[{"data":1,"prerenderedAt":552},["ShallowReactive",2],{"root:\u002Fthe-cost-of-doing-nothing-about-inefficient-claims-processes":3,"og-page:the-cost-of-doing-nothing-about-inefficient-claims-processes":527,"read-next:\u002Fthe-cost-of-doing-nothing-about-inefficient-claims-processes":537},{"id":4,"title":5,"author":6,"body":7,"date":524,"description":525,"extension":526,"factChecked":527,"legacyUrl":528,"meta":529,"metaTitle":530,"navigation":527,"path":531,"seo":532,"stem":533,"topic":534,"updated":535,"__hash__":536},"articles\u002Fthe-cost-of-doing-nothing-about-inefficient-claims-processes.md","The Cost of Inefficient Claims Processing: How to Calculate What Inaction Is Costing You",null,{"type":8,"value":9,"toc":498},"minimark",[10,14,19,26,31,48,52,55,122,125,129,132,135,140,143,197,200,203,206,210,213,216,219,222,225,233,237,240,243,246,249,253,256,259,262,266,269,272,293,301,305,308,378,381,394,398,406,414,418,421,439,452,456,460,463,467,470,474,477,481,484,488,491,495],[11,12,13],"p",{},"The cost of inefficient claims processing is the sum of wasted adjuster hours, extended cycle times, claims leakage, and lost policyholder renewals. Three of those four are measurable inside your own system today. The fourth shows up at renewal, long after the claim that caused it closed.",[15,16,18],"h2",{"id":17},"key-takeaways","Key takeaways",[20,21,22],"ul",{},[23,24,25],"li",{},"Manual task time is the cost most teams never calculate, because nobody owns the number and no report produces it.",[20,27,28],{},[23,29,30],{},"Slow claims cost satisfaction at a measurable rate. J.D. Power scores property claims closed within 10 days at 762 out of 1,000. That score falls 167 points to 595 when repairs run past 31 days.",[20,32,33,36,39],{},[23,34,35],{},"Accenture put up to $170 billion in global premiums at risk over five years because of poor claims experiences.",[23,37,38],{},"Loss adjustment expense is where inefficiency shows up on the financial statements. It is the line most carriers analyze least.",[23,40,41,42,47],{},"The cost of inaction compounds. The cost of a ",[43,44,46],"a",{"href":45},"\u002Fproducts\u002F","claims management system"," is a one-time number you can quote.",[15,49,51],{"id":50},"what-does-inefficient-claims-processing-actually-cost","What does inefficient claims processing actually cost?",[11,53,54],{},"Inefficient claims processing costs money in four places at once: staff time, cycle time, claim payments, and retained premium. Most teams only ever measure the first one, and usually only after something forces them to.",[56,57,58,74],"table",{},[59,60,61],"thead",{},[62,63,64,68,71],"tr",{},[65,66,67],"th",{},"Cost bucket",[65,69,70],{},"What it looks like",[65,72,73],{},"How to measure it",[75,76,77,89,100,111],"tbody",{},[62,78,79,83,86],{},[80,81,82],"td",{},"Wasted staff hours",[80,84,85],{},"Manual notes, status calls, re-keying data, building reports",[80,87,88],{},"Hours per person per day on non-adjudicating tasks",[62,90,91,94,97],{},[80,92,93],{},"Extended cycle time",[80,95,96],{},"Files sitting in queues, waiting on documents, chasing approvals",[80,98,99],{},"Days from FNOL to close, by claim type",[62,101,102,105,108],{},[80,103,104],{},"Claims leakage",[80,106,107],{},"Overpayments, missed subrogation, stale reserves",[80,109,110],{},"Closed-file audit, leakage as a percentage of paid claims",[62,112,113,116,119],{},[80,114,115],{},"Lost renewals",[80,117,118],{},"Policyholders who switch after a bad claim",[80,120,121],{},"Retention rate among claimants versus non-claimants",[11,123,124],{},"These four are connected. A team drowning in manual work runs longer cycle times. Longer cycle times produce unhappy claimants and more litigation. Both raise the cost of the claim itself. The staff-hours number is where the chain starts, which is why it is the right place to begin measuring.",[15,126,128],{"id":127},"cost-1-the-hours-your-team-never-gets-back","Cost 1: the hours your team never gets back",[11,130,131],{},"Manual task time