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Life Insurance Claims Benefit from Process Optimization

Erik Stockwell | March 13, 2014

The main reason life insurance exists and its true mission is to provide financial stability to families at the time they need it the most—the death of a loved one—although sometimes we lose site of that fact. Even if the promise was made 20 or 30 years ago, families require, and insurers provide, timely payment of claims to ease the burden of a difficult time.

Claims adjudication is not a simple process, however, and just like many other areas of an insured’s back office, claims modernization can contribute to an overall ROI picture that makes a great case. The value in claims modernization is, both simple and complex.

Simple Benefits: Workflow, Cost Savings, Customer Focus

Life claims processes are often manual, requiring phone calls, email, snail mail, and paper files. The claims examiner spends his or her time chasing paperwork that is necessary to pay the claim and close the file. It sounds easy enough, but in reality the process is often clunky.  Many times a spreadsheet serves as the task list. There is mail receipt and scanning involved. Documentation doesn't come together as quickly as it should and payouts (often desperately needed by the beneficiaries) are often slower than they could be.

A data-driven approach is a preferred alternative. Rules engines can provide alerts, validate incoming data and issue intelligent reminders. The preparations that an automated approach can provide will streamline the process while simultaneously recording structured data that can be used later in both claims fraud and mortality reporting.

Cost Savings

The financial benefits to this simplification are fairly straightforward. Insurers stand to save administrative costs associated with claims, improve service levels, and reduce claims fraud.

How much can be saved by improved administration and service? Every insurer is different and volumes vary, but recent experience suggests that insurers who have transformed their claims processes are putting a significant amount of savings back toward their bottom line; and that is just the experience of traditional life insurers.

Insurers who carry supplemental products stand to save even more because their administrative needs for claims are often more complex. For example, insurers who sell chronic illness and long-term care products can utilize case history functions and other features that serve to meet the needs of health-type claims. For these insurers, tracking non-standard information such as rehabilitation information and legal forms is important to the claims process.

 

Claims fraud reduction can potentially save insurers millions in recovered revenue. Modern business intelligence tools are being used to analyze and expose common experiences within diseases, common factors between fraudulent claims, and potential issues with claimants. As time goes on, these tools actually improve with new information, helping to find and highlight additional types of inconsistencies that may signal new trends in fraud.

Customer Focus

Improvements in workflow also contribute to an insurer’s overall service picture. Inadequate claims workflow can reflect poorly upon an organization, costing it future business. In today’s age of consumer product ratings and social media feedback, insurers should be more sensitive than ever to the positive and negative feedback derived from claim service.

According to LIMRA, “exceptionally satisfied claimants are nearly four times as likely to do business with the insuring company and are more than three times as likely to recommend the carrier.”  The reason is understandable. An insurer who can easily adjudicate a claim builds trust by making good on the promise, “We will be there for you when you need us.”

In many instances, a claimant’s first experience with a life insurer is when they receive the benefit payment. Instantly, they recognize both the value in coverage and the brand that is taking care of them. From this standpoint, the marketing value of a well-paid claim can’t be overstated.

Complex Benefits: Protective Value, Transformative Business Value

The value layer of improved claims goes even deeper with back office benefits. When a claims process is inefficient, it is probably also opaque to the business. The system inadvertently hides vital data that would help the insurer avoid fraud, grasp mortality trends and capture business-relevant details. The results are long-term ‘invisible’ losses that will drag on corporate performance. Insurers can form a picture of these losses by asking some pointed questions, such as:

  • How does our claims experience stack up to its anticipated experience from pricing?
  • Is the five-year audit going to be a painful wakeup call or will our analysts be notified in real time when claims are trending in the wrong direction?
  • Does our claims system warn us when common signs of fraud are detected in the process?

Protective Value

Today’s life claims modernization tools can provide an organization with additional protective value, not just workflow efficiency. Risk management is a front line consideration of a good claims system. At every step, claims data interacts with risk knowledge rules to capture both potential fraud signals as well as the threads of negative trends across products. The result is a system and process that protects insurers from unnecessary profit loss, and gives actuaries and product developers realistic confidence in their mortality projections.

Transformative Business Value

Claims has become less of an end and more of a vital link in the feedback loop leading toward better business. It is here that real transformational value happens. An organizational process that is tuned to perpetually learn from its mortality experience is better prepared to capitalize on future trends and profit from risk reductions. A modern claims system, when paired with an agile product development process, will likely produce long-term profitability and a sustainable life insurance business model.

Erik Stockwell is senior vice president and head of the life/annuity insurance division for MajescoMastek, a provider of insurance software and IT services. He can be reached at erik.stockwell@majescomastek.com.


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