Settlement of motor claims electronic assessment systems ensure profitability

of motor insurance

(best practise examples from Germany, Belgium and Poland)

Dr. Richard J. Nathschlaeger

Tashkent, April 2010

Global Innovation - Local FocusGlobal Innovation - Local Focus

Agenda

• Audatex – a global company with a strong focus on Central & Eastern Europe (CEE) and Asia

• Effective management of claims processes • Best practise examples – Germany, Belgium, Poland• Conclusions

•

• 01 A Global Company with a strong focus on Central & Eastern Europe (CEE) and Asia

The World of Audatex

Solera

San Ramon, CA

Argentina, Austria, Australia, Belarus, Belgium, Bosnia, Brazil, Bulgaria, Canada, Chile, China, Colombia, Costa Rica, Croatia, Czech Republic, Denmark, Dominican Republic, Ecuador, El Salvador, Estonia, France, Germany, Greece, Guatemala, Honduras, Hungary, India, Israel, Japan, Latvia, Lebanon, Lithuania, Mexico, Netherlands, Nicaragua, Panama, Portugal, Romania, Russia, Serbia-Montenegro, Slovakia, Slovenia, South Africa, Spain, Switzerland, Turkey, Ukraine, United Kingdom, United States, Venezuela

5

Central and Eastern Europe (CEE) in the Audatex World

Audatex GAS

SAN DIEGO, CA

Audatex CEEAudatex North-America

VIENNA, AUSTRIAMINDEN, GERMANY

Solera

SAN DIEGO, CA

Audatex UISA

READING, UK

ABZ

ZEIST, NETHERLANDS

AX Ibero - America

SAO PAOLO, BR

Audatex BEFIG

BRUSSELS, BELGIUM TOKYO, JAPAN

Audatex-APACAX Ibero-America

Audatex is the only global provider of claims management solutions

• Revenue: 600 Mio. $

• Global Network of over 100.000 users

• 2.100 employees in 54 countries

• Brand “Audatex” now also used in North America

• Over $60 million annually in product development – more than twice our leading competitor

• Nearly $30 million annually in database development – four times our leading competitor

Countries in CEE

Audatex – CEE in 2010

AT- 1969

PL-1997

HU-1994

SK-2004 BY

RU-2003

CZ-1994

RO-2005 EE

LV RS

SlHR

BA

MDTR-2008

UA-2004

LT-2009

Market Development

Local Focus :Central and Eastern Europe Region

Voice of our customer

• Big 5 insurers go CEE

• Allianz, AXA, Generali, Uniqa, VIG

• Manufacturer’s go CEE

• VW, Dacia-Renault, Kia, Hyundai, Peugeot

• High economic growth region

• Demand for electronic workflow partner

• New Customer quality expectations

New Audatex CEE Region

• Meet and exceed customers high

expectations

• Respond and capture dynamic

market developments

• Underline global knowledge, local

focus

AX-CEE: Facts & Figures

• HQ in Vienna,

• 100 employees in the region

• Product development center in

Poland

Opportunity: Action:

Audatex-CEE Region Introduction

• Audatex in CEE consists of:• 10 local country organizations

• AT, Baltics, PL, CZ, SK, HU, RO, RU, TR and UA

• 9 countries are supported out of the established country organisations:• 5 Balkan countries (Slovenia, Serbia, Croatia, Bosnia,

Bulgaria) from CEE-Headquarter - Austria• Belarus and Moldavia from Ukraine• Kazakhstan and Uzbekistan from Russia

Audatex-CEE Strategy

• Audatex CEE will continuously reinforce its position as world class estimatics services provider,

• Audatex CEE will continue to build up its standing as a premier claims services provider along the entire claims value chain, delivering on precise value propositions and improving inefficient, mostly paper based workflows,

• Audatex CEE will strive to become the trusted partner of all our regional customers for identifying business improvement opportunities and realizing them jointly with flexible online-offline solutions.

