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9/3/10 1:35 PM
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THE ‘PREDICTABLY IRRATIONAL’ CLAIMANT
Preemptive Analytics Help Identify and Address Needs
BY PUNITA GANDHI, ANAND S. RAO, AND JAMIE YODER
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interconnectedness between two forces. First, that people’s choices are influenced by their emotional or “hot” states, and are often irrational. Second, that this irrationality is oddly systemic, and forms patterns — suggesting that, if studied closely over an extended period of time, they could be predicted. In the insurance world, events that trigger a claim are examples of hot emotional states for a claimant — meaning ones in which they may be predisposed to act irrationally. Combine this interesting insight with the growing belief that the nature of the claim experience can either make or break a customer’s relationship with an insurer, and all of a sudden, it seems to makes sense to preemptively understand how people react to a claim incident, and then get ahead of them to service them accordingly so that they are not just satisfied, but pleased every step of the way. The Customer Satisfaction/Loyalty Connection The case is simple. Research conducted separately by J.D. Power and Associates and Diamond establishes that customers who have a positive claim experience are significantly more likely to remain with an insurer for a longer time and become “evangelists” so to speak in their circle of influence. Over time, this creates tremendous value for the insurer. Yet, when it comes to tightening purse strings in tougher times, claims is the area that insurers target shrinking the most. A recent study by Arthur J. Gallagher & Co. revealed that “it now takes insurers significantly longer to settle large claims than in the past,” leading to frustrated clients and tremendous inefficiencies in the claim process. This Catch-22 situation will persist, as pressure on reducing losses is critical to insurers’ survival. So, the real-world claim challenge lies in concurrently minimizing losses while growing customer satisfaction. But is this really possible? The answer is “definitely.” Somehow, these two factors are perceived to be starkly opposite forces that cannot coexist. However, the fact is that many insurers may have missed an opportunity to manage losses proactively in tandem with the pulse of their customers.
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While losses and customer satisfaction seem like awkward bedfellows, the only reasonable way to develop a true win-win between the two is to create such incredibly smart intelligence around customer behavior at the lowest possible level of granularity that not only can you, the insurer, significantly reduce losses, but also create very happy customers.
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The ‘Predictably Irrational’ Claimant . but also create very happy customers. responsive information environment in which it is possible to reduce losses while efficiently managing claims and improving customer satisfaction. A behavioral economics experiment at MIT found that a simple reminder of moral code caused cheating in exams to plummet. Leverage behavioral economics to peel back unexplored drivers. Additionally. Carry out ethnographic observations of the process by immersing yourself in each stage and watching how a claim is handled. The insurer drew very detailed. Granular Segmentation and Predictive Modeling A customer segmentation model that leverages all of the above insights as key predictive variables can create a granular understanding of specific customer needs from a claim experience. In addition. the cash benefits to insurers can be huge. the security officer called the insurer’s claim department when he heard an unusual rhythm in the machinery. it structured a claims university to continually generate proactive ways of understanding the claimant.” In the claim space. For instance. insurers should focus on these patterns. Look within your own claim organization to identify potential root causes of claim dissatisfaction. yet cleverly shifted the “promise of truth” signature of the claim form — from the bottom to the top of the form. a leading personal lines insurer simply. For example. this level of segmentation could help optimize service delivery — from the exact desired value to the specific customer segment at the lowest possible cost to the insurer. a leading P&C insurer engaged its entire claim organization in creating an unusual way of understanding value chain linkages. Develop intelligence to predict customer behavior. and dependencies. This concept can be extended further to the advantage of insurers. Assess claim processes through ethnographic analysis. In addition. Insurers should study how they can predict customer reactions to claim-related triggers and how to customize services accordingly. As a result. Whistle-Blower Suit Still Spinning Oil Spill and Adjuster Supply Related Articles Touching the Third Rail Check Yourself Musings on Successful Leadership Back to School The ‘Predictably Irrational’ Claimant Yet another simple method to boost customer satisfaction is to play on the inherent attractiveness of anything labeled “free.4 million in losses. the insurer’s claim department has won several customer service awards and has the lowest loss ratios in the top ten: more than 5 percent lower than the next best performer. This visualization process helped the company develop mental maps of clear causalities. this could lead to incredible internal efficiencies for the insurer — thus talent is focused where needed. When engineered effectively. file:///Users/GANDHIP/My%20Documents/Diamond%20General/Market%20…-%20Education%20&%20Training%20-%20Claims%20Magazine. roles. Most Read Articles The ‘Predictably Irrational’ Claimant Fraud of the Week: Publix Enemy Number One Under the Hood: State Farm's Latest App "On the Move" Five Years After Katrina. For instance. The real power of relating to people lies in reaching the deepest part that often unwittingly motivates their behavior. as shown in Figure 1 below. and the company can cater investments to specific improvements in operations — while still ensuring that customers are getting exactly what they need. this prevented a large-scale loss that could have cost the insurer $2.Claims Magazine 9/3/10 1:35 PM losses. In the end. unique customer data. Taking the lead from this handy tip. because an accident is a hot irrational state that sets off unconscious responses of which claimants may be unaware at a surface level. The insurer then witnessed a dramatic drop of more than half in claim fraud. lifelike knowledge maps. offering risk control or loss advice gratis can increase satisfaction and perceived value while equipping the insurer with access to rich.Education & Training .webarchive Page 2 of 3 . where simple human motivational triggers could induce desirable behaviors to thereby reduce claim payouts from the outset. There are four aspects to building an intelligent. based on a relationship built from a casual conversation during a loss-prevention advisory visit to a steel mill.
The insurer created a rigorous analytics engine for “search word” patterns online. One personal lines insurer applied real-time diagnostics to deal with claim fraud.com. They must then use that knowledge to design the right experience for customers and the right results in terms of profitability. and accordingly to preempt it. to understand the occurrence of falsified behavior based on the nature of search patterns traced to certain geographies.Education & Training . insurance practice managing partner. are part of Diamond Management & Technology Consultants. and Jamie Yoder. principal. Punita Gandhi.summitbusinessmedia.Claims Magazine 9/3/10 1:35 PM Real-Time Preventative Diagnostics Real-time information could be fed to claims/risk prevention functions so that early warnings of an event could trigger action to reduce or even prevent it from occurring. or if they are in a position to predict irrationality. Insurers must ask themselves if the claimants are merely irrational. insurers can save millions in catastrophe-related expenses by reacting to early triggers from real-time devices placed along river beds rising to precarious levels. www. partner. (c) Copyright 20102010 Claims Magazine. A Summit Business Media publication.com file:///Users/GANDHIP/My%20Documents/Diamond%20General/Market%20…-%20Education%20&%20Training%20-%20Claims%20Magazine. or by installing system monitoring programs in nuclear power plants that detect very early breakages in processes that prompt immediate alerts.diamondconsultants. lawsuits and other damages. Anand S. These investments help cultivate a pool of deeply entrenched customers by providing savings to them from avoidance of business disruption. All Rights Reserved. For example. inexpensive devices in a house could detect early symptoms of water damage or mold in walls.The ‘Predictably Irrational’ Claimant . They may be reached at www. Furthermore. Weaving these factors together not only brings the insurer closer to the claimant but also helps the company profit internally.webarchive Page 3 of 3 . penalties. Rao.
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