14. December 2022 By Niklas Bug and Alexander Frommelt
Smart Claims – sustainable claims handling with a future
Solving problems instead of just throwing money at them
The results of the Conference of Parties (COP27) have caused widespread disappointment in recent weeks. There is more talk than there is action when it comes to sustainability. Savings are generated, but not necessarily in a sustainable way – a fact that is also reflected in the German insurance landscape and thereby eludes the true will and interest of 70 per cent of German citizens.
The idea of a sustainable insurance product impressed more than 4,000 people and consequently won first place at adesso’s Think!2022 competition. Smart Claims is a newly conceived digital product for future-oriented and sustainable claims settlement in the insurance industry.
Take my money – insurance nowadays
The German insurance landscape is rather one-sided when it comes to compensating for damages to electrical devices – justified insurance claim? Money paid out.
But if we look statistically at the diversity of what customers want, it quickly becomes apparent that the concept of paying out money according to the ‘one size fits all’ principle does not satisfy their wants. A lot of people want to have their beloved devices repaired, but the only thing stopping that from happening is either a lack of support or the cost. Nevertheless, huge numbers of defective devices are already being repaired in Germany, a growing trend driven by legislation. In addition, statutory repair obligations will be enforced by lawmakers with increasing frequency in future.
It goes without saying that not every device can be repaired, as the required spare parts are simply unavailable or the damage is so extensive that no engineer in the world sees a chance of repairing it. In cases such as this, it is worth looking at another established and growing trend: refurbishing – repairing and selling used equipment. Refurbishing is receiving an increasing amount of attention and is also being done more and more – especially with younger generations. Lawmakers are supporting this industry with greater intensity in order to achieve sustainability goals.
So why not go on and make insurance fit for the future? A future that could already be worthwhile today and beats the lawmakers to the punch.
Smart Claims – insurance of the future
The Smart Claims concept provides the interface between an insurance company, its policyholders and various service providers.
For the insurance company, not much within its processes will change at first. Furthermore, their individual assessment processes will remain unaffected when a claim is reported. However, the compensation process is now being handled in a ‘smart’ way and no longer just with money.
This means that when the insurance company deems the claim legitimate, depending on the claim and the expenses associated with it, the policyholder can decide whether they want to have their item repaired or whether they want a higher-quality used product as a replacement. Smart Claims helps with this decision digitally, quickly and in a user-friendly way by directly transmitting relevant information to the service providers. The complexity lies in the detail: depending on the claim and the device at hand, a different and realistically suitable solution must be offered in real time and without overburdening the policyholders.
You shall not pass – convincing insurance companies
Sustainable concepts are often limited by feasibility or a lack of competitiveness. Good karma for a company and the occasionally anticipated increased customer acquisition via sustainable advertising could go hand in hand with unacceptably higher risks. For example, insufficient resources can be mobilised within an insurance company in order to successfully implement a Smart Claims insurance product.
Nevertheless, the rapidly growing interest in sustainable or climate-compensated products can no longer be denied. We find ourselves in one the most important debates about sustainability that customers find the most interesting if we also take an explicit look at electrical devices.
In addition to acquiring these new environmentally conscious customers via eco-friendly Smart Claims insurance, this IT service offers insurance companies entirely new ways to structure their insurance products. Only now can these products be thought of as profitable, thanks to a digital network of service providers, policyholders and insurance companies. The insurance landscape, especially the German one, is currently characterised by products that guarantee replacement value compensation. This means that in the case of a defective smartphone, the insurance company has to pay the policyholder the device’s original price. Insurance companies calculate the contribution payments at an equivalently high rate so that they are able to accumulate profits at all.
Smart Claims insurance makes it possible to undercut the competition’s contribution payments, which are calculated as previously described. The insurance company would incur lower costs in the event of an insurance claim than would be the case if it had to pay replacement value compensation. Instead, the insurance company has to pay for a repair or a used replacement product, which may nevertheless be worth more than the original defective device. This opens up the possibility of charging lower contribution payments when aiming for an equal profit margin.
The Smart Claims concept makes it possible to rethink insurance products. The ‘repair’ and ‘replacement product’ scenarios presented in this blog post are but a portion of a sustainably and modularly designed Smart Claims insurance product. And we do not want to stop with electrical devices. We are already thinking about the entire spectrum of household goods and progressing towards a complete building. Smart Claims creates added value for policyholders, service providers and insurance companies.
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