Claims have been seen as the Cinderella of the protection world. But as Karin Lloyd points out, that is about to change
The "customer experience" seems to be the phrase of the moment in many of the world's life, critical illness and disability insurance markets as the industry wakes up to the need for service as a differentiator in a competitive world, where products are largely commoditised and homogenised.
The claims function has made some progress in recent years, albeit patchily and with huge variation between companies. But it has often been the last area to get the attention of senior management and the investment that goes along with their focus.
In some ways, this is understandable in the current climate, with so much time, energy and budget going into meeting new and wide-ranging solvency regulations. But in other ways, it is deplorable that the basis of what we sell as an industry, which is the promise to pay a claim, is still cast as a back-office poor relation.
While money has poured into the buying process, with online quotation systems, tele-interviewing and underwriting rules engines, claims has been left behind, despite having many similar procedural requirements and the same customers with the same communication needs.
AN EYE ON THE ESSENTIALS
A recent survey (see below) conducted together with SelectX examined the current landscape for life and disability claims processing, the case for investing in technology, the importance of data in portfolio management and new customer propositions enabled by technology. It concluded that customer experience featured as the top driver for investing in technology in the claims function among 122 life and disability insurers worldwide.
There was support for extending facilities such as tele-interviewing, rules engines and online self-service into the claims function, with the survey group predicting that more than 20% of claim notifications would be handled through online self-service within the next five years compared with less than 5% today.
Not all customers are the same: companies will have to keep open a variety of communication channels and make it easy for the customer to choose between them. Customers cannot be pigeon-holed into being one sort of customer or another from a tick-box at the outset of their policy.
Buzzwords central to delivering an enhanced customer experience are choice, control, flexibility and transparency. These shift the customer to the centre of the picture, with the processes revolving around them, a dramatic change from typical current practice where the insurer's procedural requirements are at the centre.
When people in the industry talk about insurance, especially income protection, the question of fraud often pops up and many companies are still heavily influenced by the fraud percentages seen in general insurance.
If a life, critical illness and disability insurer retains an underlying mindset that all policyholders are potential fraudsters (guilty until proven innocent), it will find it hard to implement the changes discussed.
In any case, there is little supporting evidence. In the UK, the majority of insurers pay more than 90% of claims for these products, and of the ones that are declined, only a tiny fraction is classified as fraud.
Percentages vary from market to market but most people who claim on these types of product are not committing fraud. Of course it has to be taken seriously but if it dominates insurer thinking, opportunities to compete on claims service and to make that transparent to potential customers as well as existing ones, will be lost.
The investment required in thinking through this change as well as implementing any supporting technology, is significant, but it will pay off: in faster service, reduced costs and, not least, happy customers who, having experienced good service at the point of need, can act as advocates for the brand among their peer group in a networked world.
Karin Lloyd is MD of consultancy Karin Lloyd
