How P&C Insurers Can Expedite Claims During the California Wildfires
By Leor Melamedov
Since the beginning of 2020, California wildfires have burned over 3.2 million acres of land—representing an area nearly the size of Connecticut. So far, over 4,200 structures have been destroyed, devastating entire communities. P&C insurers serving affected areas are being swamped with claims for damaged property, and they need to figure out how to process these claims in record time.
To process and payout these claims under extreme time pressure, insurers will need to automate and digitize to quickly provide additional living expenses (ALE) and to shorten time to settlement.
An Emergency Call to Expedite P&C Claims
The recent wave of wildfires in California is the largest wildfire season in California history, according to the California Department of Forestry and Fire Protection. The credit rating agency AM Best estimates that insured losses from the blazes could exceed the unprecedented $13 billion recorded in 2017 when California was hit by three of the five costliest fires in U.S. history.
As wildfires become more intense and damaging in recent years, waves of policyholders are turning to their insurance companies for compensation. Unfortunately, many of these policyholders have lost not only their homes, but documents, printers, computers, and other channels that would normally allow them to submit a claim. Expecting displaced, emotionally devastated customers to plow through bureaucratic paperwork procedures is not just unrealistic, but morally questionable. So is requiring these customers to wait a long time for ALE coverage and the final payout.
California Insurance Commissioner Ricardo Lara seems to agree. Lara issued an emergency notice in August requiring all P&C providers to expedite claims and help policyholders rebuild their lives. The directive requires insurance companies to provide greater flexibility and help for policyholders, including:
Minimum four-month advance payment of Loss of Use, Fair Rental Value, or Additional Living Expenses
Minimum 60-day billing grace period to allow for lost or destroyed renewal notices
Advance payment of at least 25% of policy limits for personal property—without the completion of an inventory
Accepting any inventory form that contains substantially the same information as a company-specific form
Accepting any inventory that includes groupings of personal property, such as clothing, shoes, books, or food items rather than listing each individual item
Expediting payment of vehicle damage claims covered under comprehensive loss coverage
Cooperating with consolidated debris removal efforts coordinated through city, county, and state agencies, unless the insurer can provide more rapid debris removal outside of this effort
Naturally, insurance providers want to do right by their customers and follow the new directives. They want to make it as easy as possible for customers affected by the wildfires to file simplified claims, which will also help insurance teams cope with the surge in requests. At the same time, there is always a lurking fear of insurance fraud: bad actors who seek to capitalize on the chaos of natural disasters.
How can insurers expedite these urgent claims while staying compliant and avoiding fraud? It all comes down to having streamlined processes and the right technology in place.
Four Ways to Expedite Wildfire-Related Claims
During this time of crisis, insurers need to make sure wildfire-related claims are handled quickly without leaving themselves vulnerable to fraudsters. Here are four ways insurance providers can achieve efficiency while staying compliant and protected from fraud:
Reach Customers Where They Are
Natural disasters such as wildfires lead to devices such as landlines and computers getting lost as collateral damage. Customers may not have access to anything beyond the cell phone in their pocket. Understanding this, wireless carriers serving high-risk wildfire areas are now required by law to provide 72-hour backup power for their cell phone towers and communications equipment.
Insurers who are serving customers whose only real form of communication is their cell phone must adapt by using an agile, mobile-focused solution to reduce delays in the processing of vital claims documentation.
Companies need to implement mobile processes that will allow customers to communicate with insurance adjusters with ease. By taking advantage of the versatility mobile phones provide, customers can contact their agents wherever they may be during this time of need to expedite the claims process.
2. Improve ID Verification and FNOL Accuracy
When handling customer’s personal information, it is vital to authenticate identification before moving forward. Without this step, companies cannot grant payments as identity is not verified. During this time of crisis, however, customers cannot be expected to access scanners and computers to submit ID, and insurers do not have the bandwidth to receive policyholders in-person to complete authentication there. This is where automated, digital means of authenticating identity are needed.
More streamlined processes are also needed to ensure a successful FNOL submission. Not-in-good-order (NIGO) documents are rampant in many FNOL submissions, but particularly in the aftermath of a natural disaster. Many people will make crucial errors due to emotional stress or confusion, or fail to submit details that are necessary to push the claim forward.
For instance, some will simply write “home destroyed in fire” which may seem sufficient to the client but is not nearly enough for the insurance company to file a claim. In such instances, insurance companies are forced to chase customers for a more detailed incident description.
With a platform that allows for real-time communication, easy sharing of photos, and identification, mistakes are prevented and customers can provide all the necessary information without excess friction.
3. Boost Payment Efficiency
Customers are anxious to organize a payment plan quickly so they can get their property or vehicle fixed. However, customers cannot begin fixing anything until the insurance company confirms they will cover it. Implementing instant payment processes can help customers begin the reconstruction process faster and get closer to a final settlement.
Furthermore, fast, instant payments can be more cost-effective for insurance companies, especially as they face an influx of claims requests. Incidental and loss of operations costs (like a hotel, car rental, and more) continue until payment is completed. It is in the insurance companies’ interest to instill quick payment methods to minimize their overall spendings.
For these reasons, instant payments are optimal for both insurers and policyholders in crisis.
4. Embrace Technology
Technology can empower insurers to tackle disaster issues with greater efficiency and precision. For example, companies use technology in preparation for disasters by taking before and after pictures to accurately track damages.
While it is important to maximize the use of technology before disaster strikes, insurers should also embrace technology during and after the crisis. Customer-facing technology can help insurers serve customers remotely and without hard-to-fulfill paperwork demands.
Insurance companies are under pressure from policyholders affected by the wildfires as well as industry regulators to offer a more flexible, faster claims process. Through mobile phone-based customer communication, improved FNOL report collection, instant payments, and better customer-facing technology, P&C insurance companies can expedite their claims cycles—without compromising on compliance or fraud-prevention measures.
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