The claims department can be a profit-making generator to the company rather than only settling claims, and increasing loss ratios for the client equally.
There is nothing more satisfying to the clients than an efficient claims executive managing the file and fulfilling the promise made inside this piece of paper called “Insurance Policy”.
After all, Insurance is all about indemnifying human assets against different risks (life, health, property, vehicle, shipment, etc) depending on the insurable interest in hand. Having said that, once the loss is occurred, any individual relies on his nearest peers for help (family, friends), and in this case it is the Insurance Company.
Just imagine how large are the expectations that the client has from the insurers upon claim occurrence, so it is a huge responsibility to handle: “Human, Ethical, Social, and Financial”!!
On the other side, the claims executive has a legal binding to put the company’s interests as Top Priority in his operational duties, and being the “Front Office” guy upon claim occurrence, he’s the official representative of the company, so it’s his responsibility to apply the policy’s terms and conditions and honour the client’s right in proper indemnification.
1- Insurance companies benefit from the Volume game in its commercial deals with providers (hospitals, workshops, loss adjusters, etc), therefore they should always strengthen on this factor to have wholesale price scale;
2- There should be consistent internal auditing for the claims operations, in order to check effective & efficient operational practice is implemented at all times, and to set Standard Operating Procedures (SOP) for each line;
3- Due to the large number of Third parties involved in the claim operation (Workshops, medical providers, etc), daily monitoring is essential to first check the customer service level they are providing to your clients, and second to monitor the convenience of judgements against certain claims;
4- This is already implemented in the healthcare insurance, and in my opinion can be implemented in the motor insurance as well, in order to create a competitive advantage on one hand and push down the loss ratio on the other. This formula can work perfectly for vehicles above 5 years of manufacture, and for Motor Third Party Liability claims.
5- Again, Inter-Departmental communication with the technical team is of crucial importance especially for complex Non-Motor claims where there has been significant correspondence about the risk in caption;
6- : The never-ending dilemma… When to settle an ex-gratia payment? Under which circumstances? For which clients? And what is the percentage to be paid? Ex-gratia payment is a voluntary payment by the insurer for certain claims for non-technical reasons. Mainly these payments are done for commercial reasons, and the insurer should take into consideration a commercial benefit out of such payments;
7- Disregarding all other aspects, claims are considered a second contact with the client after policy issuance, so claims executives should be trained on Cross/Up selling techniques in order to use them AFTER finalizing the claims process and ensure that the client is satisfied from the service provided. Based on my market experience, the insurer can easily win a large portfolio from one simple motor claim fairly solved by the insurer;
8- with reference to the above point, and since Sales isn’t in their job descriptions, I strongly recommend to implement an incentive scheme for them, which will encourage them to solve the claim efficiently as it will give them the opportunity for a selling opportunity that will generate additional income;
9- This condition is of utmost financial importance to have a healthy balance sheet, as any exaggeration in the claim reserve made by the claims executive will affect it negatively. Therefore, the staff shouldn’t make any reserve until he receives material information about the exact claim cost. The reserve might look unimportant for simple claims, but is very important for large ones (i.e. Engineering, Onshore & Offshore claims, Property, Marine, etc);
10- Vis-à-vis the client, he receives the indemnification from the insurer and signs a discharge. However, if other parties are involved in the claims and there has been liability proven against them, the insurance company must use its Subrogation right to recover it. The same applies for the Contribution clause. This can earn a lot of valuable money and limit the loss.
This will affect the reinsurance as the company will benefit from a higher risk exposure and have competitive advantage
Having said all of the above, and if properly implemented, it will give a huge advantage for the insurance company on two levels:
In conclusion, the claims department can be profit-generating one if the above 10 measures are properly followed. At the end of the day, it is the claims operation that truly sets the benchmark for an insurance company performance.