Claims handling: Striking the right balance

Joe Pendle on balancing speed and certainty in the claims process

Today, many insurers are engaged in a tough balancing act ­– pursuing ever-faster claims processing while seeking certainty that they’ve arrived at the appropriate settlement.

And it’s never been more important for insurers to get claims right. According to Bain & Company, “when it comes to property and casualty insurance, proficiency in claims has become a signal ingredient of success. Roughly 75% of revenues from premiums flow through the claims function as expenses or indemnity payouts, so even a marginal improvement can affect the bottom line”.

Increased competition, emerging claim-handling technology, and advanced analytics have made managing claim expense a significant differentiator among insurers worldwide.

Faster claim payments benefit insurers and customers alike

From the moment a customer submits a claim, speed is crucial. Claim handlers should respond quickly and communicate regularly throughout the process, recognising that claimants will appreciate swift action during their time of need. Every effort a claim handler can make to shorten the time from submission to settlement reduces both risk and expense – while also leading to a more satisfied claimant.

A longer claim life cycle often translates into higher costs. In addition, longer times to close can affect customer satisfaction, increase a claimant’s level of frustration (and thus potentially settlement amount), and escalate the likelihood of litigation. This is particularly true for motor insurers handling bodily injury claims in jurisdictions that compensate for pain and suffering (that is, general damages).

Bodily injury claims can be quite expensive and complicated to handle. One decision by a claim handler could delay the entire claim settlement process, putting the insurer at risk of higher settlement amounts and the prospect of litigation. Every detail has the potential to become significant—making discipline, process, and attentiveness fundamental to success.

The flip side: The critical need for certainty

While accelerated claim payments make everyone happier, certainty should never be given short shrift for the sake of speed. The determination of accurate, fair claim settlements is imperative. Overpay, and you cost your shareholders unnecessarily. Underpay, and you risk a wide range of customer service consequences, from non-renewal to negative word of mouth. Especially in markets where competition is fierce, customers who feel they didn’t get a fair settlement will have no trouble finding another insurer.

But the risk doesn’t stop there. People with claim experiences that fall below expectations are likely to talk to friends and coworkers about their frustrations. Social media platforms have magnified these word-of-mouth exchanges and have the potential to damage the insurer’s brand.

A 2015 study of the European motor insurance markets found that “customers are more ready than ever to switch” .

But producing an accurate result is only part of the solution when dealing with claimants. The claim handler also needs to help claimants (and possibly their solicitors) understand why the settlement is accurate. To provide transparency, claim handlers need to be clear and concise when explaining the reasoning behind a claim valuation. This will make it easier for a claimant to accept the outcome and potentially help all parties involved avoid costly litigation. It should also increase the likelihood of claimant and customer satisfaction, resulting in less risk associated with renewals and increased word-of-mouth activity.

Streamlining the path to accurate settlements

Advanced analytical capabilities have begun to spread across the global claims community, from intelligent routing upon claim submission to the identification of cases with high risk spinning out of control. At every stage of the claim life cycle, there are clear opportunities to reduce cycle times and overheads, improve analysis and decision making in evaluating and negotiating final cost, and refine claim valuation estimates (from bodily injury to building replacement costs).

By leveraging data and advanced analytics, claims departments can become faster, smarter, and more accurate. Doing so will define who leads globally and in each local market.

With large and often complex caseloads, a claim handler may not have the opportunity to evaluate all the information available, let alone separate what’s relevant from the extraneous. Data and analytical tools can flag claims that warrant attention and identify those likely to be straightforward, allowing claim handlers to manage workloads effectively.

The intelligence available from analytics platforms can answer fundamental questions such as:

Is the claim straightforward? Are there fraud indicators? How have other claim handlers settled similar cases? Are there factors that could complicate the settlement process?

This approach can drive smarter decision-making throughout the claim life cycle and affect outcomes to the benefit of both the claimant and the insurer.

Consistent settlement determinations swiftly derived

Insurers should take advantage of solutions that provide consistent processes, evaluation, and settlements that can significantly reduce overpayments. Those solutions access medical codes and detailed claim scenario information – along with a company’s historical claim records – to identify which factors warrant the most attention and derive consistent final settlements.

Speed and accuracy in streamlined workflow solutions

Insurers can further accelerate claim cycle times while enhancing the consistency of claim handling and company performance with powerful claims assignment and processing tools that track assignments, catch and correct errors, and monitor company performance electronically.

Claim audits are vital in ensuring quality service and avoiding embarrassing blunders. However, manually auditing claims extends cycle times, erodes profit margins, and lowers customer satisfaction ratings. Streamlined solutions automatically audit all claims for common scoping errors and reducing overpayment.

A new collaborative solution is also available in which insureds can stream video and upload photos to show adjusters the extent of their losses. Such efforts not only shorten the time to settlement, they also empower claimants to become more active in their claim, directly affecting their overall satisfaction.

Implement overall improvements to achieve more efficient, fair, and cost-effective claim processes

Improving accuracy in decision-making leads to the most appropriate claim outcomes. Increasing speed to settlement makes insurers and their customers happier. Sacrificing one for the other provides a suboptimal result. Thanks to advanced analytical solutions, claim handlers can now strike the right balance.

Joe Pendle is the managing director at Verisk Analytics Limited, UK

Claims Media