In this exclusive expert video briefing from the IMS COVID-19 Research Insights Series, we speak with Insurance Industry Expert, Stephen Johnson, about insurance claims and the industry as a whole as it relates to COVID-19.

Chris Ritter: I wanted to get your input on how all of the stuff that's going on with COVID right now is affecting the insurance industry and perhaps more importantly, maybe we could start with claims. What do you see happening?

Stephen Johnson: Very interesting times. As you know, I had a long career in the industry at high levels and am still very well connected with many in the industry, so I have a pretty good sense of what's going on and it seems to be common knowledge that claims in the property casualty industry have been impacted in many ways by COVID-19. One way in particular, that probably many consumers, your Average Joe would be aware of, is "Insurance companies are offering to reduce my auto premium. The premium I pay for my personal auto insurance."

Johnson: And the same is happening with commercial insurance with auto policies. What insurers are seeing is with less driving, that's been seen in the last few months as a result of COVID-19 conditions, fewer accidents, fewer collisions, and so there's less work to do for insurance companies and their claim staffs for auto claims for both personal lines and commercial lines. Of course, that means they're spending less money on claim payouts. That's very interesting to see.

Johnson: It is also, I think, very refreshing to see that so many companies are offering to help out their customers especially in the personalized space with reducing premiums or even for those on payment plans who may have had a layoff etc. Insurance companies are willing to work with customers on managing paying their premiums. That's a great thing to see.

Johnson: But for the claims industry itself, what that means is we have auto adjusters who don't have as much work to do. And the larger an insurance company is, the more it will have specialization across all of its adjusting staffs. What that means is auto specific adjusters without as many claims to handle, they can do a much better job and have higher customer satisfaction scores, higher internal measuring for quality assurance, those scores are higher as well.

Johnson: What some carriers are doing is starting down a path of repurposing some of their staffs that don't have as much claims work right now and cross training them into other areas such as property, which I will get to in a minute. That's an interesting phenomenon. No carrier can tell you how long COVID will be around anymore than the scientists or the physicians that we see in the Daily News. No one really knows. Carriers are making some short-term moves.

Johnson: But if you ask what they see for the long term, they're just like the rest of us thinking things will get back to normal and we don't want to lose good adjusters. We don't want to just make severe cuts across our auto adjusting staffs. And then if things returned to normal later this year or next year, then suddenly they don't have enough auto adjusters when the claims resumed to their pre-COVID levels. That has to be thought through as well. And then to that, I add that there is a talent crisis in the industry that applies specifically to claim status at P&C (property and casualty) companies.

Johnson: What we've been talking about for the last several years at chief claims officer roundtables and other such forums is we just don't have enough good quality currently of adjusting staffs in the pipeline or to be developed in our ranks now. Before COVID-19, it was already difficult to attract people into these jobs and then we have a lot of aging that's going on. I think that adds to the mix as well. What do companies do in these conditions if they are a large auto carrier?

Johnson: And then I move over to workers comp to put in a mention there that obviously with layoffs, furloughs, that workers comp claims are reduced in claim counts and what we call frequency and actuarial term but the same thing but less seen, less pronounced than auto which is such a large part of our overall P&C multi-hundreds of billions of dollars a year industry.

Johnson: And then moving over to property. Sure, people know that there are a lot of property claims for commercial business insurance being reported triggered by COVID-19. Depending on an insurer's mix of business, some insurers may be seeing a lot of those claims. For insurers that have a well-rounded array of products, commercial lines, property, other commercial lines, and a lot of personal lines, they are the ones that have the opportunity to do more repurposing that I spoke about.

Johnson: As you know, some carriers are just focused only on particular lines such as property. If a carrier is predominantly or exclusively property and having an influx of COVID-19 related claims, then the big challenge there is just to get more adjusting resources to ramp up to meet the level of incoming claims. There are a variety of ways that that can be done. Third party administrators are available if not used previously or if used previously at lower claim count levels to scale that up. But there are a number of ways that insurers have to scale up. And then of course, some insurers are not affected much at all by COVID-related claims that we're hearing so much about in the news.

Johnson: Another thing I would like to mention is the physical work environment that we have across corporate America including insurance companies. The physical work plant for many companies, the old brick and mortar model, we know what those expenses are of lease obligations, commute times for employees. Everyone knows what that looks like. What we've been seeing across corporate America, including insurance companies, is a move to having more virtual employees. Many office buildings, office locations, completely shut down.

Johnson: What that has resulted in for many insurers is to suddenly take a workforce of all their employees including claim staff and make them instantly virtual employees. Many of those employees perhaps had never worked virtually before. There are some things to be done there, some transitions to be made.

Johnson: Fortunately, much of the industry already had a large percentage of employees working virtually, call center employees, a lot of insurers, certain claims employees, maybe most claims employees. That already existed, but COVID-19 forced or accelerated what happened there. Just to talk a little bit more about this, the company's insurers that were already going in that direction were doing so very measured and carefully, very strategically.

Johnson: For example, if an insurer had staffs and claim staff, perhaps merit-based was the way to go for employees who would qualify through certain performance criteria and doing their jobs as claim handlers to qualify for more work from home days or maybe to become a 100% virtual employee would be merit based and employees who hadn't earned those merit stripes yet would still be tethered to a physical office.

