Claims in Insurance and Claims Management

Claims in Insurance

Definition of claims: Claim is a right of insured to receive the amount secured under the policy of insurance contract promised by Insurer.

An insurance claim is the actual application for benefits provided by an insurance company. Policy holders must first file an insurance claim before any money can be disbursed to the hospital or repair shop or other contracted service. The insurance company may or may not approve the claim, based on their own assessment of the circumstances. Individuals who take out home, life, health, or automobile insurance policies must maintain regular payments called premiums to the insurers. Most of the time these premiums are used to settle another person’s insurance claim or to build up the available assets of the insurance company.

When claims are filed, the insured has to observe the settled rules and procedures and the insurer has also to reciprocate in a similar manner by undertaking appropriate steps for speedy disposal of claims. It is true that claims settlement is complex in nature, but it is the driving force to plant confidence in the hearts of people, in general and beneficiaries in specific. Insurance claim is a right of insured under a contract of insurance. Insurance contract is a contract by which one party called the insurer promises to save the other party, the insured on payment of consideration known as the premium. The insurer promises to save the insured are nominees/assignees of the insured on happening of event or risk insured. Disputes crop up in the payment of claim when the insurer and the insured understand the process of claims payment in a different way. Claims settlement is an integral part of the insurance business which is a service industry and its growth is interwoven with the people, the customers and consumers of service. It is inevitable for the insurance company to protect and guard the interests of the policyholders. An insurance claim is the only way to officially apply for benefits under an insurance policy, but until the insurance company has assessed the situation it will remain only a claim, not a pay-out.

Claims Management

Many insurers have recognized the need to improve the efficiency of their claims management process. They have streamlined processes, eliminated paper-based forms and redistributed work to match the demands to skills. The objective of their efforts is to lower costs, while also increasing overall throughput. Efficiency improvements make tasks quicker and less costly to execute. However, to realize even greater improvements in the claims handling process, insurers must also focus on the effectiveness of their claims decisions.

Claims handling costs typically represent 10% to 15% of net earned premium; in contrast, claims payouts represent 40% to 65%. Insurers that expand their focus to include effective as well as efficient claims processing will find a far larger pool of savings opportunities. Technology can play a significant role by providing integrated channels for communication and collaboration. This would help the insurance company increase employee productivity by reducing cycle time and defect rate and also increase employee participation and compliance.

Claims Processing sometimes involves collating and sharing large amounts of information among multiple parties involved in a claim, from body shops to adjusters to investigators to lawyers and doctors to claimants and regulators. And it involves the knowledge of experienced adjusters to determine the fair and appropriate outcome of a claim. In fact, losses and loss expenses absorb 80% of premium collected by carriers.

Service representatives and claims adjusters need to access data from multiple sources when processing or assessing a claim, which delays settlement time and increases costs. Manual steps reduce transparency of the claims process and raise the risk of fraud, manipulation or simply human error. Customer retention is also a challenge – experts say that 75 percent of customers leave their insurer due to claims issues.