Insurance 101: The Claims Management Process
January 13, 2022
When most people think of insurance, they think of insurance claims. Claims management is one of the most visible (and hated, but we’ll get to that later) parts of insurance.
The strong association of insurance = claims makes sense when you consider the millions of insurance claims filed each year. Take auto insurance, for example. The average person will file roughly three auto insurance claims by the time they’re 70. While that may not seem like a lot at first glance, when you factor in all the other types of insurance – home, life, health, etc. – plus the ever-growing number of policyholders, things add up pretty quickly.
If claims management is such a vital part of insurance, why is it so universally hated? In this article, we’ll dig into the claims-management process along with its key players to discover why the process leaves both customers and insurance professionals wanting to pull their hair out. Don’t worry, we’ll also recommend some tips for improving the claims-management process to make it less of a headache for everyone involved.
What are insurance claims and how are they regulated?
An insurance claim is a formal request to be reimbursed for money, goods, or services after incurring a “loss.” There is a nearly endless list of “losses,” but a few common ones are a car accident, a theft of property, or the destruction of a home or office. Think of it like this: If it’s covered by an insurance policy, you can make a claim for it.
An insurance claim is made by a claimant who may or may not be the insurance policyholder. While most claims are made by the policyholder, a non-policyholder can still file a claim if they believe they have suffered damages for something that is insured. For instance, if you’re in a car accident, you may file a claim against the other motorist’s insurance.
Claims are tightly regulated by the laws of each state, and each insurance company has its own process for regulating claims. The type of claim also plays a role in the regulation process. For example, a doctor’s bill (medical claim) is very different from an E&O insurance claim and therefore would have a different regulation process.
How are insurance claims processed, and what is the claims-management process?
While the process can vary, typically, the life of a claim goes like this: First, a loss occurs – car accident, home fire, flood, hospital bill, etc. Next, someone submits a claim to the insurer. Remember this may or may not be the policyholder. Once the claim is submitted, a claims examiner checks that they have complete information and compares it to the policy to verify the loss is actually covered. Then, a claims adjuster digs deeper into the specifics of the claim to determine whether or not the insurance company will in fact pay.
The claims-management process is like an assembly line. Each person along the way plays a specific role and performs a distinct function. Each step of the process provides an opportunity for the insurance company to find legitimate reasons why they don’t need to pay the claim. Unfortunately, each step also provides the chance for human error and customer frustration. The claim is unable to advance to the next stage until the person in charge of its current stage is satisfied. Because of this, claims can often get held up when requests for information aren’t fulfilled in a timely manner. For more in-depth information, see our claims processing blog.
The vital role of claims management in the insurance industry
Paying people for their insured losses is what the insurance industry is supposed to do, at the most basic level. This would never happen without claims submission and processing. When claims are processed badly (slowly, inefficiently, without attention to detail, etc.) it can harm both the customer who is relying on the claim payment to recover their losses AND the insurance company, who may not catch instances of fraud or other reasons a claim should not be paid – resulting in losing money.
If a claim does make it into a court battle, an insurance company will fare better if they have a clear and consistent claims-management process that can be documented. No one likes dealing with complicated processes; having the best possible claims-management process and experience helps retain both customers and employees.
Improving the claims-management process
The claims-management process can be a real time and money suck, not to mention the frustration it brings to both employees and customers. Luckily there are some simple ways to improve the process. One best practice is to continually examine your own data. This will make it easier to uncover and address areas of the claims-management process that cost more time and money than they should.
Another simple improvement is to practice good communication with employees and customers. Educate employees on the latest claims-processing best practices. With customers, be transparent about the claims process and timeline. That way they won’t be taken by surprise when things are taking a little longer than hoped. Also make sure to listen to any feedback your customers provide.
Lastly, as an insurtech, we have to recommend adopting technology to help improve the process. Investing in a good tech stack will help make the claims process go more smoothly. Your tech stack should include CRMs, compliance software, and claims-management software. Having up-to-date technology can help reduce errors and free up employees’ time so they can get back to building strong customer relationships.
Improving the claims-management process isn’t a lost cause
Claims management has a bad reputation for being the most hated part of insurance for consumers. Its slow, manual nature means it doesn’t rank very high on insurance professionals’ list of favorites, either. Thankfully, there are ways to help. By implementing the best practices mentioned above, the claims-management process can be improved. With these improvements agents can work through the process with fewer roadblocks and customers can reach the part they actually like (getting their claims paid) more quickly and efficiently.
While AgentSync doesn’t help streamline your claims management process, it can help many other aspects of your operations that are equally vital. See AgentSync in action today, for solutions to your producer licensing and compliance management headaches.