Auto Claims Revolution

By Barbara Aarsteinsen

(reprinted with permission, published in
ci – Canadian Insurance Magazine
, April 2002)

One area where so-called hub or collaborative
technology is making inroads is in the handling of auto physical damage claims. The high
volume of such cases as well as the number of parties typically involved in the
adjudication process makes them a prime candidate for Web-based automation.

As insurers grapple with plunging investment returns,
declining profitability and rising claims, online transactions have the potential to not
only cut costs but to enhance service, which can also improve the bottom line. After all,
a happy customer is less likely to stray.

Toronto-based HB Group Insurance Management Ltd., for
instance, began processing its auto claims via the Internet last fall, after a three-month
pilot during the summer at its Mississauga, Ont. Claims centre.

The project, which allows adjusters, customers, brokers,
and suppliers to interact electronically, has proven so successful that HB, a member of
The Co-operators Insurance Group, is looking to apply the technology to other categories,
such as accident, bodily injury and property claims.

“We see it as a communication and dispatch tool that
gives us ways for us to improve our internal processing and to improve efficiency,”
says Keith Dalgleish, vice president of e-commerce for HB Group. “I think it is an
important step forward.”

Dalgleish says that HB Group has now settled some 5,400
claims online and he estimates that 55,000 to 60,000 telephone calls and faxes were
eliminated from the handling process — exchanges that would normally have taken place
between the various parties involved as they traded information, cleared up queries and
kept tabs on how the adjudication was progressing.

“This has the potential to help not only us but our
vendors,” he says, pointing out that suppliers such as car rental agencies and auto
body shops also benefit from streamlined claims handling procedures as they’re freed
up from excessive paperwork to concentrate on the jobs they’re contracted to do.
“We’re certainly going to try this in other areas.

“We’ve talked to other vendors in the AB field,
like rehab companies, and to salvage companies and property contractors, and there’s
interest in varying degrees.”

HB Group is using a claims communications and management
platform called, which is offered by Castek Software Factory Inc. Founded
in 1990, Toronto-based Castek creates software for the financial services sector, with a
specific focus on the property and casualty insurance industry.

“Everybody uses different terms for it — like hub or
collaborative technology — but what we’re essentially talking about it is a
communications utility,” says Castek vice president Robert Gow. “I liken
InsuroCity to a phone system; it’s a piece of technology infrastructure, a tool that
allows people to better connect.

“The concept has been used in other industries, like
manufacturing, for years,” he points out. “The actual technology is not new but
its application to the insurance business is new.”

According to Gow, hub technology is gaining ground in the
claims field for a variety of reasons. In part, Internet applications are starting to move
more to the back-end of the insurance business from the front-end.

As well, acceptance of the Web as a communications tool is
growing and the idea of using the Internet to conduct transactions has become more
established. After all, it must be remembered that the claims adjudication supply chain is
extensive and diverse — ranging from mom-and- pop operations to international companies
— and not everybody has embraced technology to the same degree.

“There is momentum in the marketplace,” Gow says.
“Only two years ago, this was just a concept; now it’s an accepted way of doing business.”

Indeed, Gow sees lots of ways in which hub applications
will evolve in the future. Self-administered claims, for example, will be one area of
future development. The idea is that for simple claims, policyholders will be able to
handle them online by themselves, filing notice to their insurers, booking car rentals and
body shop repairs on their own.

He also foresees online face-to-face communication down the
road, with policyholders entering their claims themselves and then pushing a help button
for aid, which would be offered live by insurance company representatives via video streaming functions.

“As consumers, we expect to be able to call up an
airline or hotel or car rental agency and have our requests processed online
immediately,” says Gow. “Now adjusters are capable of that.”

Dalgleish is also looking forward to more insurers
processing their claims via the Internet, essentially adding more spokes to the hub. Since
claims can involve more than one insurer, the bigger the online community, the more
efficiencies that will be realized.

“The best thing that could happen to us is if two or
three companies came on board,” he says. “The more opportunities to tie people
together on a hub or a series of hubs, the more the potential increases.”

In another approach, Enterprise Rent-a-Car, the largest car
rental company in North America, has created its own automated rental management system
(ARMS) in a bid to streamline the process whereby it supplies insurance policyholders with
replacement vehicles when they report an auto damage claim and are awaiting repairs.

The Internet-based system electronically links its branches with insurance companies
and auto body shops, the idea being to make communication quicker and more efficient.

Generally, when a claim is filed, an adjuster logs onto the
ARMS site and creates a reservation for the policyholder involved, explains Dave Smith,
assistant vice president of Internet solutions.

The auto body shop contracted to do the necessary repairs
sends daily updates on the status of its work. If the repairs take longer than expected,
the insurer is automatically notified. Authorizations and billing extensions can be
requested and obtained as required. Once the body shop completes its job and the customer
returns the rental car, ARMS produces an invoice that is sent to the insurer.

All the information that is electronically collected can
also be used by insurance companies to analyze claims trends.

Smith says that St. Louis-based Enterprise, which has more
than 4,800 rental locations, deals with about 350 insurers in Canada and the United States
and now interacts with 310 of them via ARMS, processing more than $1.5 billion (US) worth
of transactions annually through the system. In December, the company added
French-language programming to accommodate clients in Quebec.

Indeed, Enterprise says that while its overall insurance
rental volume increased 35 per cent between 1998 and 2000, its business with major
insurers that use the Web-based system has expanded twice as fast. About 65 per cent of
the company’s total rentals come from the replacement market.

Smith estimates that 8.5 phone calls have been cut from
each rental transaction that is conducted via ARMS, doing away with the telephone tag that
often ensues when several different parties are involved in a transaction.

That not only saves money as adjusters’ time and
effort can be dedicated elsewhere but, Smith says, the more efficient communication
generally lops about half a day from a typical rental cycle. Insurers, he points out,
reduce their expenses while policyholders get better service and body shops focus on getting repairs done.

“What we’re trying to do is meet the needs of the
entire collision industry, not just insurers,” says Smith.

Barbara Aarsteinsen is the editor of ci – Canadian Insurance Magazine and can be
reached at Stone & Cox, 416-599-0772 or by e-mail
[email protected]