Johnson: That's an example of something that was being done to make this into a very successful model, but of course, it was a big bang when suddenly all employees would be sent home to work from home. And then you have some other issues such as equipment, laptops, maybe some staffs in their office environment didn't have a laptop, the old-style tower computer, some other technology issues, VPN, some other things. That would have to be worked through but pretty much everybody worked through that.

Johnson: What will be interesting... And again, this is the same statement that can be made about corporate America. When we get past COVID-19, when it is in our rearview mirror, what does the world look like then? What I hear from some people is commercial office buildings, physical office space plants will not be in the future like they were pre COVID-19. I think we will see that in the industry as well. It is a way to save costs of course, if you can execute successfully and not have the additional costs of office space and commute times, why not?

Johnson: There is a loss of culture though which is another topic I think that is very interesting. When you have people congregating around physical plants, in most ways, it's easier to manage and have the culture that you want to have to be most successful. People like to go to work. In surveys about employers, where they would give their employer a high ranking, culture is what it's all about. Part of culture is seeing your fellow employee getting to interact with management, town halls, whatever it is.

Johnson: In the case of claims operations, we all think that adjusters are learning from management, that they go to training, they have continuing education, but in fact, while that's true, many adjusters learn from each other. And so, if you're in an office space where you have cubicle rows of adjusters, what you sometimes hear is a more senior adjuster being asked by a more junior, less experienced adjuster just about something the less experienced person is seeing in a file could go ask the supervisor but if you know the person next to you probably has already been there, done that, seen that you can learn that way too.

Johnson: A lot of that is lost. There's been a lot written not just for the insurance industry about maintaining cultures when all employees or many more employees are remote, but there's a challenge. It definitely applies to claims.

Ritter: Let's break that down just a little bit here. You started off by talking about that for some areas, the number of claims are down. I think you mentioned automobile claims, they're down and that's a function of I'm assuming people just driving less. You drive less, there are fewer accidents. Is that right?

Johnson: Yes, it's really that simple.

Ritter: And then you mentioned also workers comp issue with people not physically in the office, there's less of an opportunity for those kinds of injuries and fewer claims being filed there as well.

Johnson: Yes. Not just office workers but just so many manufacturing, other facilities that have been impacted.

Ritter: On the one hand in those areas, there's an increased satisfaction because there's more time for the claims people to work on whatever claims exists there so that customers are, as you said, returning higher, more favorable scores on how they're being treated?

Johnson: Yes. It's really a function when an adjuster has a lightened workload. If we just think of this very simplistically as in a factory production of widgets. If the production levels are down for some extended period of time, then each widget can be perfected to be absolutely flawless instead of a quality score of 94% above meets the standard that widget is out the door, the scores will be closer to 100. It’s that simple.

Ritter: That's going to have obviously a favorable benefit on how the consumer is viewing insurance companies. I'm sure that's something that the insurance companies are appreciative of being able to provide.

Ritter: You also mentioned though that there's been a shortage of people who are able to do this qualified work. What are they doing? You mentioned they're transferring people to other lines, having people learn how to do other forms of claims handling?

Johnson: Yes, I believe some insurers are doing that. That's not unusual, though. In the absence of COVID-19, many insurers have a practice of giving their adjusting staff opportunities through career enhancement, career growth plans to specialize in certain kinds of claims for a period of time and then move over and start handling other kinds of claims. Sure, that happens every day. It was a common occurrence between auto, let's say, and property.

Johnson: The thought being, that for good quality staff to give them a sense of career growth and getting later into management or higher job, higher earnings to be better rounded, yet still maintaining specialization along the way. That was occurring before.

Johnson: And then sometimes insurers will cross train. They will take some of their staff, let's say, auto staff or staff handling other kinds of claims, give them some cross training so that, let's say, if you have a carrier that has a pretty varied mix of products and types of claims that come in and they have catastrophe exposures to cross train some of the non-property staff so that if a hurricane, an earthquake, or wildfire came that created claim spikes, the carrier could draw from some other adjusters who had already been cross trained or maybe rotated in periodically to handle some of those claims.

Johnson: That's not new to the industry. But we're seeing some very intentional moves, I think, by some companies with the slack in auto and workers comp and then the increase in property, but only if it's a carrier with property claims that have increased because of COVID-19. Otherwise, other than COVID-19 and business interruption right now, I'm not aware of any real increases in the property books of these companies. We had a somewhat busy spring with some tornadoes, some spring storms, and then we'll have the hurricane season coming too can generate a lot of claims.

Johnson: But it's only for certain carriers that are having the increase in property claims and then the decrease in auto claims that have this option to repurpose or train some auto people. What makes the most sense to do this would take some auto staff with little or no exposure to property claims, move them in to handle some property claims that are the least complex that would require the least experience and then try to develop quickly more of your existing property staff if you're having COVID-19 claims come in to accelerate their learning curves to handle the influx of the business interruption claims caused by COVID-19.

Johnson: That's just what a theoretical insurer could do with those assumptions.