A new customer experience in auto claims?

Historically, “total loss” automobile claims would represent only 8-12% of the total volume of claims handled. Now, total claims can represent 20 to 25% of total auto claims processed. (Photo: anekoho/Adobe Stock)

As we look at the world of claims change for 2021, it was dominated by a few key areas for specific functionality, including virtual inspection, document receipt, assured communications, and payment digitization. However, as we look to the world of auto claims in 2025, LexisNexis’ predicts that more than 80% of auto insurance claims will be processed virtually and that the processing of total loss claims will be reduced from weeks to days.

Making incremental improvements is not considered transformative, but completely changing the engagement model does. When we think of what we used to do to hail a cab versus what we do now through our Uber app, or remember going to a Blockbuster early Friday to make sure we could get a new version before they run out of copies vs. streaming movies on YouTube, these would be considered transformative experiences. If the auto insurance industry can change the experience of calling a call center, talking to many different people, and waiting 3-6 weeks for a resolution with just a few clicks on a mobile device, it is a transformative experience.

Modification of the complaints process

When carriers review their auto claims processes, they find that all auto claims fall into one of two categories:

  1. Material damage only
  2. Material damage and bodily injury

Historically, “total loss” automobile claims would represent only 8-12% of the total volume of claims handled. A confluence of events increased that number dramatically. Before COVID, people drove regularly. Then everyone was sent home for two years and spent time on Zoom calls.

Now people are driving again but they lack practice, and afterwards the accidents are more serious than they were before the pandemic. The amount of electronics in vehicles continues to increase, making it more expensive to repair them. COVID supply chain disruptions create an interesting situation where you can’t get parts to fix cars, but for cars damaged in collisions, you can charge a higher salvage price to cannibalize those parts.

Now, total claims can represent 20 to 25% of total auto claims processed. While some total loss claims also result in bodily injury claims, auto bodily injury (APD) claims make up about 75-85% of all auto insurance claims.

Auto Total Loss Claims

When you think about what happens in a total loss claim, this should be the easiest type of claim from a property damage perspective. You don’t need to take the car to a body shop for repairs, deal with parts issues, additional damage estimates, or other factors. You simply need to be paid for the insured value of the car.

The complexity exists because you are essentially “selling” your damaged car to your insurer. This means that you must sign a bill of sale and a transfer of ownership. Since near 86% of new cars and 55% of used cars are financedchances are there is a 3rd lien-holding party involved in this transaction as well.

Here is a diagram of the total loss process:

Loos process diagram.

However, when you pull back the curtain on the total loss auto claim process, you find that it has become bogged down in manual processes. “Many insurers have historically used their retrieval provider to handle the entire paperwork process, but we are now seeing a number of carriers reclaiming this part of the process to speed up cycle time and save money,” says Brandon Hall, CEO of LossExpress in Dallas.

Damage assessment has always been quantified either by an appraiser working for the insurer or by an estimate from a bodybuilder. The faxing or mailing of documents back and forth, and the related approvals that come with each of these steps have created a situation where it can take 30-45 days for an insured to fully complete the process of their total loss vehicle.

Since interest is calculated daily, banks have always provided a loan repayment amount that is only valid for a period of two weeks. If there are delays for any reason that extend the time beyond two weeks, a revised loan repayment amount should be requested. Insurers are hyper-focused on their total loss processes for two reasons:

  1. This particular type of complaint represents 20 to 25% of the total complaints handled.
  2. Policyholder retention is a key metric, so in the event of a total loss, the policyholder will have a dramatic experience, either very positive or very negative, with their insurer.

For these reasons, you’ve seen carriers invest heavily in tools for each step of this process. Allowing policyholders to upload photos of their vehicle to the FNOL, allowing Artificial Intelligence (AI) to immediately calculate a damage estimate, speeds up the critical decision whether a vehicle is totaled or not. Electronic Release of Title, Power of Attorney (POA), and lien payment information has all been redesigned to be available with a click of a button. Digitizing payments is important because the last thing a policyholder wants to hear after this weeks-long process is “the check is in the mail.”

When you think of these steps, it’s all about the groundwork of blocking and fighting that happens daily within an insurer, but shouldn’t be seen as ‘transformational’. Driving a vehicle with power windows and doors instead of manual window handles/locks is not transformational. It’s enjoyable, and perhaps it feels avant-garde at the time, but in the grand scheme of things, it doesn’t quite reach the level of transformation. The transformational part will be when our vehicles total up, coordinate a rental car with one or two clicks on our phone, it will be delivered to our location, and our insurance payment will be deposited directly within an hour of the collision.

Timothy D. Christ is a well-known thought leader and speaker in the insurance industry, with over 20 years of experience in forensic engineering and claims investigation, including two published books. Much of his advisory work focuses on the future of claims and the impacts of technology. He can be reached at [email protected].


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