Tech-driven trucking claims

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By Nina Plail | 04 January 2019

As the trucking industry grows, claims departments turn to new technology to stay ahead

The trucking industry moves nearly 71% of the country’s freight by weight1 – a number that is climbing, with projected growth at over 3% per year for at least the next five years. Low unemployment, strong online sales increases, and a booming housing market contribute to this growth, according to Bob Costello, American Trucking Associations’ chief economist.2 Greater reliance on shipping items across U.S. roadways has significantly increased demand and miles driven for this industry. However, as smaller companies grow to meet this demand, their claims departments have often struggled to maintain consistent incurred loss-per-mile-driven results. And the trucking industry has long been subject to escalating claims costs by claimants who see these companies as a “deep pocket.” These claim trends complicate profit and loss (P&L) projections, and some claims departments that in the past silently delivered adequate results have now become a black eye on the P&L. The good news is that there are options available to combat this deterioration of results.

Claims department optimization in the tech age

As leadership teams struggle with managing this challenge, several insurtech opportunities offer promise. New advances in technology coupled with claims optimization approaches bring the promise of reduced incurred loss costs, streamlined efficiency, and increased profitability.

To better understand this, we examine a few key problems that trucking/commercial claims departments often face today. These include:

  • A failure of the claims department to grow operationally as the industry itself grows. While a small claims department can often deliver acceptable results to a small company, larger claims departments require process optimization, specialization, and economies of scale to keep up. In this industry, the tried and true will not be sustainable indefinitely. Increased attorney representation rates, increased litigation inventory, and increased demands of a claims-oriented society will challenge even the best-run small claims operation.
  • A lack of data-driven decisions. Claims leaders and executives alike must use data to make key decisions. Many of today’s claims systems are built with canned reports that allow leadership to see the state of the department at any point in time. Data should easily be able to address the following questions: What is the average amount paid for property damage? Bodily injury? Workers’ compensation? How do the adjusters or teams compare to each other with respect to these trends? Which states appear to be most challenging? What trends has the claims inventory seen over time? What is the average towing and storage bill? How about rental? Which medical bills should be reviewed and reduced even for third-party business insurance (BI) cases? Is the salvage process optimized? Are you collecting more or less than the industry during the subrogation process?
  • Claims objectives and score cards that do not focus claims handlers, managers, and executives on what is important. Loss ratio or a surrogate metric (incurred loss dollar amount per mile, for example) is an important industry benchmark to focus on.

Trucking companies that have experienced growth over the last few years face several challenges at once: optimizing claims departments, scaling for growth, and integrating technology enhancements to control losses. Figure 1 shows the frequency of auto liability per 100 miles traveled for both property damage only (PDO) and personal injury losses.3 According to the chart, both property damage and injury-producing losses have increased by double digits in four out of the past six years, with injury-producing losses showing significant growth since 2015. This trend negatively affects results as claims dollars paid increase across the industry.

Figure 1: Losses per Rates per 100 Miles Traveled

Rates per 100 million vehicle miles traveled by large trucks Year Over Year Change
  PDO Persons Injured Fatality PDO Persons Injured Fatality
2011 82.70 32.90 1.41 10.71% 17.92% 9.30%
2012 93.90 38.60 1.47 13.54% 17.33% 4.26%
2013 96.30 34.60 1.45 2.56% -10.36% -1.36%
2014 123.90 39.80 1.40 28.66% 15.03% -3.45%
2015 122.00 41.50 1.46 -1.53% 4.27% 4.29%
2016* 134.70 50.30 1.50 10.41% 21.20% 2.74%
20 Yr Average 133.19 48.81 1.99  
*Credit: Federal Motor Carrier Safety Administration. Large Truck and Bus Crash Facts 2016. Retrieved on August 23, 2018, from https://www.fmcsa.dot.gov/sites/fmcsa.dot.gov/files/docs/safety/data-and-statistics/398686/ltbcf-2016-final-508c-may-2018.pdf.

Making claims-related improvements is a key step in preventing a further deterioration of results. The good news is that implementing current insurtech offerings can provide significant return on investment (ROI) – that is, the technology has the potential to pay for itself many times over.

Expense and indemnity savings driven by tech

As the industry evolves and trucking companies integrate new technology into their claims systems, savings can be realized on both the indemnity payment and expense payment side of the equation. For example, cutting-edge estimatics platforms can provide a fully digital estimation process that actually results in a lower average auto damage payment, a lower average expense cost for the service itself, and a much faster cycle time. Modern claims systems are also able to facilitate immediate response claims handling, which can result in resolution of lower impact soft tissue (neck and back) type injuries before they become represented through litigation. These solutions can be further enhanced by the use of claims telematics. Modern telematics platforms offer the ability to automatically report losses and to capture and immediately transmit important claims-related data. In most cases, video or telematic data used with a Google overlay can immediately show or recreate how the accident occurred, shortcutting claims investigative time while simultaneously providing strong evidence to combat driver fault.

In summary, telematics, automated loss reporting, early claim intervention, physical damage virtual estimating, robust reporting platforms, and real time databases can all work together to reduce claim cycle time, cut waste out of estimates, identify career claimants, and ultimately deliver a better incurred loss result at a lower overall cost. As these improvements take hold, predictive analytics with an artificial intelligence (AI) component can help identify which claims fit best into specific tech initiatives.

Insurtech advancements may very well be the only aspect of the industry that has grown as fast as the billboards, benches, and TV commercials of attorneys seeking to profit from trucking company losses. While all industry stakeholders advocate fast, prompt, and fair payments to those who are injured, it is also necessary to investigate potentially non-meritorious claims. To do this, claims departments need the best possible tools at our disposal. As companies implement these new tools, modules can be added to recognize fraud, flag it, and refer it to appropriate investigative vendors or employees. Pairing this with on-point training, structured processes, and modern procedures delivers maximum impact per expense dollar spent.

In addition to improving processes and lowering costs, the technology available can provide robust reporting modules. Reporting is an important part of the optimization equation as it connects the measures put in place by the executive team to the actual results or output of enhancements. With advanced reporting modules, claims leaders become tuned in to the goals they must accomplish in order to consider the job “well done.” These goals should ideally be communicated in a data-oriented analytical structure. How do you know if your claims leader and his/her claims department is doing a good job? Simply put, if loss rates per mile are increasing, chances are the claims department may be struggling.

With the economy and e-commerce booming, the increased reliance on trucking companies will continue to grow, and so with it will the inherent exposure that is accompanied by growth. One of the largest and most vital present day challenges to the industry is how to control loss payments on the back end. Old methodologies and practices have plagued the risk management and loss control portions of claim-related functions for years. By implementing emerging technologies and experienced knowhow, companies can begin to better realize and address the risks that they are facing. Coupled with both internal and external review, the ultimate effect on the bottom line can be both substantial and sustainable.

1 American Trucking Associations, “Reports, Trends, and Statistics.” Retrieved on September 18, 2018, from https://www.trucking.org/News_and_Information_Reports.aspx

2 Trucks.com, “ATA Economist Forecasts Strong Trucking Outlook Into 2019.” By Clarissa Hawes. April 4, 2018. Retrieved on September 27, 2018, from https://www.trucks.com/2018/04/04/ata-economist-strong-trucking-outlook/.

3Source: FMCSA. Large Truck and Bus Crash Facts 2016. Retrieved on August 23, 2018 from https://www.fmcsa.dot.gov/sites/fmcsa.dot.gov/files/docs/safety/data-and-statistics/398686/ltbcf-2016-final-508c-may-2018.pdf.