Claims Leakage Reduction Strategy: Susceptible Electronics to Watch Out For

Carriers are continually strategizing about how to counter claims leakage, the difference between what they spent and what they should have spent. Consequences of claims leakage include potential increases in policyholder premiums, a more negative policyholder experience, and lost revenue.

Each year, claims leakage costs carriers billions of dollars, according to this article from PropertyCasualty360. Mistakes leading to leakage are often identified through an audit, far too late to correct the error. Knowing where potential risks lie and having a consistent, objective process to eliminate them can help combat claims leakage in claims that include electronics and specialty items.

Property claims settlements account a large portion of carrier indemnity leakage annually.

Areas With Risk for Claims Leakage

The StrikeCheck 2022 Annual Claims Report sheds light on many of the electronic equipment categories that are susceptible to claims leakage. This report illustrates data points collected from assessment results for hundreds of thousands of items included in claims. This data paints a picture of noticeable trends, including how often assessments showed equipment had a different cause of loss than reported.

Almost 1 in 4 items were non-damaged at the time of the StrikeCheck assessment. This statistic highlights an area where adjusters could have risked thousands of dollars of potential claims leakage had they not sought actionable expert assessments to verify cause of loss.

Settlements for replacement equipment instead of more appropriate repairs are also sources of unnecessary claims leakage. Equipment at risk includes:

• Solar power equipment: Solar power equipment is becoming more popular, and its potential for claims leakage is growing as well. There is a decisive gap between the average cost of repairs at $6,446 and the average replacement cost of $11,131.

Solar power equipment, including panels and inverters, presents carriers with a risk of unnecessary claims leakage without accurate assessments.

• Outdoor equipment: Outdoor equipment includes hot tubs, swimming pools, generators, and other items used by commercial and residential policyholders. It also creates an opportunity for claims leakage without an assessment and repair vs. replacement recommendation. The average replacement cost for pool equipment was $6,496, compared to $1,016 for repairs.
• Consumer electronics: Consumer electronics account for almost one-third of all electronic equipment StrikeCheck assesses, meaning even minimal indemnity leakage per claim can add up. For example, the difference between the average repair costs and replacement costs on audio and video equipment, the most commonly claimed consumer electronics items, is $542. Repeated over dozens or even hundreds of claims each year, settling for unnecessary replacements amounts to a costly mistake for carriers.
• Electrical items: Electrical equipment includes electrical service panels, generators, outlets, switches, and fixtures. The average replacement cost for electrical equipment was $5,105, while repairs averaged $1,779.

Alpine Intel’s content is meant to inform and educate readers using general terms and descriptions. They do not replace expert evaluations that determine facts and details related to each unique claim.