The ability to handle claims is important. In fact, for many it is probably the most important function of an insurer – at least from an individual policyholder’s perspective. However, policyholders, and insurers, are hoping that losses can be avoided and that function wouldn’t be necessary. Ever. So for most people, who do not understand the risk transfer benefits of insurance, it is perceived as an expense to be minimized. That raises the question: without fulfilling this key purpose, how does an insurer convey their value?
What about actively providing claim prevention services to help prevent a claim from happening? An insurer is uniquely positioned to provide these types of services and deliver identifiable value to the policyholder. In the corporate world, risk management and loss prevention is not new, but for individuals there is still a great deal of potential for insurers to provide them with claims prevention services. One thing fueling that potential is the amount of data becoming available and the risk analysis possibilities it provides. As consumers begin to embrace usage-based insurance (UBI), the benefit of lower premiums should take a back seat to risk-reducing services that both provide added value to the policyholder and loss prevention for the insurer. While there has been some resistance to insurer-driven recommendations for behavioral changes in auto insurance, there is a great deal of opportunity in providing service notifications, warnings on potentially dangerous conditions, and exposure alerts. This applies to more than just auto coverages and UBI, too – it could be applied to homes, recreational vehicles, etc.
As with any sustainable relationship, there is the need for mutual benefit from this endeavor. In this case, the policyholder will decrease their probability of having a loss – something no one wants to go through – as well as the possibility of improving their risk class to lower premiums. The insurer shares in the reduction of exposure and along the way gains the ability to influence retention by delivering more customer value. While it could lead to lower collected premiums, this could be offset by the identification of coverage opportunities through a better understanding of individual risks. The cost of providing the services themselves may be covered by those gains and perhaps through partner relationships with service providers.
I know insurers see themselves as being there for their customers in those difficult and unexpected situations when a loss occurs. Ultimately, though, everyone is better off without these events. By leveraging their knowledge of risks and exposures, coupled with the amount of accessible data available for individual policyholders, insurers can now move beyond indemnifying someone when something goes wrong to helping prevent it happening in the first place. Along the way, it will raise everyone’s feeling of value in this very important industry.