Successful implementation of sustainability considerations in claims management
Industrial companies have long been looking at how to make their production processes more sustainable. Now the financial industry can no longer ignore the issue of sustainability. Increasing regulatory requirements and rising pressure from stakeholders, employees and customers affect the insurance companies’ value chain to varying degrees. While a high degree of maturity has already been achieved in capital investment, for example, this is different in claims management: At present, only a few aspects are oriented towards sustainable criteria. However, there are promising solutions for this.
The need for sustainability in claims results from internal and external influencing factors and must be balanced in the area of tension of the “claims triangle”: Customer satisfaction, claims expenditure and process efficiency.
Focus on sustainability increases customer satisfaction
The claim/benefit case is one of the most critical contact points between the insurer and its end customer. This “moment of truth” shows how well and in what form the insurer can keep its performance promise. When this contact point can be used positively, this is also reflected in strategic key figures such as the Net Promoter Score (NPS).
Customer demands are growing in the context of claims settlement. These processes should be quick, uncomplicated and transparent, and in the future also sustainable. A Horváth survey conducted by Forsa in 2021 shows that 60 percent of all customers want sustainable claims settlement.
To meet these requirements, insurers must analyze their internal claims processes. For example, there are various approaches to integrating sustainability in the vehicle claims process – from claim notification to management and settlement. Raising the awareness of the partner network and sales partners is also important here. These parties should also check their processes with regard to sustainable handling; for example, they could offer electric cars as replacement vehicles. It is also important to test competencies for a more sustainability-oriented environment: For example, is the partner network able to manage new claims such as a battery claim for an electric vehicle? As part of claims management, the form of repair should be derived based on defined parameters that take sustainability aspects into account. Claims settlement can also address the issue of sustainability through climate-friendly and resource-saving repair design (e.g. repair instead of replacement) and/or sustainability in the form of notional invoicing (e.g. pro rata donation for potential savings).
Reduce claims expenditure in the long term
The loss ratio, which quantifies an insurer’s expenses for claims processing and settlement, accounts for around 75 percent in almost all P&C lines. It is therefore essential to prevent damage – if possible – before it occurs and to carry out the corresponding groundwork for this (keyword: loss prevention). The measures associated with this are not only perceived by customers as future-oriented and appreciative, but also sustainably reduce claims expenditure.
Climate change is increasing the frequency and extent of natural disasters. This forces insurers to become aware of the scope of the risks and the options for dealing with them – and to proactively work to minimize the corresponding damage as much as possible. As part of this development, sustainability can reduce costs and even open up new business potential (e.g. through extended insurance for natural disasters) and the establishment of a unique selling point (e.g. maintenance networks that are geared towards growing requirements). Approaches can be implemented in this context, for example:
Conducting inventory analyses with regard to storm risks and deriving information-related/preventive measures
Participation in the review of solution maps for risk assessment
Analysis of the property network and examination of possible shortfalls during severe weather events
Effectively increase process efficiency
Digitalization and the associated innovative and automated applications make it possible to significantly increase productivity for claims processing. Sustainability also plays an important role here. The increase in sustainable products (e.g. electric cars, private solar systems, environmentally friendly building materials, etc.) requires adapted claims recording, assessment and settlement – and has a direct impact on existing processes and their efficiency.
Whether it is a case of increased networking opportunities, the use of artificial intelligence, or the training of employees to develop new, required skills: All process steps are subject to new types of pressure points, which makes testing against sustainability aspects indispensable. If insurers consistently achieve this, they can leverage previously untapped potential.
Implementing sustainability in claims along six steps
To implement the approaches for integrating sustainability in the claims triangle (effectiveness, efficiency and service proposition), we recommend developing the “sustainability in claims” vision by means of a clear methodical approach along six steps:
Analysis of status quo: The current degree of maturity in the context of sustainability is recorded and the first fields of action are identified.
Definition of the target structure/level of ambition: The target structure and desired levels of ambition for sustainability are defined along the claims triangle (customer satisfaction, claims expenditure and process efficiency).
Identification of measures: An overall list of measures for establishing sustainability is created (including using best-practice momentum).
Evaluation and prioritization: Measures are evaluated on the basis of the defined target structure and the level of ambition. The top measures are developed as data profiles.
Deriving the implementation roadmap: The selection and the implementation sequence for the measures are derived.
Implementation and tracking: Measures are implemented operationally and their success is measured on the basis of KPIs.
Would you like to discuss your questions and measures on the topic of sustainability in claims management with us or exchange further ideas? Please do not hesitate to contact us at any time.