Monday, January 30, 2023

[Column] Beyond the fines in the insurance industry

By on May 18, 2018

Editor’s note: This column originally appeared in the May 17-23, 2018, issue of Caribbean Business.

BY ALICE MELÉNDEZ, Director, Prima Group Inc.

The insurance industry in Puerto Rico is facing multiple challenges that are forcing us to rethink our business models.

After Hurricane Maria, some insurers have not been able to provide satisfactory experiences in their claim reimbursement processes, not because of external factors such as the magnitude of the damages, but due to internal factors such as organization, coordination and logistics.

The problem is not only the swiftness of the claim’s redemptions. For example, the market-research firm J.D. Power & Associates’ latest 2018 U.S. Property Claims Satisfaction Study found it was not the insurers that were the fastest at settling claims that received the highest scores. The time it took to settle a claim was the single lowest-rated attribute in the study. The key element was in the candor of the information provided to the customer. The insurers that maintained clear and effective communication with their customers and distribution channels received the highest scores in customer satisfaction.

The insurance industry in Puerto Rico should not compare the timeframe for claims reimbursement after Hurricane Maria with the timeframe after hurricanes Katrina, Georges and Hugo because we now have accessibility to technological tools that can facilitate the services that were not available for these catastrophic events. The Insurance Industry has at its disposal GPS, drones, smartphones and mobile applications that facilitate the inventory of damages. In addition, artificial intelligence and multi-platform technologies assist, in an expeditious way, the storing, synchronizing and sharing of information with different stakeholders.

Existing innovation is supposed to enable the process while limiting frustrations for the customers, producers, adjusters or employees. Take, for example, a response to a contemporary catastrophe, such as Hurricane Irma in Florida, where more than 900,000 claims were received, 88.5 percent have been resolved to date and estimated insurance losses reached $8 billion.

To enhance our contingency plans, we need to understand the situation in a holistic approach. Certainly, we need to take into consideration the fact that Puerto Rico is an island, with limited access in an emergency, with different topography than Florida or Texas, and with an economic contraction for over 10 years that has weakened our infrastructure. Multisectoral alliances within the insurance industry would make a big difference due to high public interest.

To solve one of our limitations, which is the shortage of adjusters in Puerto Rico, we could evaluate alliances and temporary reciprocity of licenses for engineers to conduct property damage assessments and for certified public accountants to conduct business-interruption evaluations. We must develop continuing education that integrates engineering with the insurance professionals and vice versa.

“The insurance companies must pay attention to the building codes…and can work together with architects to protect the built environment…,” according to Mike Kreidler, Insurance Commissioner for Washington state, published in the Journal of the American Institute of Architects. This is a global necessity that can only be handled with teamwork, and our Puerto Rico Insurance Code needs to evolve to allow this.

To stay relevant, we must request a regulatory framework that encourages innovation and simplicity, that invests in multidisciplinary education and requires by law that contingency plans must be approved by the Insurance Commissioner and explained with precision to all distribution channels. Presently, there are many producers who are not clear on the processes of some insurers nor have access to the status of claims that makes it impossible to provide good service to the consumers represented.

The root of the solution that meets consumer rights starts with the workflow of each insurer, more than the timeframe. Start with an analysis of the training and supervision given to the independent adjusters and inspectors, the number of people who have the authority to approve offers versus the number of claims and distribution channels that have access to the information in real time. We are going to face many challenges as an industry, with disruptive technology and raising rates, but for now, we need to remember the basics: the purpose of insurance, the relevance of the business.

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