The property claims and restoration industry has been facing some significant challenges. Last year saw an increase in the frequency and severity of severe convective storm activity, resulting in $60 billion in insured losses. With the increase in exposure values and extreme events, these losses are likely to increase. Of course, these events are occurring against the backdrop of rising costs of labor, materials and equipment, and an ongoing labor shortage.
The industry has also been experiencing a shift internally. According to Verisk, since the pandemic, 16% of restoration estimators and 26% of carrier adjusters have changed roles. With many industry professionals nearing retirement, adjusters and contractors often face the task of accomplishing more while working with fewer resources.
While these changes and challenges can be daunting, they also represent tremendous opportunities for organizations to adapt and innovate. By embracing change, we can unlock new strategies, processes, and solutions that foster resilience and simplify complexity.
Sustained Innovation Delivers Value
When we think of innovation, we immediately imagine disruptive innovation that transforms industries or causes a paradigm shift. While that type of innovation is important and necessary to advance industry and society, most innovation is incremental. Sustained innovation is when you iterate and improve solutions and processes. It often requires experimentation and collaboration, and ultimately, an innovative mindset that is always open to exploring new ways and means of improving a process, always with the end user and end customer in mind.
We’ve seen these types of innovations in the property claims space. Just look at how far we’ve come using technology such as image recognition software to estimate replacement costs for buildings and contents. While the technology has been around for some time, it continues to improve in both accuracy and the number of objects it can identify.
One way I like to approach innovation is through integrative thinking. I’m a huge fan of Roger Martin, Director of the Martin Prosperity Institute at the Rotman School of Management of the University of Toronto. An expert in strategic management, Martin has championed integrated thinking concepts, which generally state that when you’re presented with two choices, and you believe those are the only choices you have, you should stop and evaluate a broader landscape of alternatives outside the binary approach. In addition, Roger has a great philosophy on competition and working with traditional competitors for the benefit of all parties in the value chain, an informative approach to how we can innovate in partnership for shared clients in the broader ecosystem.
This simple yet transformative process can help leaders foster a culture of sustained innovation in their organization. We often face two alternatives and try to make the best decision based on the information we’re presented. But if we broaden the landscape and challenge our team to explore more possibilities, we can uncover new opportunities and drive meaningful innovation.
Simplify Complexity Through New Capabilities
An end goal of innovation and technology is to simplify complexity. If we think of the best innovations, they often make tasks simpler, faster, and more accurate, and that’s precisely what our industry needs. The labor shortage is putting immense pressure on the workforce, and restoration professionals are facing increased complexity in scoping and estimating losses and repairs.
With fewer people and more claims, there’s a need for innovation that enhances efficiency through workflow automation and streamlined communications for participants involved in the claims and restoration process.
Generative AI can be helpful in this area to augment the administrative burdens so many professionals face in their day-to-day jobs. It has the potential capability to alleviate manual processes such as searching and scoping losses, summarizing activity notes and communications, answering pricing questions, reducing fraud, and evaluating property characteristics.
The technology has tremendous potential to act as a co-pilot, assisting contractors and adjusters by simplifying and automating manual administrative tasks so they can serve policyholders faster and more accurately. There’s been much hype about GenAI, but it still needs a human in the loop for certain steps and decisions. While it can potentially be a disruptive technology in claims and restoration, it can provide immediate boosts in productivity and efficiency rather than completely transform operations.
Evaluate Systems to Optimize Operations
Change must also be viewed holistically, not just with technology but through your staff and the systems you create to maximize their potential. So, consider: What are the needs and incentives of the contractor, independent adjuster, or technology provider you work with?
Management plays a critical role in developing systems that can adapt to change and drive innovation. I’ve found the “System of Profound Knowledge” by Dr. Edward Demming particularly impactful in understanding how to optimize your people and processes.
Essentially, Demming advocates for a broad, systematic approach when implementing new capabilities in your organization. He found that each team member’s success is directly tied to and limited by the system they are working within. So, ultimately, for us to properly embrace change and harness it for innovation, we need to improve our systems, starting small and then expanding the scope of improvement efforts. This sustained improvement and innovation often leads to greater success.
Despite the disruption and challenges the industry has been facing, organizations can navigate change by embracing innovative thinking, streamlining processes, and embracing new technological capabilities. Organizations that do this will be well-positioned to navigate today’s headwinds and be better equipped for the future.
Aaron Brunko
Aaron Brunko is the president of property estimating solutions at Verisk, a leading global data analytics provider. Aaron can be reached at [email protected].
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