A key aspect of delivering an exceptional policyholder experience is effective insurance claims management. However, insurance carriers will need to overcome common roadblocks like claim complexities, data security challenges, fraud risks, and evolving policyholder expectations to ensure timely and fair claims settlements.
In this article, we’ll take a closer look at the challenges carriers face with insurance claims management and the practical solutions they can implement for quick and accurate claims processing.
Importance of Effective Claims Management in Insurance
An efficient insurance claims management process is mutually beneficial to both policyholders and insurance carriers.
Often the only times policyholders interact with an insurance carrier (outside of policy renewals) is when they need to file a claim. This means it’s one of the few opportunities insurance companies have to deliver an exceptional experience. A claims filing process that’s quick, error-free, and leads to a fair settlement can help foster policyholder loyalty and retention.
Internally, effective claims management means the insurance carrier’s team accurately verifies coverage details to control costs, mitigate fraud risks, and uphold compliance with industry standards.
6 Common Challenges in Insurance Claims Management
Though claims management is a key insurance workflow, there are some common roadblocks that teams may face:
1. Complexity of Claims
Insurance carriers’ teams may be well-equipped and prepared to deal with standard claims. However, not all claims can be handled using standard procedures. More complex cases can be tricky for teams to deal with and take longer to process and reach settlement. The unique circumstances of these claims can often lead to delayed settlements, higher costs, and greater potential for error.
2. Keeping Pace with Technological Advancements
Ongoing technological advancements in the insurance space have paved the way for more efficient and consumer-centric service across all workflows, including claims processing.
However, it’s also a clear challenge for insurers to adopt digital transformation strategies that are cost-effective and deliver a tangible ROI for the organization. Otherwise, insurance carriers may find themselves investing in tech just for the sake of it, which can be a costly venture that doesn’t drive actual results for the company and only complicates workflows.
3. Safeguarding Sensitive Data
At every step of the claims processing workflow, insurance carriers collect sensitive information that must be safeguarded to protect policyholder confidentiality and meet compliance requirements. This includes data like the policyholder’s home address, contact information, payment details, and medical records in some cases.
Insurance companies have become prime targets for hackers, given the wealth of sensitive data they possess. Data breaches and hacks can be costly for insurance companies and harmful to their reputation, so they must adhere to data security best practices and leverage the proper security measures to avoid these damaging outcomes.
4. Evolving with Policyholder Demands
Insurance carriers focused on delivering a policyholder-centric service must stay up-to-date with consumer expectations, which are constantly in flux.
As macroeconomic conditions change, new entrants join the market and technology advances, policyholder expectations continue to evolve. Insurance companies must stay agile and adapt their claims processing workflows accordingly to remain competitive.
In its 2024 Global Insurance Outlook report, global consultancy EY explores how digital leaders in the retail, ecommerce, and technology sectors have influenced how policyholders expect to receive tailored and convenient offerings from all providers, including insurance carriers. The report states, “…if insurers don’t deliver what they want—precisely when, where and how they want it—customers will take their business elsewhere…”
5. Combatting Fraud
According to one survey, insurance professionals suspect that 20% of claims might contain fraud.
Whether policyholders falsify the details of an accident to get coverage, over-inflate the value of a loss or repair, or engage in other forms of theft, insurance carriers can face significant losses if they’re unable to accurately detect and prevent claims fraud.
Ongoing tech advancements are only driving the risk of insurance claims fraud higher. Bad actors can leverage advanced technologies like generative AI to produce hyperrealistic fake documents, photos, and videos to support their fraudulent claims, making it increasingly challenging for claims specialists to spot potential fraud without relying on advanced fraud detection systems.
6. Inbound Claims Surges from Extreme Weather Events
Some things are completely out of the insurance carrier’s control but provide challenges to claims management nonetheless. This includes when extreme weather like winter storms, floods, or hurricanes lead to an uptick in inbound claims calls. Such events can lead to widespread property damage and a surge in claims filing for home and auto policies.
If carriers don’t have the proper people power and systems in place to handle large fluctuations in claims volumes, they could struggle to process claims in an accurate and timely fashion. This could lead to operational bottlenecks, slower payouts, non-compliance, and poor policyholder satisfaction as a result.
Solutions to Overcome Claims Management Challenges
Insurance carriers can implement the following best practices to overcome claims management challenges for better accuracy and efficiency:
Deliver Exceptional Employee Training
Effective employee training programs ensure staff members are prepared to handle complex claims, uphold data security, detect fraud, and properly utilize relevant software solutions.
From new employee onboarding to re-skilling and upskilling current employees, insurance carriers must invest in their human resources to give them the proper skills and tools to succeed in their roles.
Leverage AI and Machine Learning
Teams that embrace advanced tech like AI, machine learning (ML), and automated insurance claims management software can streamline the process for internal teams and policyholders.
When paired with human talent, these advanced solutions help minimize the time teams spend on tedious and repetitive tasks, giving staff members have more time to work on complex claims that need human expertise.
Plus, these solutions can help mitigate the risk of human error to ensure more accurate policy verifications and settlements, supporting better policyholder satisfaction.
Strengthen the Security Framework
Insurance carriers can focus on strengthening their existing security posture to mitigate the risk of fraud and data breaches. This might include implementing fraud detection software using predictive analytics to more easily spot anomalous patterns that indicate possible fraud.
Additionally, teams should use proper access management policies and procedures to ensure only authorized users gain access to sensitive policyholder and claims data. This helps minimize the risk of a potential breach and supports compliance with the Gramm-Leach-Bliley Act and other important data security regulations.
Outsource to an Onshore Team
Claims processing may not be the core competency of an insurance carrier’s team. If they’re experts in other insurance workflows like underwriting or policy administration and don’t have the proper tools or expertise to deliver effective claims management, outsourcing this process might be the best course of action.
Onshore outsourced teams offer dedicated expertise on certain workflows—like claims processing—enabling in-house teams to focus on what they do best. Outsourced providers often boast top talent and advanced technology that insurance carriers may not have access to, supporting a more efficient, accurate, and quality experience for policyholders.
Partner with Covenir for Expert Claims Management Outsourcing
Insurance carriers can navigate the complexities of insurance claims management on their own. However, partnering with an expert outsourced provider like Covenir makes it much easier for teams to focus on growth and innovation while we handle the execution and customer engagement.
Covenir’s onshore teams aren’t just an extension of your in-house team—we fully integrate with your operations to enable smooth and efficient delivery of claims management. Our team offers round-the-clock support and expert, empathetic claims services for all types of personal and commercial insurance lines. Whether you need extra support during busy periods or extended capabilities after hours, we can help.
Contact us today to learn more about our custom FNOL and claims management solutions.