The Risk of an Inefficient Claims System

Claimants are not satisfied with the claims process. As a result, many of them plan to switch carriers, and insurers stand to lose a great deal of premium in the coming years. For any insurer still running on an inefficient claims system, that should serve as a wake-up call. The time to overhaul your claims management system has arrived.

The premium at risk

Insurers that provide poor claims experiences risk losing up to $170 billion in premiums over five years. That is the conclusion of Accenture research into claims and underwriting, based on a survey of more than 6,700 policyholders.

Accenture found that 31% of claimants were not fully satisfied with their home and auto insurance claims experience over the prior two years. Among that dissatisfied group, 30% said they had already switched carriers and another 47% said they were thinking about it. That is 77% of unhappy claimants who have either left or are considering it, and it is where the premium at risk comes from.

AI is part of the answer

Accenture's research did not stop at the problem. It also pointed at a response: AI used inside a claims workflow rather than bolted onto the outside of one.

Many claims processes suffer from gaps in communication and from tedious work that eats the handler's day. Automation can close both. Updates go out on their own, keeping the policyholder informed of key developments without requiring the handler to remember, and without messages slipping through the cracks. The repetitive work, such as populating common forms, comes off the handler's desk so the time goes to the judgment calls that genuinely need a person.

VCA's approach to 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.

AI does not replace the human touch

When you are dealing with a problem, sometimes you just want to speak to a person. First Orion's insurance consumer survey found that 49% of customers prefer speaking with a live person when they contact their insurance provider.

Nationwide's own consumer research points the same way: 58% of customers want to be able to reach an agent or claims representative over the phone. The same survey found that 36% want a digital claims tracker and 74% want their claims handled quickly.

So automation does not remove the need for people. When a claimant has a problem with their claim, they want to reach a real person. Human interaction is not always needed, though. People also appreciate being able to follow progress themselves, and above everything else they want a fast resolution. Automation serves both sides at once. Claimants can check status and receive updates without calling, while handlers hand off the tedious, repetitive parts of the job. That way, when a claimant does need a person's time, that person has it to give.

Technology keeps moving the expectation

As technology changes, expectations for claims service change with it. With email, texting, online shopping, and digital banking, wait times that seemed reasonable a few years ago now feel painfully long. Companies cannot tread water. If they do not move forward, they risk drowning under new customer expectations.

World Economic Forum research makes the point that innovations such as connected devices and mobile technology have reshaped everyday experiences. Because of that shift, insurers now have to meet expectations set not only by rival carriers but by the strongest companies in entirely different industries.

Some companies are getting it and some are not. Adoption of AI and other claims technology varies widely, and so do the results. Accenture's comparison of technology leaders against technology laggards put the leaders growing up to five times faster.

Are you a laggard or a leader?

Your company has no doubt adopted some technology. That does not automatically make it a leader.

If you are running an inefficient claims system, that is a serious problem, and it is not something you can bandage over and pretend is fine. You need a real change. Genuine modernization is not a piecemeal adoption of one tool here and another there. It is an overhaul of workflows and operations, the kind that comes from consolidating onto a single claims platform rather than stitching together disconnected point solutions.

If you do not make that change, your competitors will.

Consider the full implication of Accenture's findings. Many claimants are unhappy, and roughly three in four of those unhappy claimants may switch to another carrier. That is where the $170 billion figure comes from.

Customer churn is a problem for insurers, and it is also an opportunity. People may not enjoy dealing with insurance companies, but most accept that they need homeowners and auto coverage. When a customer leaves one insurer, that company loses the premium, but the customer still needs cover, so another company gains it. Premium at risk on one side of the market is premium available on the other.

How customers pick a new insurer

Although insurers can expect to gain some customers while losing others, they should not assume the two cancel out. A company offering a better claims experience may lose very few customers while gaining many, which is real growth. A company offering a poor one may see the opposite: heavy churn paired with a struggle to attract anyone new.

Cost is a big motivator, but it is not the only reason people switch. ValuePenguin's auto insurance shopping survey found that 47% of people who chose not to switch at their most recent renewal said it was because their insurer offered the lowest rate, while 35% said it was because they liked the customer service.

When customers do start looking, they get some quotes and they read reviews. The internet has made bad reviews and public complaints easy to find, and plenty of people weigh that heavily when choosing a business. Think with Google's consumer research found that 53% of shoppers say they always research a purchase first.

A poor claims experience puts customers and their premium at risk. It also produces negative reviews and public complaints, and that reputational damage makes it harder to attract new customers in the first place.

Frequently asked questions

How much premium do insurers risk from poor claims experiences?

Accenture research based on a survey of more than 6,700 policyholders found that insurers providing poor claims experiences risk losing up to $170 billion in premiums over five years. Accenture found that 31% of claimants were not fully satisfied with their home and auto insurance claims experience over the prior two years. Among that dissatisfied group, 30% had already switched carriers and another 47% were thinking about it.

Does claims automation replace the need to talk to a person?

No. First Orion's insurance consumer survey found that 49% of customers prefer speaking with a live person when they contact their insurance provider, and Nationwide's research found that 58% want to be able to reach an agent or claims representative over the phone. Automation lets claimants check status and receive updates without calling while handlers hand off the tedious, repetitive parts of the job. When a claimant does need a person's time, that person has it to give.

Does claims service affect whether policyholders stay with their insurer?

Cost is a big motivator, but it is not the only reason people stay or switch. ValuePenguin's auto insurance shopping survey found that 47% of people who chose not to switch at their most recent renewal said it was because their insurer offered the lowest rate, while 35% said it was because they liked the customer service. A poor claims experience also produces negative reviews and public complaints, which makes it harder to attract new customers in the first place.

Making the right investment

Most insurers know they need to invest in technology. The real question is which investments return the most.

Among competing priorities, the claims experience belongs near the top. Poor claims experiences drive policyholders away and create reputational damage, on top of the cost of running long and overly complicated processes. Whether you are a carrier managing high volume, a TPA juggling several client programs, or an independent adjusting firm trying to grow without adding headcount, the fix has the same shape: one integrated claims system instead of several partial ones.

A more efficient claims system improves customer satisfaction and reduces cost at the same time. Unresolved inefficiency also has a way of surfacing later as claims leakage that quietly erodes the loss ratio, and the claims oversight view is where that usually shows up first.

The honest way to size the opportunity is to work it out on your own operation rather than on a vendor's. Our guide to the cost of inefficient claims processing sets out the inputs and the arithmetic, and a demo shows which of those numbers the platform reports on day one.