

"In 2005 carriers thought they were slick if they gave you a debit card, but there was no power so the plastic was useless," Bowler says. "But with Sandy you had a company that literally brought power to a hotel in the northeast, brought the whole hotel up so they had a base of ops for their staff, and were trucking in water and food services so their teams could function in the area, and that was spreading out to the community. The industry learned that that's all part and parcel with being a good corporate citizen."

[To hear about how insurance companies and financial firms are managing their complex data architectures, attend the Future of the Financial Services Data Center panel at Interop 2014 in Las Vegas, March 31-April 4.
You can also REGISTER FOR INTEROP HERE.]

Nathan Golia is senior editor of Insurance & Technology. He joined the publication in 2010 as associate editor and covers all aspects of the nexus between insurance and information technology, including mobility, distribution, core systems, customer interaction, and risk ... View Full Bio

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DeanH211
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DeanH211,
User Rank: Apprentice
4/14/2014 | 9:34:43 AM
re: Cycle Time: The Most Important Metric in Claims
Payment accuracy (loss cost leakage), allocated and unallocated unit costs, claim throughput (including cycle time), claim quality (as measured in formal claim reviews) and customer satisfaction. Effectiveness means paying the right amount, at the right time, while keeping the customer informed and complying with all applicable laws and regulations. Effectiveness demands so much more than low cycle time, which is why the title of your piece was inappropriate.
Greg MacSweeney
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Greg MacSweeney,
User Rank: Apprentice
3/11/2014 | 3:20:10 PM
re: Cycle Time: The Most Important Metric in Claims
I've clearly never filed a homeowners insurance claim, but the industry average of 7.7 days to get out and see a claim is crazy. And the avg of 7.7 means that many claims took 12, 13, 14 days or more. A homeowner has a hole in his roof (or worse, his roof is blown off), and the homeowner can't do anything to fix it for almost 8 days? I can see 7.7 days in a big disaster when there are 1,000s of claims in a small area, but wow. In today's society of overnight shipping, real-time streaming downloads of media and overall instant satisfaction with everything from shopping to travel to media, insurers need to step it up.

Remember, customers don't measure their insurance company vs the industry avg. They measure their insurance experience against amazon, apple, google, VirginAmerica.
Kelly22
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Kelly22,
User Rank: Author
3/11/2014 | 2:23:11 PM
re: Cycle Time: The Most Important Metric in Claims
Good point, insurers that are putting forth the effort to quickly process claims are likely focusing on other areas of the overall customer experience. Amica probably wouldn't have scored as high if their customers were unsatisfied with their results.
KBurger
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KBurger,
User Rank: Author
3/10/2014 | 1:23:51 PM
re: Cycle Time: The Most Important Metric in Claims
Part of the issue may be that it continues to be difficult to quantify and measure concepts such as "satisfaction" or "experience." Cycle time is quantifiable and it is easy to know how rapidly a claim was settled. Furthermore, even if everything was done "right" and speedily, if the policyholder isn't satisfied with the claim payment, that creates a negative experience regardless of speed or anything else.
Nathan Golia
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Nathan Golia,
User Rank: Author
3/7/2014 | 5:45:35 PM
re: Cycle Time: The Most Important Metric in Claims
True, Jonathan. However, given that companies with low cycle time tend to have high marks elsewhere, is it a sort of "canary in a coal mine" that helps identify whether an insurer has a top-notch claims operation overall? That is, insurers keeping cycle times down also follow other claims best practices that ensure customer satisfaction.
Nathan Golia
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Nathan Golia,
User Rank: Author
3/7/2014 | 5:43:04 PM
re: Cycle Time: The Most Important Metric in Claims
Thanks Dean. What would you suggest as crucial metrics to measure claims department effectiveness? For many insurers, customer satisfaction on claims is a key competitive differentiator, and if keeping cycle times low increases customer satisfaction, it must be up there.
JonathanG373
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JonathanG373,
User Rank: Apprentice
3/5/2014 | 6:43:16 PM
re: Cycle Time: The Most Important Metric in Claims
This is along the lines of the old claim adage of a good claim is a closed claim. While cycle time is a good measurement for many claims, it does not measure how well the claim was handled.
DeanH211
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DeanH211,
User Rank: Apprentice
2/28/2014 | 7:24:58 PM
re: Cycle Time: The Most Important Metric in Claims
Claim cycle time may be the single most important indicator of customer satisfaction, but I think it is an enormous stretch to call cycle time the "most important metric in claims."
KBurger
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KBurger,
User Rank: Author
2/28/2014 | 6:00:17 PM
re: Cycle Time: The Most Important Metric in Claims
This is interesting and it makes me wonder if some of the focus on customer experience/engagement is perhaps somewhat misplaced. If at the end of the day it's all about how quickly a claim can be processed, that is a very specific, quantitative (not qualitative) infrastructure-based, non-personalized transaction. Yes, it depends a lot on the channels through which the claim is reported (e.g., agent, mobile, call center, etc.) but it seems it has less to do with accommodating channel preferences and more with integrated, modern systems.
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