Best Practices in Life Insurance Claims: Miles to Go

As part of their series on the effective use of technology in operational areas of life insurance, Celent zeroed in on the challenges faced by claims organizations. Analysts Karen Monks and Tom Scales asked three basic questions: 1) what are best practices for claims processing, 2) how are life insurers investing in claims, and 3) what can life insurers do to improve the claims process?

Monks and Scales found that claims organizations have a long way to go in the development of best practices for a compelling reason: life insurers underinvest in claims technology.  As a result, best practices in claims have yet to be fully developed. On average, survey respondents spend approximately 5.6% of premium on IT budgets; however, for 65% of insurers, claims make up a smaller portion of the budget than other operational areas.

While significant tech investments are made in revenue generating operational areas, claims organizations are inching by with homegrown systems or decades-old technology – some with back-end processing systems that are 30 to 40 years old.  When investments are made, those expenditures are most commonly used to maintain existing systems or help claims play catch-up with other areas of the company. For most, integration between front and back end systems is lacking.

The analysts are quick to point out that claims operations are more to be celebrated than censured for their penury. “This observation is not meant to be criticism of claims organizations,” they wrote. “Quite the opposite, it is a testament to their team members that they accomplish what they do with minimal investment in technology.”

The researchers also found that underlying policy administrations are aging, and have data quality and data access issues that hold the claims experience in the relative dark ages. Until policy admin systems are updated, the ways claims organizations can be improved will remain extremely limited.

“A surprising number of companies have minimal, if any, workflow in their claims processes. Those that do may not be leveraging them to their full advantage,” the report stated.

Manual processes are still the mainstay of the claims operations, from submissions, setup and requirements tracking to claims adjudication. Customer and agent communications are highly manual as well.  Monks and Scales asked participants, “What is the one thing you would like to change in your life claims process?” Replies included correspondence integration and automation, front-end automation to capture mortality data, web-based claim forms, and using a single workflow platform to automate the full claims cycle.

While the researchers expect claims operations to benefit from the trickle-down effect of tech adoption in other areas, it remains to be seen how quickly – and how much – claims operations can improve this way. Until tech allocations for claims become more generous, there is little these insurers can do to automate these processes – which could greatly benefit from automation, both as a cost-saver and driver of an improved customer experience. At Vidado, we help life insurers go digital while still embracing paper. Take a look at how insurers are leveraging the power of data to boost efficiency and improve the customer experience.

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