January 6, 2023
Top issues facing auto claims departments and how to solve them
by Todd Fannin
Insurance carriers have always had a deep list of challenges: Rising repair costs, recruiting quality personnel, spikes in claims volume from major weather catastrophes or during peak vacation times, and meeting customer expectations. Then came the COVID-19 pandemic, which accelerated and intensified these pressure points while also creating new ones. Insurers had to quickly move employees to work from home and find alternatives to in-person inspections and interactions.
Moving forward after the pandemic’s disruption, carriers are finding themselves in a new post-pandemic world in which all the traditional challenges are being combined with newer ones –supply chain disruptions and skyrocketing inflation. This complex combination is stirring up a “perfect storm” and causing significant disruption to the insurance industry.
Top Issues Facing Insurance Claims Departments
Staffing challenges will continue to grow
The unemployment rate for the US insurance industry has remained around 2.1% for much of 2022, as noted by the Jacobson Group and Ward third-quarter 2022 ‘Insurance Industry Labor Market Study.’ A low unemployment rate should be a good sign for the industry’s health, but is it?
The report notes that carriers cannot hire people fast enough to replace those who are leaving. According to the US Bureau of Labor Statistics (BLS), less than 25% of the industry is under 35. In comparison, the percentage of insurance professionals over 55 has increased by 74% in the last 10 years. The BLS expects 50% of the current insurance workforce will retire over the next 15 years, which could leave the insurance industry with 400,000 open positions requiring significant additional recruitment and training costs to fill.
Rising auto repair costs
Driving behaviors developed during the pandemic have led to a steep increase in accident severity. Supply chain issues have driven up part prices. Body shop staffing challenges have required wage increases to attract and retain new talent. These forces have driven repair costs up significantly since the start of the pandemic.
The average gross appraisal value (excluding discounts and taxes) for Q3 2022 was 13.6% higher than Q3 2019, according to Solera data. The average replaced parts and body labor costs per estimate during the same period were up 27.5% and 13.2%, respectively. Struggling to hire enough technicians to meet the post-pandemic repair demand, many shops, including large MSOs, have asked for rate increases over the last 12 months.
As new vehicle models enter the market with ever-increasing technological advancements, new construction materials, and shops’ growing staffing challenges, the cost of repairs will continue to climb.
As reported in the Insurance Journal, the U.S. Property & Casualty industry posted a combined ratio of about 106.6 in Q3 2022. According to an S&P Global Market Intelligence analysis, this is the highest ratio in five years. While catastrophe losses (CATs) account for some of this increase, repair and replacement costs and increased cycle times to resolve claims were significant contributing factors.
The Insurance Information Institute forecasted that the personal auto combined ratio for 2022 will be 105.26%, up 3.8 points from 2021. Continuing investment market volatility combined with some states limiting or denying rate increase requests suggests insurance carriers’ struggles to achieve profitability in the face of increasing costs will continue for the foreseeable future – how long is anyone’s guess.
How insurance carriers can address these issues
If the global pandemic taught our industry anything, market and workplace conditions can and will change rapidly. More than ever, insurance companies need efficient, cost-effective claims solutions with flexibility and responsiveness baked in.
Material damage claims make up approximately 60% of auto claims exposure volume and are a prime opportunity for process and cost improvement. A trusted partner to the insurance industry since 1966, Solera is at the forefront of meeting the material damage challenges of both today and tomorrow with its new full-service virtual auto estimating solution XpertEstimate.
Frictionless claims processing reduces claim costs
XpertEstimate is a no-code, turn-key virtual appraisal service that delivers the self-service options customers crave alongside scalable expert appraisal staffing and innovative technologies, making the claims process more accurate and efficient.
How does XpertEstimate do this? Here are some highlights:
• The customer creates and submits quality damage photos through a fast, safe self-service process powered by Guided Image Capture.
• Qapter®, Solera’s AI-powered platform, uses sub-second image processing and deep-learning algorithms to detect damaged parts and recommend repair operations.
• Intelligent parts sourcing and procurement are incorporated in real-time with Solera’s PartsNetwork® solution.
• With an average of 20+ years of industry experience, the XpertEstimate team adds insights to the completed estimate, improving accuracy, and freeing scarce carrier staff for high-value customer-facing tasks.
Flexible and scalable
In addition to reducing cycle time throughout the claim estimate process, XpertEstimate also provides the flexibility and scalability modern claims departments need. Whether assisting due to surges in volume (such as CATs), supplementing permanent staff, or filling staffing gaps due to turnover in the scope of a more extensive partnership, this solution is agile and customizable to meet each carrier’s unique situation.
The aim is to provide the right expertise at the right time. As all insurance professionals know, time is our scarcest and most valuable resource. Any carrier can fold XpertEstimate into their existing claims processes with minimal time and almost no friction, as they can do it without IT resources. Staff can enter new assignments via a web-based portal and completed estimates can be returned via email or (if desired) via integration using application programming interfaces (APIs) that are easy to install.
How to get XpertEstimate
Xpert Estimate is one of the exciting new solutions we proudly offer our insurance carrier partners. Solera has invested significantly in its global and scalable modular technology platforms, data analytics capabilities, and AI across its solutions. We address the full range of the vehicle ownership lifecycle through our four lines of business—vehicle claims, vehicle repairs, vehicle solutions, and fleet solutions. Operational excellence, innovation, and customer success drive our culture.
Contact us today to find out how Solera’s XpertEstimate virtual appraisal service can help your organization overcome some of the most common challenges facing the insurance industry today.