is the largest recoverable cost in most claims operations, and the easiest to quantify.",[11,133,134],{},"Claims handlers spend a significant part of every day on work that does not advance a file: sending acknowledgments and status notifications, logging time, maintaining file notes and diaries, generating letters, reports, invoices and summaries, and hunting for claim information across systems and inboxes.",[136,137,139],"h3",{"id":138},"work-the-calculation-on-your-own-operation","Work the calculation on your own operation",[11,141,142],{},"The arithmetic is simple, and the point of doing it yourself is that the inputs are yours rather than a vendor's.",[56,144,145,155],{},[59,146,147],{},[62,148,149,152],{},[65,150,151],{},"Input",[65,153,154],{},"Where it comes from",[75,156,157,165,173,181,189],{},[62,158,159,162],{},[80,160,161],{},"Claims staff headcount",[80,163,164],{},"Payroll",[62,166,167,170],{},[80,168,169],{},"Manual hours per person per day",[80,171,172],{},"A workflow assessment, or a week of honest time logging",[62,174,175,178],{},[80,176,177],{},"Working days per year",[80,179,180],{},"Your own calendar, not a rule of thumb",[62,182,183,186],{},[80,184,185],{},"Average fully loaded wage",[80,187,188],{},"Finance",[62,190,191,194],{},[80,192,193],{},"Average client billing rate, if you bill out",[80,195,196],{},"Your client contracts",[11,198,199],{},"Headcount times manual hours times working days gives annual hours lost. Multiplied by the fully loaded wage, that is the direct cost, and it is money already spent: payroll the firm pays whether those hours produce revenue or not.",[11,201,202],{},"There is a second, separate figure for firms that bill clients. If part of the recovered time can be redirected to billable work, that is new revenue rather than saved cost, and it only exists if billable demand exists to absorb the capacity. Do not add the two together and call the sum a saving. Most vendor calculators do, and that is why their outputs do not survive a CFO reading them.",[11,204,205],{},"The recovered hours are the honest headline. In most operations they add up to full-time equivalents of capacity sitting inside a payroll that is already being paid.",[15,207,209],{"id":208},"cost-2-what-cycle-time-costs-in-retained-premium","Cost 2: what cycle time costs in retained premium",[11,211,212],{},"Extended cycle times cost insurers customers, and the relationship is measurable rather than theoretical.",[11,214,215],{},"The J.D. Power 2025 U.S. Property Claims Satisfaction Study recorded an average claim cycle time of 32.4 days from filing to finished repairs, and more than 44 days from first notice of loss to final payment. Both were the longest since the study began in 2008.",[11,217,218],{},"The satisfaction cost of that delay is specific. Claims completed within 10 days scored 762 on a 1,000-point scale. Claims where repairs ran past 31 days scored 595, a 167-point drop tied to nothing but elapsed time.",[11,220,221],{},"The 2026 study showed improvement, with average repair time down 2.8 days to 29.6 days and final payment down 3.4 days to 40.7 days. J.D. Power credited faster cycle times and better digital capability. The direction of travel confirms the mechanism: when cycle time moves, satisfaction moves with it.",[11,223,224],{},"Satisfaction becomes a financial number at renewal. Accenture research found that up to $170 billion in global insurance premiums could be at risk over five years because of poor claims experiences, based on surveys of more than 6,700 policyholders across 25 countries and more than 120 claims executives.",[11,226,227,228,232],{},"The claim is the only moment most policyholders ever test what they bought. A slow one is a churn event with a delay on it. That is the case for treating ",[43,229,231],{"href":230},"\u002Fclaims-oversight-software\u002F","claims oversight"," as a retention control rather than a reporting chore.",[15,234,236],{"id":235},"cost-3-loss-adjustment-expense-and-claims-leakage","Cost 3: loss