Total Loss Insurance
Reimbursing customers in ways they consider fair and reasonable
Case Study in a Tweet
Results
Higher customer satisfaction ratings
More first-offer acceptances of insurance claim payouts
A shift in customer perception from: unfair to fair, untrustworthy to trustworthy, and confusing to clear.
#customer experience #behavioral science (decision-making)
Project Details
Client
Allstate Insurance Corporation
Client Description
An insurance company that offers a full range of products, including protection for vehicles
Team
Collaborated with a UX Designer
My Role
Lead researcher (contract) - planned and conducted all user research
Project Timeline
3 Months
Deliverables
Research report with recommendations, Appendix: techniques for influencing expectation and perception (cognitive biases and heuristics), Video highlight reels with multiple insights tagged per clip
Context
The focus of this project was a specific type of insurance claim called a “total loss”
When an insured vehicle is damaged so severely that the cost of repair is greater than the vehicle’s value, it is considered a “total loss”, and customers are offered a cash settlement instead of having their vehicle repaired. These customers are often dissatisfied with the amount of money offered for their unrepairable vehicles.
Customer’s reactions to a total loss is a significant issue for Allstate:
20% of all auto claims are a total loss
8% of customers reject the cash settlement value
In total, 1 in 4 customers leaves Allstate within 18 months of filing a total loss claim
EXECUTIVE SUMMARY (TLDR)
The Ask
The Claims E-Commerce Program Team and Automation & AI Strategy Team asked my UX Team to:
Determine how customers determine (calculate) their vehicle’s cash value
Explore how customers react to valuation at different points in their insurance journey
Identify how Allstate could provide customers an appropriate and trustworthy set of expectations for their vehicle’s cash value
Problems
Customers accept the first cash settlement offer for their total loss vehicle at a lower rate than desired, which results in lengthy negotiations and often unsatisfied or frustrated customers
When customers get less money than they expected, they are more likely to leave Allstate for another insurance company - whether they negotiate or not
Many customers are dissatisfied with the amount of money Allstate offers for unrepairable vehicles. When customers dispute the valuation, it adds time to resolve the insurance claim, reduces customer satisfaction, and increases the chances that customers will leave Allstate for another insurance provider.
Goals
BUSINESS GOALS
Increase
Trust that an Offer is Fair
Confidence that Allstate’s value of a vehicle is an accurate representation of the vehicle’s value.Willingness to Accept a Valuation
Promote understanding of how a value is determined and set a unified anchoring point for value.Satisfaction in the Experience
Customers feel like they are supported, guided, informed, in control, treated fairly, and treated well.
Decrease
Dispute and Negotiation
Customers attempt to uncover why Allstate’s value of a vehicle clashed with their own.Time
The cycle time from the time of loss to the delivery and acceptance of a settlement.Surprise
The value of their vehicle is less than customers believe it should be.Confusion
The way in which a value is determined by Allstate is not clear. Customers are not sure if it is a fair offer.
RESEARCH GOALS
Claims Process
Identify opportunities for improvement related to the Total Loss customer experience
Valuation
Identify how we might give customers an appropriate and trustworthy set of expectations around vehicle value when they experience a total loss.
Learn about why and how people think about the value of their vehicle.
Explore how customers react to valuation at different points in their insurance journey. Gain insight into how they might react if our valuation doesn’t match their expectations.
Solutions
Primary Solution
Most customers consider Kelley Blue Book as the-one-and-only gold standard for determining their vehicle’s value. Any other way of determining valuation is deemed dubious and potentially untrustworthy. For customers to trust our valuation, Allstate’s total loss claim experience must acknowledge that individuals will question our valuation and compare it to Kelley Blue Book. Allstate needs to reset customers’ value anchor away from Kelley Blue Book in order to set their own.
Secondary Solutions
Created guidelines for how and when to best communicate vehicle valuation with customers that served as the basis for further prototypes and pilot studies
Made recommendations on how to increase customer satisfaction during the total loss experience beyond just the valuation of vehicles
Determined ways to positively influence customer’s perception of cash settlements (actual cash value) offered
Prevented stakeholders from moving forward with risky solutions by invalidating concepts at an early stage.
