Summary of regulatory developments Updates for July 2022
We highlight the latest noteworthy items in the life insurance industry from various regulatory agencies for July 2022.
Milliman’s Christine Fleming and Nina Plail discuss how insurtech is transforming claims management in the trucking industry for both companies and consumers.
Disclaimer: This podcast is intended solely for educational purposes and presents information of a general nature. It is not intended to guide or determine any specific individual situation, and persons should consult qualified professionals before taking specific action. The views expressed in this podcast are those of the speakers and not those of Milliman.
Rebecca Driskill: Hello. And welcome to Critical Point brought to you by Milliman. I'm Rebecca Driskill and I'll be your host today. In this episode of Critical Point we're going to be talking about trucking, and more specifically, trucking insurance and how technology can improve the insurance process for both companies and consumers as well. Joining us today are Christine Fleming and Nina Plail, two of Milliman's auto claims management experts, who are here to speak to us about trucking insurance. Christine and Nina, welcome to the podcast.
Christine Fleming: Good morning, Rebecca. How are you?
Rebecca Driskill: Good.
Nina Plail: Good morning.
Rebecca Driskill: Hello. How are you guys?
Christine Fleming: Doing well, thanks.
Rebecca Driskill: In from Boston or the Northeast.
Christine Fleming: Yeah. I flew in from Boston this morning.
Rebecca Driskill: Despite the rain.
Christine Fleming: Despite the rain.
Nina Plail: Lucky me, I come from Florida.
Rebecca Driskill: That is way better, actually.
Christine Fleming: Despite the rain.
Rebecca Driskill: Despite the rain. Well, we're just going to jump right into it. For our listeners who may not know, we’re talking about trucking and trucking insurance. What actually constitutes a trucking company? What is a trucking company?
Christine Fleming: That's actually a really good question. It's not always so obvious. People tend to think of trucks as big tanker trucks on the highway that don't really relate directly to their lives. Trucking, though, is basically anything that delivers something other than the United States Post Office. And with the growth of online shopping, I think we’re all used to ordering things online like a pair of pants or a kitchen gadget and getting it delivered to our front doors. The vehicle used to do that delivery would be trucking.
Rebecca Driskill: Great. Cool. So some company sends a box of clothes to your door that's a trucking company was probably used to get there.
Christine Fleming: Absolutely.
Rebecca Driskill: How are these trucking companies insured?
Christine Fleming: So with trucking companies, they can either go out into the market, the insurance market, and buy insurance from an insurance company. We know a few of them: Progressive, GEICO, State Farm, you know, "Like a good neighbor." Or they can self-insure. If they’re a large trucking company, they can set aside money to self-insure accidents that come in that they need to handle and resolve.
Nina Plail: And I think an important distinction is that when a trucking company is insured by a carrier, a lot of times they have access to that carrier’s expertise. Sometimes trucking companies elect to self-insure or have a very high deductible and handle their own claims. And those two scenarios can present very different outcomes. The insurance carriers are very on top of the game, so to speak, especially the insurtech piece of it. Over the last five to 10 years, there have been great gains in technology that have greatly improved efficiencies and reduced costs. So that a carrier is actually in a better position to wind up settling a claim for a lower possible amount at the end. Sometimes a trucking company, while they’re great at trucking and probably fairly good at handling their claims since claims is not their core business, a lot of times they lose out on being able to take advantage of new technologies. And as a result, they could end up, accidentally, paying more for claims and, eventually, affecting their bottom line.
Rebecca Driskill: Because they’re a trucking company. They're not an insurance company. So they do trucking really well but they may need a little help with the insurance.
Nina Plail: Yeah, absolutely.
Christine Fleming: That’s exactly right.
Nina Plail: I'm sure you wouldn't want GEICO to be delivering your pants that you buy on eBay. They may not get there very fast. Likewise, trucking companies are probably excellent at what they do delivery-wise, but not necessarily claims experts.