adjustment expense and claims leakage",[11,238,239],{},"Loss adjustment expense (LAE) is the cost of investigating and settling claims, separate from the money paid to the claimant. It covers adjuster salaries, independent adjuster fees, legal and expert costs, inspections, and claims department overhead.",[11,241,242],{},"LAE is where process inefficiency lands on the financial statements, and it is routinely analyzed less closely than indemnity. Manual workflows, weak vendor management, and missed subrogation all add points to the combined ratio without ever appearing as a line item called \"inefficiency\".",[11,244,245],{},"Claims leakage sits alongside it. EY's P&C claims practice puts leakage at 7% to 14% of carrier claims spend.",[11,247,248],{},"The connection back to staff hours is direct. A handler with no time left after administrative work is a handler who does not chase the subrogation opportunity, does not revisit the stale reserve, and does not question the invoice. Leakage is usually a symptom of capacity, not carelessness.",[15,250,252],{"id":251},"cost-4-turnover-in-a-market-where-replacements-are-scarce","Cost 4: turnover in a market where replacements are scarce",[11,254,255],{},"Claims staff turnover is expensive on its own, and the replacement market has tightened.",[11,257,258],{},"The US Bureau of Labor Statistics estimates roughly 400,000 insurance professionals will have retired between 2021 and the end of 2026. Around 356,100 people worked as claims adjusters, appraisers, examiners, and investigators in 2024, with about 21,600 openings projected each year.",[11,260,261],{},"An experienced adjuster who leaves because the job has turned into data entry does not get replaced quickly or cheaply. Every departure also takes file knowledge with it, which shows up later as rework and reopened claims.",[15,263,265],{"id":264},"why-the-cost-of-inefficient-claims-processing-compounds","Why the cost of inefficient claims processing compounds",[11,267,268],{},"The cost of inefficient claims processing grows over time while the cost of fixing it stays roughly fixed. That asymmetry is the whole argument.",[11,270,271],{},"Three things drive the compounding:",[20,273,274,281,287],{},[23,275,276,280],{},[277,278,279],"strong",{},"Claim volume rarely falls."," Wasted minutes per claim multiply by a growing denominator.",[23,282,283,286],{},[277,284,285],{},"Wages rise."," The same lost hours cost more each year at the same level of inefficiency.",[23,288,289,292],{},[277,290,291],{},"Expectations move."," A cycle time that was acceptable in 2022 loses bids in 2026, because a competitor's claims software is producing better numbers for the same client.",[11,294,295,296,300],{},"Meanwhile the alternative is a quotable figure. ",[43,297,299],{"href":298},"\u002Fpricing\u002F","Pricing"," sets out what drives the range on an implementation.",[15,302,304],{"id":303},"how-to-measure-your-own-baseline","How to measure your own baseline",[11,306,307],{},"Measuring your own inefficiency cost takes seven numbers, and most operations can pull five of them in an afternoon.",[56,309,310,320],{},[59,311,312],{},[62,313,314,317],{},[65,315,316],{},"Metric",[65,318,319],{},"What it tells you",[75,321,322,330,338,346,354,362,370],{},[62,323,324,327],{},[80,325,326],{},"Manual hours per handler per day",[80,328,329],{},"Recoverable capacity",[62,331,332,335],{},[80,333,334],{},"Average cycle time from FNOL to close",[80,336,337],{},"Speed of the operation",[62,339,340,343],{},[80,341,342],{},"Time to first contact",[80,344,345],{},"Front-end responsiveness",[62,347,348,351],{},[80,349,350],{},"Claims per handler per month",[80,352,353],{},"Throughput",[62,355,356,359],{},[80,357,358],{},"Reopen rate",[80,360,361],{},"File quality",[62,363,364,367],{},[80,365,366],{},"Subrogation recovery rate",[80,368,369],{},"Missed money",[62,371,372,375],{},[80,373,374],{},"LAE per claim",[80,376,377],{},"Everything above, in dollars",[11,379,380],{},"Compare each one against your own