Results
Metrics improved
Increased customer satisfaction during the claims process
Increased the number of customers who accept the first valuation offer (no negotiation)
Positively shifted the perception of the Total Loss process
Based on customer satisfaction surveys since the implementation of key recommendations, the following trends were observed:
From ➜ To
Unfair ➜ Fair
Untrustworthy ➜ Trustworthy
Arbitrary ➜ Reasonable
Confusing ➜ Clear
Opaque ➜ Transparent
PROCESS AND APPROACH
Kickoff
Our stakeholders already had areas of inquiry they wanted to explore, identified some of the main customer pain points, and a few hypotheses of solutions. We took these ideas and put them into the research backlog for this project, combining them with new research opportunities the product team developed.
Our team was conflicted about how to best solve customer problems
The primary area of disagreement was whether or not notifying customers about the depreciation of their vehicle before any claim was filed would be beneficial, harmful, or have no effect at all. This would be a main area to focus on later in the project.
Hypotheses uncovered during the kickoff - will need to validate/invalidate in the future
By providing customers the ability to input condition details about their vehicle when getting insurance and update those details upon renewal: valuation calculations can be calculated more quickly and customers can get paid faster.
By notifying customers of their vehicle’s depreciating value over time:
Positive reaction - Customers will be less surprised and disappointed in the event a total loss ever does occur.
Negative reaction - Customers will experience unnecessary points of contention with little to no upside
Neutral reaction - Customers aren’t likely to remember or care about past vehicle value estimates if their vehicle is ever damaged, they care about what the actual valuation offer is in the present.
Many customers are inherently distrustful of their insurance company and don’t expect fair valuations
At kickoff, the stakeholders wanted to test whether communicating a customer’s depreciating vehicle value would be advantageous. This was one of many hypotheses we captured and would later test.
Review of Previous Internal Research
At such a large company such as Allstate, it's often the case that relevant research was already conducted. We didn't want to duplicate efforts and waste time rediscovering what was already known, so we reached out to other departments until we found a very useful study that unearthed how current Allstate customers feel about their claims process experience. We were able to leverage a large survey to identify satisfaction levels at a scale that our team otherwise wouldn't have had the capability to do ourselves. We were able to use this survey as a jumping off point for this project.
What was done
Before conducting our own research, we leveraged what others at Allstate already knew and had learned. I reviewed a Customer satisfaction survey (from the Marketing Analytics & Research Administration) that revealed why, and to what degree people were displeased with their total loss experience.
I extracted relevant information from the survey and confirmed that indeed, the amount of the settlement was the primary problem customers had. Customers were also dissatisfied with the way in which Allstate explained how their vehicle's value was calculated. Other Issues that scored low customer satisfaction ratings revealed themes I would explore further using other research methods later on in the project.
Why it was done
At the beginning of the project, the stakeholder's hypothesis was that the primary problem customers had with a claim was the amount of money offered for their unrepairable vehicle - known as the settlement. While this seemed likely, I wanted to verify we were focusing on the right problem and not overlooking potentially ripe areas for improvement. Out team also wanted to balance the quality of the claims experience (journey) with the satisfaction of the settlement (destination).
What previous research was used
Claims Process Satisfaction - Negative and Positive Ratings (tree diagram)
Shows how various topics in the satisfaction are relatedBefore - confusing and contains irrelevant data
After - easy to understand and only contains relevant data
Claims Process Satisfaction - Negative Ratings (bar chart - shown below)
Shows the relative severity of various aspects of the claims experienceBefore - confusing and contains irrelevant data
After - easy to understand and only contains relevant data
What I learned
It’s not just about the money
Customers care a lot about the settlement cash offer for a total loss, but they also care almost as much about communication, the amount of time processes take, and customer servicePerceptions of time and money are variable
Expectations of how long things should take and how much something is worth are relative, and these perceptions can be shifted by helping shape initial expectations.