Rebecca Driskill: Well, and that kind of leads into the next question, which are not just what kind of claims are companies facing, but what should companies know about their insurance claims?
Christine Fleming: Well, there are basically two types of claims, generally speaking, that come in related to trucking companies and trucking accidents. One would involve property damage, damage to vehicles. And the other would involve injury to a person. And, unfortunately, like we said before, that can happen sometimes despite best efforts to avoid accidents. People can get injured in accidents involving trucks. Those are the two basic categories, wouldn't you say, Nina, property damage and bodily injury?
Nina Plail: Absolutely.
Christine Fleming: And they’re each handled a little bit differently. Maybe you want to go into a little bit more on that.
Nina Plail: Sure. So, typically, in every accident, there's going to be a couple of vehicles that are damaged. So while these claims are not as high in dollar amounts as a bodily injury claim can be, they’re much higher in frequency. So trucking companies handle very many property damage claims. That is an area where the insurtech advances have changed the industry entirely.
Christine Fleming: And I think that's a really important point. Forgive me for interrupting. But I think it's a really important point because even though there are a lot of property damage claims, relative to injury claims thankfully, I think we can all agree. Even though there are a lot of them, they tend to be lower dollar amounts, again relative to an injury claim. And so trucking companies tend to not necessarily overlook them, but they think of them somehow as less significant. It's only a $500 auto damage claim. Or it's only a $1000 auto damage claim. And companies also tend to think of them as actual numbers. You know, the estimate is what it is and we just have to pay it. We just have to hold our nose and pay it. When, in fact, across all the claims, even the smallest dollar amount savings on any one claim is going to add up to tremendous savings over a large population of claims. So any amount of money that you can pay that's less and achieve the same customer satisfaction in terms of repairing the car as before is going to be appreciated in terms of saving money on the bottom line. And further, it's absolutely not the case that the damage is the damage and it costs what it costs. There are various ways of getting estimates and redlining estimates and making sure that the estimates are fair and reasonable values to prevent trucking companies from overpaying on an auto phys dam claim. So it's a really important component of claims handling to effectively and efficiently resolve the property damage claims as Nina was saying before.
Nina Plail: Yeah, absolutely. We have seen the average property damage claim settlements go from around $2900 a piece at to $2200 a piece just by implementing a photo-estimatic platform.
Rebecca Driskill: So companies are able to apply technology to streamline the claims process. Let's talk about this for a sec. What did it look like before? And how is it changing?
Christine Fleming: Right. So traditionally, years ago, and up until pretty recently, the typical process would be for an auto physical damage claim or property damage claim, the typical process would entail something like this. You get in an accident. You call your insurance company. An adjuster calls you back some hours or maybe even days later. They try to set up an appointment with you to send somebody out to inspect the car. You have to get your vehicle towed to an auto body shop. Sometimes it needs to be on an approved list. It's not always that easy to find. And some days, maybe even weeks later, you get an estimate. And then you have to pay for that estimate, get reimbursed by your insurance company at which time you return the rental vehicle and you can pick up your own car. Typically, it would involve a lot of paperwork, some phone calls back and forth, a lot of involvement on the part of the claimant as well as the insurance company and the various vendors that serve the insurance company or the trucking company. Property damage claims today, and in the recent past, I'd say over the past five years, in particular, Nina, it's really been booming in technology, saving us a lot of time and cutting out a lot of those steps.