trend rather than against a published benchmark. A reopen rate that is rising, a throughput that is flat while volume grows, and an LAE per claim that climbs while volume holds steady are all findings on their own, with no industry average required.",[11,382,383,384,388,389,393],{},"If pulling these figures takes more than a day, that difficulty is itself the finding. A claims system with live dashboards makes these standing numbers rather than a research project. Our breakdown of the ",[43,385,387],{"href":386},"\u002Finsurance-claims-processing-workflow\u002F","insurance claims processing workflow"," covers where each metric is captured, and the ",[43,390,392],{"href":391},"\u002Finsurance-kpis\u002F","claims KPI set"," covers what to watch once you have them.",[136,395,397],{"id":396},"where-the-hours-actually-go-back","Where the hours actually go back",[11,399,400,401,405],{},"The manual tasks that consume handler time map to specific capabilities. Acknowledgements and status notifications go to automated workflow rules. Intake and data capture are structured at source rather than re-keyed later. Field documentation is captured at the property instead of typed up two days later. Payments are issued through ClaimsPay rather than a check run. Status enquiries are deflected by giving claimants their own view of the file through InsuredConnect. Reports and bordereaux are produced on demand by ",[43,402,404],{"href":403},"\u002Fbordereau-reporting-software\u002F","bordereau reporting software"," instead of assembled by hand.",[11,407,408,409,413],{},"Document review and file summarization are the newest candidates. VCA's approach to ",[43,410,412],{"href":411},"\u002Fai-built-for-claims\u002F","AI in claims"," is practical by design: it belongs inside the claim file, where the work is already happening, supporting adjuster judgment rather than replacing it.",[15,415,417],{"id":416},"run-the-numbers-for-your-own-operation","Run the numbers for your own operation",[11,419,420],{},"The exercise above is worth an afternoon whether or not you ever change systems, because the output is a number you own rather than a number a vendor gave you. Once you have it, the comparison that matters is your annual inefficiency cost against the cost of fixing it, not against zero.",[11,422,423,424,428,429,433,434,438],{},"VCA Software has been building claims software for more than 20 years, from Bolton, Ontario and Scottsdale, Arizona, for P&C claims operations including ",[43,425,427],{"href":426},"\u002Findependent-adjuster-claims-software\u002F","independent adjusting firms",", ",[43,430,432],{"href":431},"\u002Ftpa-claims-management-software\u002F","TPAs",", and ",[43,435,437],{"href":436},"\u002Fcarrier-claims-management-software\u002F","carriers",".",[11,440,441,442,446,447,451],{},"If you are weighing internal development against buying, the ",[43,443,445],{"href":444},"\u002Fresources\u002Fbuying-guide\u002F","claims management software buying guide"," works through the comparison, and ",[43,448,450],{"href":449},"\u002Frequest-a-demo\u002F","a demo"," is the fastest way to see which of the seven metrics above the platform reports on day one.",[15,453,455],{"id":454},"frequently-asked-questions","Frequently asked questions",[136,457,459],{"id":458},"how-do-you-calculate-the-cost-of-inefficient-claims-processing","How do you calculate the cost of inefficient claims processing?",[11,461,462],{},"Multiply manual hours per handler per day by headcount and working days per year to get annual hours lost. Multiply that by average fully loaded wage for the direct cost. Then add cycle time effects on retention, claims leakage as a percentage of paid claims, and turnover replacement cost. The staff-hours figure is the floor, not the total.",[136,464,466],{"id":465},"what-is-a-good-claims-cycle-time","What is a good claims cycle time?",[11,468,469],{},"J.D. Power data shows property claims completed within 10 days score 762 out of 1,000 for satisfaction, compared with 595 when repairs pass 