Future Countries in CEE

• CEE offers still a lot of opportunities for expansion

• Audatex-CEE will follow its customers

• Database can easily be localized

• 02 Effective management of claims processes

Largest part of premiums written goes to claims handling activities

Product development & Risk management

Network development

Sales Claims handlingHealth indemnification

Repair

5% 5-10%10-15% 10-15% 0-30%+ + + + 30-70%+

Repair value control - example Ukraine in 2009

• 30% use professional tools

• 15% use less professional tools

• 55% use “best guess” principle

Repair value control improvement

• Completely exclude “best guess” principle• Use professional tools

• Sign only professional body shops for partnership• They have knowledge & know-how

• Exclude fraud • Control everything, even the smallest claims!!!!

Three steps to reduce claims costs effectively

1. Encourage market to use one “calculator” for estimation of damage amount• 40 years of history • 85 manufacturers• Customized for 52 countries

2. Connect all users with offline/online solution – which is currently:• Central database and case management• Сommunication between partners • Additional documents handling (pictures, invoices etc.)

3. Connect all users with online solution – which will provide with:• Profound and logical system of case and partners management• Claims history based on global market data – possibility to prevent fraud• Advantageous statistics possibilities – may be used in underwriting

•

• 03 Best practise examples

• Comparative Market Overview – Germany, Belgium, Poland– Market dynamics– Basic motor claims data

• Challenges and opportunities– Based on the market evolution insurers face different challenges– How to make the claims process faster, better, cheaper

• Conclusions

19

1 Motor Claims Handling in Germany

2 Motor Claims Handling in Belgium

3 Motor Claims Handling in Poland

4 Conclusions

20

Germany - strong manufacturers’ position, independent assessors and market consolidation

German Market

Manufacturers are a channel for insurance policy distribution

Market consolidation reducing number of bodyshops and assessors

Insurance carriers trying to reduce claims costs

Key Forces @ work

Manufacturers acting as bodyshop operator and dealers

Manufactures trying to prevent margin erosion for after sales

Strong position of independent assessor organisations

21

German Market

Source: Audatex

Motor Claims

8200

8300

8400

8500

8600

8700

8800

8900

9000

2004 2005 2006 2007 2008 2009

Year

# of

Cla

ims

('000

)

Number of Claims per Year ('000)

Average Severity EURO

2850

2860

2870

2880

2890

2900

2910

2920

2930

2940

2950

2960

2004 2005 2006 2007 2008

Year

Average Severity (AXDE)

22

Insurers face constant pressure to improve service at a lower costSeveral steps have been taken by the market participants to increase efficiency

• Reduce severity:– Standardized electronic estimate is required for every claim

– Implement the research results of AZT for painting and repair

– Increase the accuracy of the estimate through VIN vehicle identification

• Automate and rationalize the communication– Between assessors and insurers

– Between repairers and insurers

– Involving all other parties – towing and rental companies

• Waste and fraud reduction– Automatic SLA management

– Automatic dispatching and review via Claims Filters

– Electronic handling of paperwork, photos, etc.

23

1 Motor Claims Handling in Germany

2 Motor Claims Handling in Belgium

3 Motor Claims Handling in Poland

4 Conclusions

24

Belgian Market

Insurers• 34 Insurance companies

Assessors• 265 Assessors

– 199 independent– 66 affiliated with insurance

companies

Repair Shops• 2909 Repairers

– 1791 brand tied – repair only specific brands

– 1118 no brand

Wreck Buyers• 497 Wreck buyers

Importers• 30 Importers

Car Parc• 4,929,284 cars• 523,161 vans• 152,505 trucks• 355,933 motor bikes

Claims• 650,000 Claims per year

– 56,575 total losses– 1.12 million Audatex calculations

• Some of the lower repair averages in Western Europe

All claims are estimated and handled through the Audatex platform

Source: Audatex

25

The Audatex platform enables fully electronic and flexible process for everyone

Audatex Platform

Experts

Insurers

Repair Shops

Total loss buyers Importers

WAN

26

Prerequisites for the Belgian model

• Full cooperation among the insurers– All have implemented the World Audatex Number – WAN

