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Total Loss Pain Points Yesterday and Today: How Far We’ve Come

—August 27, 2015
Total Loss Pain Points Yesterday and Today: How Far We’ve Come

By Sunil Nayak, Senior Director, Product Management, Mitchell

There are three basic steps in the process of declaring a total loss -- the FNOL, the appraisal and the settlement -- and each can easily become a point of pain for the customer and the insurer. Technology is one analgesic, lessening the pain by streamlining the process for a measurably better customer experience.

Given the rapid arc of technological progress over the past few years, we may be nearing the point where most pain can be eliminated altogether. This article examines the past and current total loss claims handling at each step in the process and anticipates the potential for a pain-free future.

FNOL Claims Management Process

Even today, First Notice of Loss is largely a manual process. It has progressed in a linear fashion, one slow, costly step at a time. Every incident required an appraiser to be sent on location to survey the vehicle and determine if the actual cash value (ACV) threshold had been exceeded. It was an expensive, inefficient way to make a decision regarding repair versus total loss. These long cycle times didn’t position the insurance company in the customers’ high esteem either.

Mitchell has ushered in a new age of FNOL claims management with WorkCenter™ Claims Triage. Using historical or benchmark data on vehicles that were identified as total loss in the past, the appraiser can more accurately predict total loss probability in the current FNOL situation. Armed with these tools and predictive analytics, now the appraiser can quickly determine the pathway to total loss or repairable status by answering just a few basic questions.

If the vehicle can’t be driven, WorkCenter Total Loss can initiate early tow or the salvage process. WorkCenter’s Claims Triage tools also work with the carrier’s Claims Management system such as Guidewire, for staff to easily access the information needed to facilitate accurate claims processing.

Something that once took hours is now possible in minutes, so we can move painlessly to the next step in the Total Loss process.

Accurate Appraisal Management

Accuracy and thoroughness are critical to the amelioration of pain during the appraisal process. Without an accurate description of the damaged vehicle’s equipment and options, the appraiser is operating at a disadvantage. But this essential information hasn’t always been readily available. In the Dark Ages of total loss valuations, the appraiser had to figure out the list of standard and optional features on his own. The bottom line? Lots of time spent, lots of opportunities for mistakes, misunderstandings, mistrust and pain.

In the modern age, most vehicle identification number (VIN) decoders automatically populated a list of standard equipment and optional add-ons. This improvement saved significant time on every appraisal, but it’s even better today.

Today’s enhanced VIN decoders use the vehicle’s build sheet data (original manufacturing information about that vehicle) automatically selects standard and optional features for evaluating total loss and repair. Decoding the VIN, provides the evaluator with the year, make, model, trim, engine and drive train information. Knowing exactly what was on the car at purchase eliminates the need to consult the manufacturer. This saves time and reduces the potential for error.

Mitchell’s WorkCenter Total Loss solution incorporates build sheet data from numerous original equipment manufacturers (OEMs) including GM, Chrysler, and Nissan brands, as well as Mazda and Kia. As consumers increase their demand for custom vehicles, we recognize the challenge appraisers face in identifying a vehicle’s configuration after it has been damaged beyond recognition.

As a result, Mitchell is committed to expanding the number of OEMs included in our system. More data allows us to envision a time in the not so distant future, when it won’t take much more than a push of a button to decode a VIN for any vehicle in operation today. Integrating more manufacturers’ data will make the appraiser’s job easier and estimates more accurate, thereby ensuring a better outcome (and less pain) for the customer.

Measurable Results From a Powerful Combination

Auto Insurance Claims Settlement

The final step in the process is also the one with the greatest pain potential for everyone. Typically, settlements are negotiated, and a negotiated settlement typically results in the consumer satisfaction index (CSI) dropping and the payout increasing.

In the early to mid-2000s, getting to this step was a time- and labor-intensive process. By the mid- to late 2000s, appraisal settlement had been automated, providing access to extensive databases with econometric algorithms that instantly valued vehicles. However, state-of-the-art back then was the black box. It revealed nothing about the sources or methodology the adjuster used to make his evaluation. This all but guaranteed a customer pain point. After all, as we’ve learned from J.D. Power & Associates research, if the customer doesn’t recognize the source of an evaluation, the consumer isn’t going to trust it .

Mitchell’s total loss valuation report details the loss vehicle’s information along with each comparable assignment and its associated adjustments. Clearly quantifying the value of the vehicle puts the adjuster in a better position to efficiently settle the claim and satisfy the customer with a fair settlement.

The Future of Total Loss

In the near future, we could see a shift to consumer self-service in regard to total loss settlement. Automated valuations could easily lead to a scenario like this:

The insurer declares a vehicle a total loss and sends the customer an email or mobile app notification that provides instant access to valuation documents and other settlement materials online. The consumer reviews the information and verifies or corrects it. If the consumer is satisfied with the valuation, he or she accepts it by electronically signing and notarizing the forms. Payment is issued electronically. The adjuster or system automatically provides vehicle replacements services too.

For many total loss claims, this model would facilitate a true no-touch settlement process. This model reduces friction and provides the customer with an easy-to-understand valuation from trustworthy, recognizable brands and data sources. It creates a win-win situation for everyone; expediting the settlement and reducing Loss Adjustment Expenses (LAEs).

 

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