31 days. Targets should be set by claim type rather than as a single number, and measured against your own history first.",[136,471,473],{"id":472},"is-claims-leakage-the-same-as-inefficient-claims-processing","Is claims leakage the same as inefficient claims processing?",[11,475,476],{},"No. Claims leakage is money paid out that should not have been, through overpayment, missed subrogation, or stale reserves. Inefficient claims processing is wasted effort inside the handling of the claim. They are closely linked, because handlers with no spare capacity are the ones who miss recoveries, but they are measured separately.",[136,478,480],{"id":479},"how-much-does-claims-management-software-cost-compared-with-the-inefficiency","How much does claims management software cost compared with the inefficiency?",[11,482,483],{},"The useful comparison is against your calculated annual inefficiency cost rather than against zero. Work out the recoverable payroll first, then ask what a quote looks like against it.",[136,485,487],{"id":486},"what-is-loss-adjustment-expense","What is loss adjustment expense?",[11,489,490],{},"Loss adjustment expense (LAE) is the total cost of investigating, adjusting, and settling claims, excluding the payment made to the claimant. It includes adjuster salaries and fees, legal and expert costs, inspection expenses, and claims department overhead. It is reported as a dollar figure and as a ratio to earned premium, and it forms part of the combined ratio.",[136,492,494],{"id":493},"where-do-claims-handlers-lose-the-most-time","Where do claims handlers lose the most time?",[11,496,497],{},"The largest time sinks are status communication, file notes and diary maintenance, re-keying data between disconnected systems, generating letters and reports, and searching for claim information. None of these require adjudication judgment, which is why they are the first candidates for automation.",{"title":499,"searchDepth":500,"depth":500,"links":501},"",2,[502,503,504,508,509,510,511,512,515,516],{"id":17,"depth":500,"text":18},{"id":50,"depth":500,"text":51},{"id":127,"depth":500,"text":128,"children":505},[506],{"id":138,"depth":507,"text":139},3,{"id":208,"depth":500,"text":209},{"id":235,"depth":500,"text":236},{"id":251,"depth":500,"text":252},{"id":264,"depth":500,"text":265},{"id":303,"depth":500,"text":304,"children":513},[514],{"id":396,"depth":507,"text":397},{"id":416,"depth":500,"text":417},{"id":454,"depth":500,"text":455,"children":517},[518,519,520,521,522,523],{"id":458,"depth":507,"text":459},{"id":465,"depth":507,"text":466},{"id":472,"depth":507,"text":473},{"id":479,"depth":507,"text":480},{"id":486,"depth":507,"text":487},{"id":493,"depth":507,"text":494},"2022-08-29","Inefficient claims processing costs staff hours, cycle time, leakage, and renewals. How to measure each one inside your own operation instead of guessing.","md",true,"https:\u002F\u002Fvcasoftware.com\u002Fthe-cost-of-doing-nothing-about-inefficient-claims-processes\u002F",{},"The Cost of Inefficient Claims Processing","\u002Fthe-cost-of-doing-nothing-about-inefficient-claims-processes",{"title":5,"description":525},"the-cost-of-doing-nothing-about-inefficient-claims-processes","Claims operations","2026-08-14","6XGsCZZiZytM-Cf9CWLcM4Omzyd1X5eDTyoFcE4Iaf8",[538,542,545,549],{"path":539,"title":540,"date":541},"\u002Fthe-insurance-customer-retention-equation-why-claims-satisfaction-is-pivotal\u002F","Why Claims Satisfaction Drives Retention","2026-08-19",{"path":543,"title":544,"date":535},"\u002Fthe-evolving-landscape-of-claims-management-embracing-digital-transformation-to-enhance-the-customer-experience\u002F","What Moves Claims Customer Experience",{"path":546,"title":547,"date":548},"\u002Fcar-insurance-claims-service-in-a-transparent-world-plain-language-is-essential\u002F","Car Insurance Claims and Plain Language","2026-07-08",{"path":550,"title":551,"date":548},"\u002Fthe-risk-of-an-inefficient-claims-system\u002F","The Risk of an Inefficient Claims System",1792214674032]