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Claims management can improve profitability

13 July 2015Jonathan Faurie
Jonathan Faurie, FAnews Journalist

Jonathan Faurie, FAnews Journalist

There is an old saying in the insurance industry that the true value of an insurance policy comes out at claims stage. Most certainly, a client’s further commitment to a company may depend largely on their claims experience.

With this being said, what are we doing to improve the claims experience? Are we embracing new systems and processes in order to facilitate this? Nicholas Berg, AIG’s Head of Casualty for Europe, the Middle East and Africa (EMEA) region points out that the industry is seeing rapid progress in new technologies and applications that are leading to smarter, higher-performance products.

Source of frustration

Looking at the bigger global picture, Berg points out that the process of handling claims has in recent times taken several steps forward.

He adds that the insurance industry has relied for too long on paper-based and labour-intensive systems for issuing and managing policies as well as for managing claims. The number of hand offs between agents, adjuster and payments staff was time-consuming and, for clients, frustrating in terms of delays.

Quantum Leap

The McKinsey report points out that new claims management systems can automatically divide claims into clusters based on their complexity, their estimated value, and the risk of fraud. Some claims are paid automatically while others are assigned to the appropriate adjustor. This approach improves cycle times, increases customer satisfaction, and reduces revenue leakage from fraud.

All relevant documents and physical evidence can be photographed or videoed and then embedded in the report. Statements by witnesses can be taken and signed on-site. In difficult claims, video-conferencing helps settle issues between customer, adjuster and investigator.

The report shows that the returns came immediately; and instead of taking seven days on average, liability reports can now be filed on the same day. The rapid settlement of a claim triggers an even more creative process, namely the analysis of claims data for the purposes of mitigating losses.

In the long run, this is mutually beneficial for the client and the insurer.

Filling the gap

There are ongoing concerns in the South African insurance industry about situations where there is an insurance shortfall. In these cases, clients are expected to fund losses, or certain portions thereof, out of their own pockets.

A more efficient claims process allows insurers, and brokers, to identify the areas where there is underinsurance, and to advise their clients against this.

A major Europe-based manufacturer, which is a multinational company, found out at claims stage that they were underinsured for a specific loss and reflected on the importance of valued advice where they could have avoided the loss. 

Managers at the firm in question were shocked to discover that the company’s insurance covered only 85% of what turned out to be a substantial claim. As a result, the balance had to be paid from the company’s financial reserves.

Berg points out that what happened to this company is common: it had bought off-the-shelf protection, which then failed to meet its full, complex requirements.

Editor’s Thoughts:
Claims management is a complex process that has been identified by a number of insurers in the industry as an area that needs to be improved. The question is: are we catching up with the rest of the world when it comes to improving claims management?  Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.

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