Insurance 101: The Claims Management Process

When most people think of insurance, they think of insurance claims. Claim 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 is an insurance claim?

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.

What is claims management in insurance?

Insurance claims management is the process an insurance carrier takes to ensure they pay claims in accordance with regulations, from swift payment of “clean claims” to quick resolution on disputed claims that may require more hands-on attention from adjusters.

Many insurers turn to a claims management system to handle the claims process. Since filing a claim is the point of having insurance, the claims management process is central to a carrier’s general customer service reputation. Some carriers turn to a third-party administrator to handle their claims management services on their behalf. Insurance claims management companies often operate call centers and armies of adjusters, but this is such a cost center that, whether internal or external, carriers want to stay close to the data that claims management systems collect.

How are insurance claims regulated?

Because the McCarran-Ferguson Act of 1945 designates insurance as a state responsibility, claims are regulated by the same 50-state system that rules most insurance particulars. State insurance claim regulations tend to be fairly tight, 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.

Insurance claims management can be such a difficult process because claims regulations often stipulate tight timelines. One state may require an insurer to respond to property claims within days, while another may allow a month to pass. Insurance adjuster regulation is disparate, as well; many states don’t require claims adjusters to have any kind of insurance license. 

In the case of an emergency or disaster, states often change their claims regulations and timelines, and accommodate emergency licenses for applicable adjusters. These shifts in insurance claims regulations make it nearly imperative for insurers working across state lines to have a claims management system to handle the complexities.

How are insurance claims processed? 

While the process can vary, typically, the life of a claim goes like this: First, some event causes a loss – car accident, home fire, flood, hospital bill, etc. Next, the claimant submits their claim to the insurer. Once the claim is submitted, a claims examiner at the insurer (or their third-party insurance claims management company) checks that the claim has 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, and to what amount. 

The claim-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 claim-management process provides an opportunity for the insurance company to ensure a claim or its amount is legitimate. 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 – these delays can also make an insurer’s claim-management process a regulatory risk if it isn’t tight. For more in-depth information, see our claims processing blog.

What is the purpose of claims management in the insurance industry?

As stated, insurance claims are a fundamental piece of the insurance industry, and are highly regulated. So, having a process or system in place to manage claims is key to ensuring a company is following the regulations for timely submissions, responses, investigations, and payments, while also protecting itself against fraud and too-frequent claims.

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, which may not catch instances of fraud or which may run into regulatory trouble  – 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.

Thus, whether an insurer has an internal claim-management system or hires external claims-management companies, having a process to systematically gather the appropriate data is key.

How to improve your 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 ways to improve the process:

• Use a claims management system that gives you visibility into your data.
• Make a practice of examining your claims data to uncover and address areas of the claims-management process that cost more time and money than they should.
• Leverage communications tools and automated workflows when possible to give claimants visibility into their claims status and free your staff from laborious “status update” calls.
• Invest in a comprehensive tech stack with CRM, compliance software, and claims-management softwares that can integrate to ensure your adjusters and claims process in general follow closely to state regulations.

Improving the claims management process isn’t a lost cause

Claims management done poorly can be slow and manual. Yet, with the surge of modern insurance infrastructure, more robust insurance claims management systems seem inevitable for both insurers and third-party claims managers. 

In the meantime, although we can’t help with claims management woes directly, insurers can go for operational efficiency in their producer and adjuster compliance workflows with AgentSync. To see how, schedule a demo today.