BLOG VIEW: Natural disasters are inevitable in the homeowners’ insurance and mortgage loan servicing industries. Moreover, as disasters increase in severity and frequency, property loss claims will also increase.
In November 2023, the National Center for Environmental Information reported that the U.S. experienced 25 weather-related disasters in the first 10 months of the year, more than any other year on record. Each event resulted in more than $1 billion in losses.
How can mortgage servicers process the growing number of claims efficiently? Fortunately, as the rates of climate disasters are increasing, so is the availability of technology that modernizes property loss claims processing.
Let’s take a closer look at some potential scenarios in processing a claim and see where the latest tools are benefitting homeowners and mortgage servicers.
In the aftermath of an event like a wildfire or a hurricane, impacted homeowners are in a highly vulnerable state. Everything servicers can do to streamline the process of property restoration or rebuilding provides tremendous value. One example is an online loss draft application, allowing a homeowner to submit claim details directly into a system, tracking all the documentation and communications as well as the current status of each claim, and making it easy to get the claims process started.
In addition, a digital claims tool ensures homeowners have access to all the information they need to file a claim in one place. For example, many homeowners change insurers throughout the life of their loan as policy rates or other circumstances change. In the aftermath of a natural disaster, homeowners are understandably under a tremendous amount of stress as they deal with the damage. Having a digital tool that includes everything the homeowner could possibly need to kickstart the claims process, including the name of their insurer, can provide a small measure of relief during an otherwise chaotic time.
Homeowners who have sustained damage are also likely to reach out to their mortgage servicers to determine where to send documents and photos related to the claim. Regardless of how homeowners submit their documentation, there is still traditionally a lag before the details make it into the servicer’s tracking system. At every step of the process, there is a delay while waiting for documents to be sent back and forth between the homeowner and the mortgage servicing team.
Another advantage of a more streamlined, automated process is the reduction in human error. Whether it’s a dramatic increase in the number and/or complexity of claims related to a single, severe natural disaster or an overall increase in overall claims due to the increased frequency of natural disaster occurrences, both circumstances amplify opportunities for errors using a manually-driven loss claims management process. Furthermore, details from paper documents must be entered manually, the likelihood of errors increases. These errors could delay claims process, not to mention add unnecessary stress to homeowners that are already under a tremendous amount of strain.
The largest benefit of using an online portal to enable homeowners to submit loss claim applications is providing homeowners greater transparency into the process. Homeowners can see the status of their claim and submit initial and follow-up documents online. An enhanced customer experience will lead to increased customer satisfaction, and when homeowners have questions, the answers can be found easily online.
Homeowners can use their smartphones to take photos, scan documents, and upload those items into an online portal. The ability for homeowners to communicate with their servicer via cell phone is especially important if the local post office is damaged, as mobile may be the sole means of reliable communication available. Furthermore, when physical mail cannot be delivered after a home is damaged or destroyed, communication can still happen in real time via mobile phones.
Using technology to process claims not only improves the homeowner’s experience, but it also provides benefits to the servicer. For example, a digital tool can track each loan’s specific loss draft requirements and guidelines from different insurers, and these tools can also ensure compliance with regulatory requirements for claims. This is another way that technology can guard against oversights or errors, so that if compliance-related questions arise for a claim, audit trails within the software exist to provide a detailed accounting.
A surge in claim volume can also impact servicers’ ability to process claims accurately and efficiently. Using the latest technology can provide servicers with real-time transparency into claims statuses and internal protocols for processing claims. Using data from digital tools servicers can see where processing often stalls or where bottlenecks commonly occur. Data can be analyzed to identify trends, assess risk, and improve overall operational procedures and controls related to claims management. These insights can help servicers make adjustments to streamline claims processing even more.
Mortgage loan servicers can’t control the weather or what insurance companies do, but using technology tools to add transparency into claims processing can help homeowners with the rebuilding process and offer them a better customer experience during a vulnerable time following a major property loss.
Patricia McCarthy is vice president of escrow for mortgage subservicer Dovenmuehle Mortgage.
Photo: Kelly Sikkema