The prior research I found contained useful graphs that contained irrelevant data for this project and was difficult to read. I reformatted the research results into a more useful and readable format in order to draw new insights and knowledge from the data.
Transition to the next step: Now that we learned that money offered in a settlement was the most important issue, followed by how that amount of money was communicated, our team knew what issues to focus on and prioritize moving forward. We also identified secondary and tertiary issues in the claims process, that if addressed, would mitigate problems customers had and hopefully reduce churn of customers who defect after a claim - which is a large problem in the inurance industry.
Secondary (Desk) Research
While the previous survey leveraged Allstate's internal findings, our team wanted to take the research one step further, developing a more holistic perspective based on industry-wide assessments. This would allow us to determine if we missed anything on our own, bring greater depth and clarity to our understanding, and validate our findings.
What was done
To put Allstate’s finding into a broader perspective and provide context, I looked beyond the company to the entire auto insurance industry.
Findings
The main findings from the literature review echoed what we found in the survey - the perceived fairness of a settlement is the most important factor for customers, followed by the explanation and transparency of the claims process. However, It's not enough that the experience is fair and efficient - resulting in logical satisfaction. The customer must also feel cared for in an effortless process that they understand - resulting in emotional satisfaction. This makes holistically improving all aspects of the customer experience as an integrated system paramount.
The industry average customer satisfaction for how customer claims were handled is 7% better than Allstate. This is a clear opportunity for improvement.
Allstate customers appear to be more loyal than the industry average. Whereas the industry average of 1 in 3 customers are likely to defect in the next 12 months, Allstate's defection rate is only 1 in 4 in the next 18 months.
The claim is a very strong trigger for switching insurance carriers. Customers that have submitted an insurance claim in the past two years are almost twice as likely to switch providers than those who have not.
Transition to the next step: With a firm understanding of how Allstates issues relate to global issues in the insurance industry, we could move forward with confidence, knowing how our small study connected to the bigger picture.
Interviews:
End-to-End Claims Process
With a wealth of quantitative data under our belts, we decided to pair that knowledge with qualitative insights in a mixed-methods approach. Taking the areas of inquiry and issues uncovered in the survey and market research, our team came up with questions we still had about the customer's journey and experience during a claim. We spoke to many customers about what mattered most to them and how they were affected by events in their claim experience. These interviews provided a more detailed and grounded account of what it really feels like to go through a claim and/or total loss.
What was done
I spoke to ten people who were currently going through a total loss or recently experienced one within the last six months. A nuanced, first-hand view of how insured customers experience the Total Loss claims process emerged, and revealed new pain points and opportunities while enriching the understanding of previously identified themes.
Insights
Time
Customers expect different timelines during their claim process, and those expectations are influenced by the needs and responsibilities in their day-to-day life. Depending on the context, faster is not always better.Personal Impact & Control
Customers are ultimately focused on how their decisions, actions, and interactions with the insurance company will affect the financial bottom line.Trust & Fairness
Customers are wondering if they can trust the insurance company to make fair decisions on their behalf. They want to make sure that the outcomes are fair, and don’t trust valuations blindly.Guidance, Support, & Communication
Customers expect assistance and status updates throughout their insurance claim experience. The importance of individual steps is contextual, and customers should be guided through each one.
I spoke remotely with interview participants about their experiences with their most recent vehicle insurance claim - some participants were with Allstate while others were customers of other insurance carriers.
Transition to the next step: Interviewing participants fleshed out the primary, secondary, and tertiary issues revealed in the survey. We were able to combine quantitative questionnaire results with rich qualitative findings, resulting in a true mixed methods approach - triangulating the truth.
Prototypes: Valuation Reactions
Taking what we learned up to this point, we built prototypes that embodied our hypothesis of what improved our customer's perceptions, attitudes, and behavior. We tested several prototypes, each of which focused on different stages of the claims process as we experimented with different types of content and ways to communicate that content to users. We learned what resonated with users, what impacted their behavior, and what led to greater satisfaction.
