How good is your claims process? The claims process is a make-or-break moment in the insurance company-customer relationship. If it’s not up to par, you could be alienating policyholders and stifling your company’s growth. Claims benchmarks and key performance indicators (KPIs) give you a way to rate your process, but numbers only paint an accurate picture if you know how to interpret them.
Consider four common claims KPIs:
- Time to settlement
- Retention rate after a claim
- Claim error rate
- Cost per claim
While these figures are all important, some elements are out of the claim handler’s control. For example, no matter how quickly you work, backlogs with auto repair shops and contractors can drag out claims and drive up costs, and while you can work carefully to avoid errors, nobody’s perfect. The retention rate is even harder to control.
If some KPIs are out of your control, what can you do to bring them up? The key is to focus on factors behind the KPIs, particularly the pieces that you influence directly. Ultimately, it all boils down to claimant satisfaction and an efficient, transparent claims process.
Policyholder Churn Following Claims
When policyholders complain, they’re usually complaining about how claims are handled. That’s the takeaway of a Value Penguin analysis of complaint data from the National Association of Insurance Commissioners. When looking at complaints for all insurers, 68% of complaints were about claims handling.
Many of those claimants will leave. Accenture found that 83% of claimants who were dissatisfied with the way a claim was handled or settled had either already switched insurers or were planning to do so.
What Matters to Claimants?
In retail, it’s sometimes said that the customer is always right. Insurance is more complicated. You can’t just give the claimant whatever they want. You need to figure out exactly what the loss is and what coverage applies. That’s the entire purpose of the claims process. At the same time, if you don’t keep the claimant happy, you’ll probably lose a customer.
McKinsey & Company did research to find out what drives claimant satisfaction, and they came up with five answers:
- Employee courtesy
- Ease of communication
- Employee knowledge and professionalism
- Transparency and ease of process
- Speed of claim settlement
Speed Is Important – But Communication Is More Important
Out of the five elements that McKinsey identified, it’s easy to focus on speed of claim settlement. Speed is important. It’s also easy to measure. As a result, time to settlement is probably one of your more important KPIs.
But what speed should you be aiming for? How fast does the process need to be to keep claimants happy? Well, it depends.
If you send a letter by mail, you expect it to take at least a couple of days. If you send an email, you expect it to arrive instantly. Expectations are everything, and communication helps you manage expectations.
Likewise, if you tell a claimant it will take a week and instead it takes a month, you’re going to have an angry claimant. On the other hand, if you communicate a realistic timeframe and provide updates, you can avoid frustration, even if the timeline remains the same. In light of recent claim cycle increases, this realization has been critical. The J.D. Power 2023 U.S. Claims Digital Experience Study found that digital communications channels became increasingly important to customer satisfaction as average auto repair cycle times grew longer.
Managing Expectations and Putting the Claimant at Ease
During the FNOL intake, you need to put the claimant at ease. The J.D. Power Auto Claims Satisfaction Study shows that five things can help accomplish this: not putting the customer on hold, explaining coverage, explaining the claims process, providing services and explaining the next steps with clear timelines.
This last action is the most important. When you explain the next steps with clear timelines, the policyholder is 3.6 times more likely to feel at ease. Explaining the claims process makes them 2.4 times more likely to feel at ease, and explaining coverage makes them 2.2 times more likely to feel at ease.
Your policyholders aren’t insurance claims experts. They need everything explained to them. If you can do that, you can get the claim off to a good start. From there, if you can continue to keep the lines of communication open and meet expectations, you can deliver a positive claims experience. And that will impact your other claims benchmarks and KPIs.
Claimant Satisfaction and KPIs
Time to settlement is only one KPI. Others might include your retention rate after a claim, the cost per claim and the claim error rate.
We’ve already seen that by improving communication, you can improve satisfaction. That will have a direct impact on the retention rate. But what about cost per claim and claim error rate? They’re connected, too.
A lack of communication may contribute to errors. For example, a claimant might not disclose information because they don’t realize it matters or because they don’t trust the claim handler, resulting in missed details and errors. Poor communication may also increase the cost of the claim if the process drags or if the claimant feels they need to challenge the settlement or even hire a lawyer.
A good claims process is transparent and efficient. The claimant and the claims handler are in communication, and they both know what the other expects. Updates happen automatically, and the claim progresses on schedule. When that happens, the claims KPIs fall into place.
Are you delivering the best insurance claims services? Is your claims process as efficient and transparent as it should be?
If your claims benchmarks and KPIs aren’t meeting expectations, it may be time to update your claims management platform so you can enable file handlers to work smarter. When you free them up from mundane tasks, they’ll have more time to focus on the human side of the claims process.
VCA Software (formerly Virtual Claims Adjuster) is setting a new standard for claims management technology. Download our Buying Guide and Request A Demo to find out what’s possible.
