Study finds drop in digital P&C claims, preference for human touch

The P&C industry’s heavy investment in digital tools was meant to cut costs, speed claims, and boost customer satisfaction. But, running up against more severe events – inflation, the pandemic, and supply chain disruptions – policyholders are losing faith in digital applications and are preferring the old one-on-one interactions with their insurers.

That, according to a new survey from J.D. Power, which found a sharp rise in the number of customers contacting their insurer for information while, for the first time, saw a declining use of digital claims reporting usage.

“This is a worrying sign for the industry, as digital tools are apparently not meeting customer needs,” said Mark Garrett, director, insurance intelligence at J.D. Power.

“This is a worrying sign for the industry, as digital tools are apparently not meeting customer needs.”Mark Garrett, director, insurance intelligence, J.D. Power

The $700 billion property and casualty industry spent more than $8 billion in digital transformation in the last year and half, according to estimates. But studies have found as little as 40% of claimants reported positive experiences.

The new report titled the J.D. Power 2023 U.S. Property Claims Satisfaction StudySM concluded 2022 was the decade’s worst year financially for homeowners insurance providers. The combination of more severe events, rising costs and longer cycle times has strained customer satisfaction and tested the limits of the digital tools that were designed to help the industry respond more quickly and efficiently.

“The longer cycle times have made it increasingly difficult to keep customers informed via digital channels and limit their need to contact their insurer with questions,” Garrett said.

“Satisfaction among customers who need to primarily call their insurer for updates includes some of the lowest scores compared with other update methods. Also noted this year is that the increase in severity has driven down digital claim reporting as lower-severity claims are more likely to be reported digitally.”

Some insurance brokers were unsurprised by J.D. Power’s findings.

“When a claim occurs, people are hurting,” said Ben Guttman, of North Central Insurance Agency in Parkton, Maryland. “They are often displaced or at least imminently aware of the damage around them. All they want is to get back to normal.”

As with most things in life, Guttman said, when expectations aren’t met it leads to frustration and resentment.

'Digital cannot hand hold'

“Digital cannot hand hold through a claims process, and thus it can prove frustrating when all people want is to talk to a person who can reassure them that despite delays, there is a resolution in sight,” he said.

Some other key findings of the 2023 study included:

Repairs taking longer than previously to complete: The average claims cycle time – the amount of time from reporting the claim to finished repairs – is now 22 days, which is more than four days longer than a year ago and a week longer than what was reported in the 2021 study.

• Insurance company results are mixed: While the overall industry improved 3 points (on a 1,000-point scale), eight ranked insurers showed declines in satisfaction while nine improved year over year. Notably, the insurers that have the largest increases in satisfaction were able to limit their customers needing to contact them for information, a key difference between brands that have improved in score and those that have declined.

Proactive management of customer expectations necessary: While average repair cycle times of three weeks or more create a significant drag on customer satisfaction, there are steps insurers can take to improve customer satisfaction for longer, more complex repairs:

• Offering options for receiving status updates
• Providing accurate claim length expectations
• Limiting customer-initiated requests for information
• Making representatives immediately available

Forcing digital on customers who prefer a phone call strains customer satisfaction: Among customers who have indicated a preference for interacting with their insurer via phone/in-person channels, satisfaction is notably lower when they primarily must use digital channels for key touch points in the claim.

The study found that Erie Insurance ranked highest in property insurance claims experience with a score of 912. Amica (903) ranked second and Nationwide (884) ranked third.

Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].

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Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].