What was done
We then developed and presented concepts in order to understand how people react to valuation at various times in their insurance journey, and how they develop a perspective on their vehicle’s value. We talked to five individuals who experienced a total loss within the last six months, or were currently going through a total loss. We showed them non-interactive mockups of a valuation at quote, renewal, and first notice of loss (FNOL).
I co-designed three prototypes with a UX designer
Tough wireframes were used to discover how participants would react to valuation at various times in their insurance journey, how they process valuation presented in various formats, and gain insight into how they might respond if our valuation doesn’t match their expectations.Each prototype was tailored to a participant’s vehicle. Valuation estimates and settlements were customized to reflect their current vehicle’s value. In order to encourage more authentic responses from them, each stimulus was customized to show the vehicle each participant’s currently owned, and valuation estimates and settlements were tailored to reflect their current vehicle’s value based on real-world calculations. This made each scenario easier to understand, more realistic, and increased the sense that there were specific and tangible monetary outcomes to react to.
Scenarios tested
Quote Valuation Scenario: We asked participants to imagine: they were shopping around and considering a few insurance companies.
Renewal Valuation Scenario: We asked participants to imagine: they were renewing and updating their insurance policy a year after their initial purchase.
First notice of loss (FNOL) Scenario: We asked participants to imagine: they had a car accident and filed a claim that was determined to be a total loss. After waiting a few days, they received a final valuation offer from their insurance company. (To make this scenario more realistic, participants were asked to close their eyes and Imagine getting into a car accident. We then played a sound recording of a car crash.)
Findings
Based on reactions and comments from participants, I identified elements from each stimulus that were most successful at informing participants enough to feel confident that they were being offered a fair value for their vehicle without being overwhelmed or confused.
Input Accuracy
Very rarely do customers express a desire to be dishonest, but they do have a shifting frame of reference for the material they are familiar with.Comprehension & Understanding
Customers need a frame of reference for assessing the condition of their vehicle, since the “condition” is a subjective evaluation.Unintended Consequences
When condition and valuation are introduced into existing touchpoints (such as quote or renewal) will alter how customers behave in various ways that are difficult to predict.
The prototypes shown to participants were customized to show the participant's vehicle and estimated valuation range. This made it more realistic for participants to react to and made it feel as if their vehicle was actually being evaluated. This approach yielded more authentic responses than would have been possible otherwise.
Transition to the next step: Interacting with prototypes unearthed both attitudinal and behavioral insights - we learned how to best communicate cash value offerings and communicate and frame them in a way that were more desirable and understandable.
CONCLUSION
Key Takeaways and Recommendations
Takeaways
Customers are disappointed with the cash value Allstate offers because their expectations are based on owner-to-buyer resale market values (typically KBB: Kelley Blue Book) In contrast, all insurance companies calculate the cost of replacing a vehicle based on industry standards that are not available to the public. This results in consumer frustration, confusion, and the perception that Allstate is cheating them.
Past valuation estimates are ignored. Allstate’s previous estimates were not considered in the determination whether or not the actual valuation (after the claim) was fair. This invalidates Stakeholder’s main hypothesis at the beginning of this project.
Main Recommendation
We need to reset customers’ value anchor away from Kelley Blue Book in order to set our own.
For customers to trust our valuation, Allstate’s total loss claim experience must acknowledge that individuals will question our valuation and compare it to Kelley Blue Book. In turn, our process should make the setting of an anchor point a collaborative process, one that a customer can be invested in through education provided by communication with Allstate.
There is an opportunity for Allstate to proactively educate customers about how their claim will be determined in order to manage their expectations upfront and move customers’ value anchor away from Kelley Blue Book to a new value.
Results
Metrics improved
Increased customer satisfaction during the claims process
Increased the number of customers who accept the first valuation offer (no negotiation)
Shift the perception (sentiment) of the Total Loss process
Based on customer satisfaction surveys since the implementation of key recommendations, the following trends were observed:
From ➜ To
Unfair ➜ Fair
Untrustworthy ➜ Trustworthy
Arbitrary ➜ Reasonable
Confusing ➜ Clear
Opaque ➜ Transparent
