Contents Cover- the under-served aspect of property insurance innovation

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TLDR  Consider:

Structure losses– estimated to the nearest square foot or square meter.  Plenty of automated tools and techniques, and plenty of auditing for consistency.

Contents lossesmanual assessment and data entry.  Some automated tools for high value, niche cover or pre-inventory.  Little consistency in estimation as there is little consistency in what’s being assessed

One would wonder how this dichotomy can exist within property insurance – it’s the same pot of funds used to indemnify an insured, whether it’s for structure or contents/FF&E.  The. Same. Funds.  Wrestle every penny for structure, not so much for unscheduled personal property (UPP).

While it’s difficult to pin down an exact number (even the statisticians treat contents as a stepchild number), clearly Contents/FF&E losses comprise paid severity in the tens of billions of dollars annually in the U.S. alone.  Why is it, then, that in great part the efforts to innovate property insurance claim assessment have been focused on structure loss capture and estimation?

Some thoughts:

  • Contents losses, in contrast with structure, have little uniformity claim to claim. Structures are built differently but by using uniform methods; the same applies to estimating the damage.  Not so much for UPP.
  • Contents reflect fashion as well as function; this affects valuation in a significant way.
  • It is difficult to apply assessment/valuation tools such as structure square foot calculators to total losses of contents.
  • Inventory of contents losses is labor intensive. The damaged décor of a damaged room can be assessed in minutes where it will take much more time to itemize the damaged contents.
  • Customers may assign emotional connection with contents; this is less likely with structure.
  • Contents cover limits are often an offshoot calculation of structure limits- no practical method to value a household of contents in a manner like the area of a structure times a multiplier provides a good estimation of a dwelling cover limit.
  • There is little intellectual capital effort dedicated by carriers to keeping a contents or FF&E adjusting skill set. Not many executive general adjusters place expertise in contents adjusting on their CV.

In summary, contents claim adjusting is disuniform.  Disuniformity resists innovation.

Are there insurance entrants that have taken small bites of contents innovation?  Sure, there are, but in general the contents innovators are niche insurers (narrow scope of covered categories) or renters/condo insurers where the contents cover comprises the primary cover for the insured.

Much of the innovation in contents insurance focuses on access, or policy acquisition, e.g., on-demand such as what Snap-it (South Africa based), or Trov, champion.  Take images with a smart device, perhaps send an image as needed, and you are covered.  Switch on, switch off.  And for valuations for claims- these firms focus on discrete, higher value contents, items with a specific, verifiable, AI- processed claim presence.  The concepts haven’t gained universal success (in fact some contraction of markets covered) but the efforts are encouraging.

Another avenue for innovation is the niche play, e.g., Laka, a UK entrant that is building a community of bike owners and an associated cover for bicycles and gear, all addressed through a clever application.

Lemonade has extended the innovation beyond policy acquisition and claim handling, and associates a public benefit with its cover that encourages customers to have more awareness of how claims affect the insureds as a whole, and provides charitable contributions when surplus earned premiums are considered.  Claim less = contribute more.  The innovation includes the principle of public good.  Oh, and if you haven’t heard- Lemonade settles claims in seconds through application of claim verification algos.  At least a few have been.  😎

And Lemonade has a colleague in utilizing a psychological and/or game theory approach to UPP claims- Slice On-Demand Insurance.  Founder Tim Attia has the firm dabbling in app-based psychology of claims, where the app ‘talk path’ is psych PhD vetted, encourages customer buy-in to legitimacy in the claim report with inclusion of video support.  Innovation in leveraging behavior, not unlike Lemonade’s approach.  And, Slice is experimenting with straight through claim processing utilizing binding arbitration- that’s game theory that’s old but an application that is innovative.

But what of more ‘traditional’ contents/FF&E claims?  Not much change, that is clear.  Yes there are tools that have been introduced that make the claim scope easier to capture , e.g.,  field capture of inventory details that are transcribed remotely into an estimate (see Enservio ), or home inventory apps that help a homeowner maintain a detailed list of personal effects in case of a loss.  But those ‘efficiencies‘ have not changed how contents losses are handled.  If it’s agreed that structure cycle time (claim inception to settled) is say, 18 days, then UPP (unscheduled personal property) cycle time can easily be double or triple that.

And for heavy losses?  No real change- still need that exhaustive inventory of anything being claimed, and analog/digital pricing schemes.

If dwelling losses can be calculated on an aggregate cost per measured unit, what prevents some clever data analytics and AI from estimating a household’s UPP loss based on data indicators and predictive analysis of some decades of UPP loss histories?

Commercial FF&E claim handling is not much better, but there are hints of innovation that have a foundation in serving the customers’ needs.  EquiX has an inventory-to- pricing- to- sourcing application that in one fell swoop assesses the loss and hands the insurance customer a practical and actionable accounting of a loss.  Per the firm’s founder, James O’Brien, a recent claim with a total loss at a car dealership was dealt with using the firm’s intuitive valuation and sourcing software (and vendor network) in a few weeks where traditionally the assessment would have consumed months.  The combination of the pricing/sourcing engine and ‘boots on the ground’ provided by Commercial-Ease bridged the analog on-site information collection with straight-through processing, resulting in cycle time efficiency in combination with carrier and customer satisfaction.  It’s a recognition that these claims are unique, but handling can be uniform and innovative.  I’d enjoy sharing more innovation success anecdotes with the reader, there simply aren’t that many.  Perhaps the industry is waiting for UPP severity to reach a meaningful, more than tens of billions of dollars level.

The good news?  There are UPP adjusting jobs available- just saw a Sedgwick Co. advertisement looking for contents specialists.

Bring pencil and paper, please.

Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners. He also serves the insurance and Fintech world as the ‘Insurance Elephant’. 🐘

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

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