Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor!

A Long-Term Perspective: Balancing cost and quality in insurance claims management

Claims represent the moment of truth in insurance. These interactions are where the insurer and its claims management partner deliver on the promises made in exchange for the policy premium.

Because the cost of acquiring a new customer is often substantially higher than the expense of retaining an existing customer, delivering a positive claims experience has a significant value for all parties. Quality in claims management throughout the entire process – from first notice of loss through adjudication and payment – strongly influences claimant satisfaction with the insurance company. A quality claims experience also greatly increases the likelihood of customer retention, renewal and opportunities for account growth. Put another way, investing in quality claims management delivers tangible, sustainable financial returns for insurers.

On the other hand, a negative claims experience can leave claimants dissatisfied and make policyholders more likely to seek other insurance partners, a downward spiral that increases expenses for insurers and can tarnish a company’s reputation in the marketplace.

In this whitepaper, Crawford & Company® explores how taking a long-term perspective on cost and quality in claims management increases value for insurers and provides advantages in the long run, through improved customer satisfaction, fewer errors and quicker resolution of claims.

Table of contents

The importance of quality in claims management

Cost considerations in claims

Strategies for balancing cost and quality

Future trends and challenges

Conclusion

The importance of quality in claims management

Insurance claims can be complex, but defining quality in claims management is relatively simple. A quality claims management experience is one that is completed accurately, in a timely manner, that results in high customer satisfaction. High levels of satisfaction increase customer retention and establish a strong foundation for long-term relationships.

In the claims management process, there are essentially two customers – the claimant and the insurance company paying the claim. Quality claims management matters to both. Speed and accuracy are important to claimants as well as carriers.

Communication throughout the claim process is a strong driver of quality. Clear communication, delivered with empathy while advising customers on what they can expect, can elevate a claims experience from a quality perspective and build trust.

Digital technologies are one part of the equation when it comes to delivering quality in claims management. Other important factors are professional expertise and service rendered with empathy and dedication.

Impact on customer satisfaction

Quality in claims service is strongly correlated to customer loyalty. Ease of doing business with an insurer throughout a claim is a key component in the customer experience, as studies show.

The J.D. Power 2024 U.S. Claims Digital Experience Study found that new digital claims reporting features are increasing customer satisfaction scores with automobile and homeowners insurers. According to J.D. Power, overall satisfaction with the digital claims process was 871 on a 1,000-point scale, up 17 points from 2023.

Applications have taken center stage in the personal insurance customer experience, as J.D. Power said satisfaction scores were highest when insurer mobile apps were used to report a claim, submit photos and/or videos, and receive updates from insurers.

An area of improvement is insurers’ human follow-up with customers who use digital communication channels, the study found. Even though 84% of claimants indicated their insurance company provides an easy digital communication process, only 39% said their insurer always responds in a timely way to email and text messages.

Notably, almost 20% of customers use more than one channel when they have a question, which is a point of frustration that lowers satisfaction by more than 100 points, according to the J.D. Power study. Having multiple channels for communicating with policyholders is positive, certainly, as customers’ preferences vary. However, lack of responsiveness to customer inquiries – especially on a claim – is a negative experience that can cost insurers in the short and long term.

Reducing errors and fraud

Improving accuracy in claims management offers advantages to claimants as well as insurance companies. Errors in claims adjusting can result in a range of outcomes, from delayed settlements, to additional expenses, longer cycle times and inflated case reserves.

Quality control is critical in minimizing errors and detecting claims fraud. Technologies, tools and methods are available to enhance quality by reducing errors and identifying signs of fraudulent activity.

An example is Asservio, a digital estimate review software that Crawford uses to automate quality assurance and expedite the claim estimating process. This tool is customizable for insurance companies’ adjusting guidelines. Through its rules-based engine, Asservio:

• Improves accuracy

• Maintains consistency

• Accelerates cycle times

• Drives continuous improvement

Cost considerations in claims management

An insurance company’s outlay in claims is typically measured in direct costs – that is, claim payments and administrative expenses, which include claims management. Keeping those expenses from fluctuating is important to the overall profitability of the insurer.

Direct expenses are not the only costs an insurance company can incur. Indirect costs should be considered as well. Indirect expenses include customer churn and reputational impairment. An adverse claim experience, stemming from low quality in claims management, may deprive the insurer of a policyholder and taint the company’s perception in the eyes of customers. That, in turn, increases customer acquisition costs.

A look at U.S. property and casualty insurers’ loss and expense ratios shows variability in both since 2019. Losses in a given year fluctuate more than administrative expenses, but even a one-point difference translates into a meaningful financial measure. For this reason, insurance companies should adopt a long-term view of claims management as they pursue growth and profitability.

Source: NAIC

Short-term vs. long-term costs

Expense management is a critical function in any business, and it’s particularly important for insurance companies, which assume risks on their balance sheets in exchange for policy premiums. The long-term financial health of an insurer depends on maintaining a balance of income and expense.

