The Importance of Claims Innovation for Insurance Buyers and Brokers

Innovation is dominating the headlines today, sounding more like a science-fiction novel than the news. Technology advances are making devices like infrared cameras and drones more accessible and enabling advancements in business processes that help reduce costs and improve customer service – all of which begs the question, ‘Can innovation help control cost in the commercial insurance industry?’

Liberty Mutual Insurance believes it can, and has invested in tools to help better manage general liability, property, commercial auto and workers’ compensation claims. The insurer has a dedicated team of data scientists and predictive analytics modelers, as well as a devoted innovation team whose full-time job is to explore how innovation can be used to improve service and reduce costs.

“It’s one thing to say you want to be a leader with analytics or innovation, but to make it a reality you must dedicate teams to data analytics, predictive modeling, and innovation,” said Glenn Shapiro, chief claims officer of Liberty Mutual’s commercial insurance operation. “With the rate that technology is changing, dedicating resources to innovation makes perfect sense. It provides the opportunity for us to think differently about our business and deliver clear benefits to buyers and brokers.”

Liberty Mutual’s Glenn Shapiro reviews the value of innovation for buyers and brokers.

Seeing is Believing

During an inspection of a commercial insurance water damage claim, a Liberty property adjuster wondered if an infrared camera would allow him to better understand and more accurately assess the extent of damage. And with that one question, Liberty’s innovation team set out to look into the technology and test it. As a result, infrared cameras were deployed into the field.

“One of the first test cases was a large gymnasium with water damage,” explained Shapiro. “Everyone who looked at it believed the entire floor needed to be replaced. But with the infrared camera, it was determined that actually only a quarter of the floor had water damage. Not only did this technology save considerable cost, but the customer was able to get back to business quicker with a less involved repair.”

Armed with portable infrared cameras, Liberty’s commercial property adjusters are able to examine the extent of damage, rather than ripping out walls, floors, and ceilings to find it—an expensive and time-consuming endeavor.

Another great example of Liberty’s innovation team reducing costs and improving service is in post-catastrophe situations. The most trying time for the insured and the insurance company is waiting for access to the catastrophe zone. In some cases, authorities won’t allow access for many weeks. So Liberty’s innovation team was tasked with ‘how can we gain access and assess damage sooner.’ Their answer: Drones.

Drones and satellite imagery allow the insurer to get an early view of the loss and quickly assess the rough scale of damage in order to make initial payments and deploy field claims resources. For the insured experiencing the loss, this quick action and movement towards recovery is a huge help in a very difficult time.

Glenn Shapiro highlights the value of drones and infrared cameras in better managing total claim costs.

Putting Data to Work

One of the benefits of technology is the ability to gather, analyze, and trend data. Many predictive analytics models have been developed to allow insurers to point to possible problems, but often in a very general way. Liberty’s predictive modeling team has taken this to a new level with laser models, allowing for a very specific action at a specific point in time.

Glenn summarizes the importance of predictive modeling in managing claim costs.

“I often explain this like the ‘check engine light’ on your car dashboard,” said Shapiro. “When this light comes on, it could be a range of different problems. But if it said ‘right front tire is low’ you would know immediately what needs attention.”

Liberty was the among the first Property & Casualty insurers to bring the sophisticated data analytics that are standard in Group Health insurance to workers’ compensation claims management. More recently, Liberty has developed several laser models for workers’ compensation claims that accurately identify cases in need of specific action. The insurer’s compensability model can identify cases with 90% accuracy that require deeper compensability review. Another model can identify potential fraud, and another can detect possible opportunities for subrogation recovery. Many other laser models are being developed to use data to focus in on specific issues faster.

The result of Liberty’s systematic focus on claims innovation helps better control the total cost of claims. In fact, Liberty Mutual/Helmsman closes workers’ compensation claims 20% faster than other insurers, and its 10-year ultimate average cost of workers’ compensation claims is 10% lower than the competition, according to an internal analysis of Schedule P filings valued as of the end of 2014.

Technology Creates Opportunity

What’s come of this is an environment within Liberty where questions are asked and solutions are sought, where data, analytics, and innovation come together. Data, predictive analytics, and innovation teams work interchangeably to turn ideas into actions.

The keys to successful claims innovations, according to Glenn Shapiro.

“The claims process that we had 20 years ago or even five years ago is long gone,” said Shapiro. “We have to continually seek out innovation if we expect to compete with not only other insurance companies, but other services that people consume every day. Innovation isn’t just looking at new ideas; it’s making them come to life that makes the difference.”

Glenn Shapiro can be reached at [email protected].

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty Mutual Insurance. The editorial staff of Risk & Insurance had no role in its preparation.