Top 8 Challenges faced by Insurance Companies in Managing Claims

In developed insurance markets as well as in emerging markets, one area which is crying for immediate attention in Insurance companies is Claims Management. In developed markets, mostly claims processes have been automated using legacy technology platforms, which fail to address the requirements of the customers used to digital world and also of the companies ensuring speedy yet error free claims. On the other hand, companies in the emerging markets are focused on New Business, mostly managing claims processes without really leveraging the true capabilities of the available technologies, leaving their customers dis-satisfied.

Critical Challenges Insurance companies face in managing Claims are as follows:

1. Changing Consumer Behaviour

In the last decade, consumer behaviour has rapidly undergone change. Many aspects of their day-to-day life are touched by the digital revolution. Every product / service they want to buy and deal with is available through a mobile or web app on their smart phones. So, consumers expect to engage with their insurers for their new business, policy servicing and claims needs through a user friendly interface giving them single window experience. Every engagement is required to be completely paperless and serviceable end to end through this single interface. They also expect these services round the clock 24x7.

2. Complex Claims Process and Delayed Claims Settlement

One of biggest reasons of dissatisfaction amongst insurance customers is when they face either delays / rejection of their claims or when the claims process involves too many interactions with insurer office / third parties to fulfil multiple requirements raised at different points in time. Customers often buy their policies through distribution partners or a sales touchpoint which is different from their claims intimation / registration touchpoint. Customers many times do know the status of their claims or don not know from where they can get the information about the status. All this makes claims settlement process bureaucratic, document intensive, effort intensive and unpleasant experience. Claims settlement process is the biggest “moment of truth” for any insurance customer as they expect their insurance cover to kick in as soon as they experience the risk for which is the cover is taken.

3. Frauds, Waste and Abuse

Frauds, Waste and Abuse continues to be one of the top risks in Claims Settlement processes. Most insurance companies are conservative in protecting themselves from the incidents of Fraud, Waste and Abuse, which makes insurance claims settlement process highly document intensive, complex and long.

4. Insurtechs

Over the last few years, Insurtech firms have been at the forefront of driving innovation in insurance products and services. These young and tech driven talented companies are now offering niche & personalised insurance coverages & claims experience leveraging technology & predictive analytics. Insurtechs are now occupying the space between Insurers and their customers, furthering the gap between insurers & their customers.

5. Collaboration with multiple entities within and outside the organisation

As part of the Claims process, Claims Management team have to deal with many internal and external stakeholders such as underwriters, medical officers, reinsurers, hospitals / clinics / laboratories, investigators, compliance & legal professionals, finance & accounts team etc. Many times, claims process is not integrated and automated both within and outside the organisation beyond Claims Team. This adds to delays to the Claims Settlement TATs.

6. Lack of visibility to manage Claims Settlement Process

In order for any process to be efficient, managers should be able to monitor the progress of the process. Lack of end-to-end integration and automation of the Claims process means that managers are unable to see how the Claims process progresses. Thus, they cannot monitor and make timely proactive interventions so that promise of TATs can be met.

7. Rapidly Changing Regulatory requirements

Insurance is one of the highly regulated industries globally. Especially in the emerging markets regulations keep evolving impacting all the processes including claims processes.

8. Data Privacy Requirements & Cyber Security threats

Data privacy requirements and Cyber Security threats are the biggest challenges faced by insurers as many of their customer facing processes such as Claims Management process, systems and apps are exposed over the Internet to customers and other external stakeholders.