It is relatively easy to find expenses to trim in an effort to achieve short-term savings. The challenge for insurers is knowing what factors are driving their costs and how to sustain savings over the long term. For example, reducing junior staff or implementing hiring freezes as experienced employees leave can save money in the short term. Finding and replacing talent in insurance, particularly in the claims function, is difficult.

A focus on minimizing short-term costs can result in larger expenses over the long term that create a financial drag on insurance company operations. This can hamper insurers’ competitiveness and put pressure on growth plans.

Strategies for balancing cost and quality

An optimal use of claims management services strikes a balance of cost and quality that enables consistent outcomes. The following are strategies that can help insurers achieve that balance.

Best practices in claims management. Important investments in claims quality include training and development programs for claims adjusters and adoption of standardized procedures and guidelines. Skill development and maintenance are necessary for all levels of adjusters, while repeatable procedures are fundamental to consistency.

Leveraging technology. Existing and emerging technologies offer new ways to augment claims management. For example, artificial intelligence and machine learning can deliver quantum leaps in efficiency when it comes to claims processing, sorting and assigning claims to different resources. Blockchain technology is another tool that offers transparency and fraud prevention with data that is shared by multiple parties. Smart contracts are programs that can be stored on blockchains and activated when certain conditions are met, and all related transactions can be verified and monitored.

Continuous improvement. Another strategy for balancing cost and quality is to implement methods for ongoing assessment of quality and improvement. Integrating customer feedback mechanisms can support the refinement of claims processes to drive further improvements in quality.

Balancing cost and quality with digital desk

Intelligent automation using Crawford’s Digital Desk solution is a way that insurance companies can effectively balance cost and quality in claims, while achieving greater efficiencies. Digital Desk combines AI-powered triage, enhanced efficiency that increases field capacity and optimization of expenses and claims outcomes that seek to exceed policyholder expectations. Insurers can deploy Digital Desk as software-as-a-service that integrates with in-house systems or as a managed service. Here’s an example of Digital Desk at work:

A tree falls in a storm that damages the property of a homeowner, who files a notice of loss with his insurance company. Digital Desk triages the claim and makes tailored recommendations to dispatch an inspector to photograph the damage and gather information from the policyholder. An experienced desk adjuster using Digital Desk reviews the documentation and keeps the policyholder informed throughout the claim process. Digital Desk enables the insurer to quickly assign claims to the right resources to meet the policyholder’s needs, while keeping field adjusters available to process more complex claims. This solution balances cost and quality while delivering service that surpasses the customer’s expectations.

Two paths to unlock value in data

Crawford’s ConanTech℠ solutions combine the company’s technology and consulting expertise to assist clients in various industries. ConanTech is available through turnkey software solutions, including Data as a Service (DaaS), Software as a Service (SaaS) and Business Process as a Service (BPaaS), as well as consulting engagement to enhance clients’ in-house data capabilities.

With ConanTech, businesses gain impactful strategic insights, a clear vision of areas for improvement, and the ability to integrate with existing business processes.

Future trends and challenges

_{The claims field is undergoing a technological transformation. Advances in predictive analytics, the Internet of Things (IoT), AI and other digital capabilities are providing real-time visibility and more efficiency in claims management. These gains are occurring across the spectrum of claims, from simple residential incidents to complex commercial losses.}

Technology improvements are making possible new and faster ways to inspect, estimate and settle claims. Crawford is utilizing technology that enables rapid assignment to resources that align with the complexity of the claim.

For example, a desk adjuster often can gather all the data needed to process a high-frequency, low-severity homeowners claim – saving the time and expense of sending a field adjuster. On the other hand, a complex industrial claim might require dispatching a highly experienced adjuster with specialized expertise and sophisticated inspection equipment.

A key to technological innovation is the use of data. In claims, data is the fuel that powers decision making. Collecting and analyzing claims data is becoming easier with tools that assist adjusters as well as claimants.

In an increasing number of personal insurance claims, policyholders are using apps to upload photos and other evidence of loss, which become part of the claim file. Insurance customers’ preferences vary on self-service tools. Some prefer to interact personally with a claims professional, while others are content to exchange information via chat, text or email. As consumers’ comfort with new technologies evolves, so too will their expectations. Insurers and claims management providers will need to adapt to meet customers’ expectations for quality service.

Conclusion

When insurance companies achieve a balance between cost and quality, they position themselves for long-term success. Quality claims management results in consistent outcomes, operational efficiency and customer satisfaction.

Timely, accurate and responsive service in claims provides benefits to insurers and policyholders. Both obtain financial certainty, and the positive experience reinforces trust in the insurer/insured relationship. Customer loyalty earned in this way offers long-term value.

Optimizing claims management is possible when insurance companies take certain steps. These include:

• Viewing claims management services as a strategic investment in the long-term health of the company. Seen this way, quality claims management is far more than an expense; it becomes a high-performing investment that delivers significant returns over time.

• Selecting a claims management partner carefully. A quality claims management partner embeds innovation and continuous improvement in its processes, seeking to develop solutions that meet the diverse needs of insurers and claimants. Prioritizing customer satisfaction, a quality claims partner becomes an extension of the insurer’s team and brand.

For more information, please visit www.crawco.com.