Nina Plail: Yes, absolutely. Even from the simplest standpoint of saving-- each day you save is going to be one less day you pay in rental expense, potentially one less day for a claimant to get lured into the plaintiff/attorney situation, TV commercials, billboards, and so on. So what we can do now, actually, is we can intercept the loss notification as soon as it comes in to the loss unit and run it through a digital estimating platform instantly that will as fast as send a link to do the photo estimates to the accident scene, if it's not a serious accident. Or to the claimant if it is a serious accident. We don't want to be making someone take photos of their vehicle if they’re bleeding or need to go to the hospital. But the majority of cases are lower impact so we can do that then. So we’re at the point now where we can take an auto damage estimate or auto damage component of a claim and resolve it in hours instead of days, using technology such as forwarding photo links that teach a claimant or a car owner how to walk around the car, take pictures of the damage, pictures of the odometer and the VIN plate. And basically, upload those to a desk appraiser who is trained to write an estimate and return a result possibly with a payment within hours. In the past, the industry felt like we were doing a good job by settling an auto damage estimate within 30 days. Now, with this new technology, we're looking at hours and at the most, days. So it's really a game changer. There’s also sort of a standing nonwritten insurance rule that the faster you resolve someone's auto damage claim, the less likely they're going to make an injury claim. People, in this country, seem enamored with their cars. And if we don't do the right thing very quickly with their car and get it back on the road, they get angry with us. And then they go to an attorney. And then the attorney sends them to a doctor. And then we’re paying a lot more money for this claim. On the injury side, we can also intercept that potential injury as soon as the loss comes in the door by working with the first notice of loss unit and get it to a fast track unit and get it resolved. Even if it is a serious injury that is not eligible for fast-track because fast-track really can't lower G-forces. And we can actually take those either from the loss unit or to be even more robust from a telematic device that we can insert in the vehicle that will automatically notify us and make it even a little faster yet.
Rebecca Driskill: So like in the trucking-- in the truck itself, there might be a telematics device that sort of can talk about the speed the truck was going and anything else, any other data.
Nina Plail: The speed, the G-force, the location. We do video telematics where we actually within 60 seconds of the loss, will have a video of the actual accident occurring on the roadway as well as a video of the driver driving the truck. So in a sense, we have an instant liability determination. We can also defend the drivers very well with these videos because the world seems to think trucking companies are always at fault for accidents. Many times they’re not. But then it becomes a word against word. So instead of word against word, we actually have a video of the accident. So getting back to the injury piece by using these pieces of technology to quickly determine liability, we can jump on an injury claim immediately and resolve it before it sticks around and becomes a litigated claim that you may be looking at in trial three or four years down the line.
Rebecca Driskill: So it sort of sounds like a win-win in that the claimant is having their claim satisfied or solved right on the spot. But also for the trucking company, you don't have this long-tail cost that may jump out of nowhere six months down the line.
Christine Fleming: That's absolutely right. It is a win-win. I think it's an obvious win for the claimant, the person who is bringing the claim. They want as early a resolution as possible. They want the payment for the car. Which one of us hasn't experienced some sort of damage on their car, unfortunately? And it's the worst thing to have your car in a garage and you’re in a rental. And so early resolution of that is always nice for the claimant. And the same principles apply to the bodily injury. But it's also the best result for the trucking company or the insurance company as well because the longer a claim remains open generally speaking, the more expensive it will get. The more waste I would say in terms of dollars spent on the claim is expended, which is something that across the board we want to try to avoid. So early resolution definitely works very, very well for both sides.
Nina Plail: Significant savings in terms of bottom-line dollars spent and expenses. So we have seen on the property damage side between 20% and 30% savings over all on the indemnity, which is basically what you pay to repair the car. And 30% to 50% on the expense side, which is basically the service for that virtual platform. It's much less expensive than for a typical appraiser to go out. On the injury side, the most significant thing we’re seeing is a lower average payment because more of the claims payments now are lower because of that fast-track process. But we’re also seeing over a 30% reduction in litigation volume 12 months down the road. So very, very significant dollar savings.
Rebecca Driskill: Well, Nina, Christine, thank you for joining us.
Christine Fleming: You're welcome. It was our pleasure. Thank you.
Nina Plail: Thank you, Rebecca.
Rebecca Driskill: You've been listening to Critical Point presented by Milliman. To listen to other episodes of our podcast, visit us milliman.com. Or you can find us on iTunes, Google Play, Spotify, and Stitcher. We'll see you next time.