Claims automation: The next step in the journey towards greater customer centricity

According to a US insurance industry report published by NAIC, P&C insurers in the US paid out as much as 69% of the premiums in claims. This along with the ever growing number of claims and the costs associated with processing BlogImage_0002_Layer 7the claims makes ‘Claims Processing’ a very critical cost center for an Insurer.

Claims processing is the moment of truth for an Insurer’s customers

This is when the insurance company fulfills its promise to its customers, to indemnify the cost of loss in exchange for the premiums they have been paying. Claims processing though is plagued by a gamut of challenges resulting in higher cost of processing claims –

  • Disparate media (paper, electronic, voice, emails) for loss intake
  • Broad portfolio of legacy applications for claims intake each catering to specific geographies, business lines etc.
  • Regulatory and compliance framework governing the insurance industry and the complexity it poses to insurers with multinational presence
  • Manual touchpoints across the claims process which impact data quality and turnaround time
  • Large number of paper documents resulting in high routing, storage and damage costs, higher turnaround time and lower productivity

Increased emphasis on costs, customer experience

An efficient claims processing is critical to the bottom line of an insurance company. As such, most global insurers when it comes to claims management focus on increasing the profitability of the organization by lowering the cost of processing claims. In today’s era when customer loyalty takes precedence over everything else, Insurers also have to focus on increasing the customer satisfaction by reducing the claim cycle time, i.e. the time it takes process a claim from first notice of loss to claim settlement.

Most Insurers have already taken up initiatives to rationalize and consolidate claims application portfolios. By adopting a comprehensive approach to claims management, Insurers can realize lower maintenance costs while providing benefits arising from process improvements. The result is a single global claims platform that is scalable and configurable to meet the needs of a global enterprise, to replace legacy standalone applications catering to specific business lines or geographies.

Insurers also realize that by automating claims management and by streamlining the claims processing they can reap gains of reduced expenses. Most insurers today at the very least have a tight coupling between the claims processing and transaction processing systems that allow them to automatically post transactions and make payments on claims. They also have electronic document management system to store the various paper files be it scanned photographs, claim forms etc. This is in turn well integrated with the claims processing system an insurer has resulting in lower storage costs and increased productivity by dramatically lowering the time required to access the documents. This in turn means faster adjudication of claims that boosts customer satisfaction.

Insurers in the quest to improve customer experience by handling claims faster have turned to Value Based Adjudication. By streamlining and redesigning the claims process, the emphasis is on balancing the effort required to adjudicate a claim against the estimated dollar value of the loss. Claims processing is expedited for certain claims that, based on well-defined set of rules qualify for value based adjudication, resulting in one-touch settlement of claims.

The next step: Automating claims adjudication

Most insurers would like to automate adjudication of claims. Claims automation would enable straight through processing including the set up and payment of claims with minimal and if possible, no manual intervention. Driven by adjudication rules, straight through processing has the potential to drive operational efficiencies and simplify claims processing. This however begs the question as to which claims can be automated? It could be based on the loss estimate or claim complexity or even the volume of claims for certain business lines.

Claims automation can help insurers with their cost reduction efforts and drive productivity as simpler claims can be processed with minimal human intervention, thereby enabling adjusters to focus their attention towards the complex losses. It will also enable the claims to be adjudicated faster, more accurately and uniformly, thus enabling insurers in their journey towards greater customer centricity.

Snehil Singh

Associate Consultant - Business Consulting, Virtusa . Snehil is a business & technology consultant with experience in requirement management, solution development, problem solving and stakeholder management. At Virtusa, Snehil is currently involved in the delivery of a business process transformation solution for one of the leading insurers in the world. Snehil is a PEGA certified business architect and holds the AINS® (Insurance) designation. Snehil is a graduate from BITS Pilani, and obtained his MBA from School of Management, IIT Kharagpur. An avid Liverpool supporter, Snehil is a sports enthusiast who loves playing badminton and football and dreams of travelling around the world.

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