Imagine the following claims settlement process of a car insurer:
After an accident has occurred, the beneficiary calls an insurance agent who in turn contacts the insurance company. It can take up to three days until the notification of claim is entered and a qualified clerk is assigned the case.
The clerk checks whether the beneficiary’s policy was valid at the time of the accident. If not, the process terminates here. The next steps basically try to answer two questions: Whose insurance is obliged to pay and how much is it going to cost?
For estimating the cost, the regulator talks to the doctors and injured parties about the injuries caused by the accident and how they need to be treated. Then, she comes up with a quote for the car repairs. This requires a lot of phone calls. For answering the question about who is to blame for the accident, the regulator calls the beneficiary, other injured persons, witnesses and the police. Furthermore, she is likely to drop by the people involved and the place of accident.
Estimating the costs for repairs and doctors is influenced by many variables: Which repair is really needed? Is it required to order original spare parts from the manufacturer or can parts produced by other companies also be used? Which medical treatment is sufficient?
None of these questions is easy to answer. Typically, it takes 35 days until the clerk has gathered enough information before she can decide whether or not to pay compensation and if so how much.
If all parties are satisfied with the compensation, the file can be closed. In average this happens after 40 days in total. However, if legal measures are initiated, the process might take considerably longer. A lawsuit easily consumes 5 years.
Considering all claims, the insurance pays 3,500€ as compensation for physical damage and personal injury. Internal costs sum up to 500€ as an average.
a) How can the process be radically improved from the customer perspective while lowering the costs for the insurance?
b) Which hidden assumptions need to be removed?