– WAN allows the process to start with any of the partners– WAN facilitates the settlement on TPL claims

– All vehicles are identified through VIN

• Single independent provider of claim services– Audatex does not take sides– Constant innovation together with all partners– All big partners sit on the Technology Advisory Board– Independent monitoring of partner performance

– Non-compliant partners are excluded from the hub

• Rules based automation of the workflow– Automatic approval based on claim size and complexity– Intelligent routing of jobs (to assessors and shops)

27

1 Motor Claims Handling in Germany

2 Motor Claims Handling in Belgium

3 Motor Claims Handling in Poland

4 Conclusions

28

Poland – a market in transition

• PZU today controls 40% of the motor insurance market

• Direct insurers are opening up and growing fast

• Heavy competition has translated into a price war

• Insurers are focusing on closer cooperation with their partners to create competitive advantages and ensure higher satisfaction for the policy holders:

– Reduce the number of non standard manual estimates– Move toward automated workflow with the repairers, assessors– Optimization of the internal workflow through removing redundant processes– Developing incentives for selected partners

29

Poland - Market Statistics

Average Claim Amount (USD) 2,144 - Rapidly growing car parc

- Decline in severity in 2005/6 due to large

influx of old cars from EU

Source: Audatex

Motor Claims

1'200

1'250

1'300

1'350

1'400

1'450

1'500

1'550

1'600

2004 2005 2006 2007 2008 2009

Year

# of

Cla

ims

('000

)

Claims Frequency - Average Number of Claims per Year

Average Severity

2'080

2'100

2'120

2'140

2'160

2'180

2'200

2004 2005 2006 2007 2008 2009

Year

USD

('000

)

Average Severity (claim amount)

30

Poland - typical “old” mistakes

• Internal mobile assessors were sent to inspect every claim

• Only 30% or less of repairable claims go to Preferred Repair Networks (PRN)

– No control over the non PRN repairs– 70% of non PRN claims took up to 10 times more time to settle

• Shops were forced to lower labor rates– High attrition among PRN shops– Authorized shops avoid PRN contracts– No way to verify the compliance of the rates used to the contractual

ones– Questionable quality of repair => negative impact on customer

• 50% of claims were paid out without proof of repair– High levels of fraud – same damage claimed at several insurers

• Large number of manual estimates

31

Poland - Recent Improvements

• Reduced work for the insurer– Estimates are required in standardized and mostly electronic form– Reduced number of process steps– Internal assessors focus on “real” challenges– Opportunity to automate process steps through software tools

• Ability to “sell” the PRN from the beginning– Learn about the claim as soon as possible– Drive more work to the shops– Involve shops (PRN) from the early stage to reduce rework– Control labor costs in the estimate

• Increase the % of controlled repair to control fraud

• Apply policy to control non PRN repairs

32

1 Motor Claims Handling in Germany

2 Motor Claims Handling in Belgium

3 Motor Claims Handling in Poland

4 Conclusions

33

Best practices summary – faster, better, cheaper claims management

• Standardize the process – deviations create waste – Use standardized electronic estimating tools (Audatex is customized and

operating in 18 countries in CEE) – Analysis shows savings potential of a minimum of 8% to 10% of the total repair

cost

• Involve all relevant parties in a structured electronic way

– Create PRN’s if market dynamics allow

• Steer the claim to the PRN to get best service at lowest cost

– Drive more work to trusted shops– Involve shops (PRN) from the early stage to reduce rework

34

Best practices summary – faster, better, cheaper claims management

• Employ tools to reduce severity– Manage fraud by reviewing every estimate in an automated way– Electronically control all SLA’s

• Increase accuracy of planning - Reserve assignment, reinsurance, statistics

Improve customer satisfaction at lower cost !

Thank you !