Viewpoint: How Insurers Can Reconcile Claims, Customers, and Conflicts

In the eyes of a claimant or beneficiary who has just experienced a claim event, insurance is no longer a two-way contractual agreement; it becomes a guarantee on which payment is expected. This expectation, though understandable, chips away at an insurer’s right to manage claims, which is already under threat by some public perceptions that insurers are predisposed to deny claims.

In reality, insurers pay most claims. When they do deny claims, denials are largely based on misrepresentation or unmet terms and conditions. Although insurers cannot control attitudes towards the industry, they can positively impact customer touchpoints throughout the insurance value chain. By mindfully addressing these critical touchpoints, insurers can improve relations with customers and build claims policies and processes that deliver adverse decisions swiftly and fairly.

Interestingly, customer reactions to claim denials can be traced back to disclosures or lack thereof during the application process. Non-disclosures and misrepresentations continue to be a challenge for insurers.

London-based insurer Legal & General faced this challenge by launching a program called CYD – Check Your Details. Provided to applicants via a form or online app shortly after their initial application, the CYD program leads applicants through their disclosures to ensure they answered truthfully and correctly. This process reengages applicants with their disclosures and strengthens their awareness of the consequences of non-disclosure or misrepresentation. Following a claim, the insurer can reference the customer’s CYD sign-off as a reminder that they had the opportunity to check their details. L&G created this video for agents and brokers to illustrate the importance of CYD and “highlight the impact that incorrect information, or not sharing important information, can have on a client’s claim.”

Annual claims reports sent to customers can be another powerful tool to transparently share information about claims outcomes. Insurer Aviva shares “claims not paid” data across its major product categories. In its 2023 customer report, Aviva stated that it declined fewer than one in every 100 claims for life insurance and terminal illness and shared its top reasons for decline, including misrepresentation and unmet definitions. These reports remind customers that most claims are paid and build awareness about the reasons claims are denied.

Another element that insurers have within their control is the experience and training of their claims teams. This factor is particularly important as the industry develops more medically and financially complex insurance products.

In the past, many insurers hired recent college graduates for claims processing positions. Inexperienced professionals could handle the administrative aspects of the job, but what about the high-pressure prospect of communicating a denial to an emotional customer? Or explaining the specific terms and conditions of a complex disability income insurance (DII) product?

Ideally, the claims team dealing with complex living benefits like DII or critical illness products should either have a legal or medical background. Allied health professionals like nurses, psychologists, or occupational therapists also have a strong skillset for claims adjudication: medical experience and frontline customer experience.

It takes more work to recruit and train these experienced professionals, but the results are worth the effort. An insurer’s claims team will have the skills needed to talk to customers, explain policies, and understand the ins and outs of complex insurance products.

Excellence in claims service can and should be a strategic focus for all insurers and is particularly important at the point of a denial. Consider focusing on these elements to enhance customer experiences during claim denials:

· Provide user-friendly systems for submitting documentation: Adopt digital processes that allow policyholders to easily submit documentation. People may be caught up in the financial and emotional aftermath of a loss or injury; reduce their mental load by providing clear pathways to submit information.

· Do not delay: If an adverse decision is the likely outcome of a claim, try not to prolong the inevitable with delays or requests for additional evidence. Claims teams should make decisions quickly and confidently.

· If possible, pick up the phone: Many policyholders still receive a denial letter or email that is densely written and runs on for multiple pages – not the best way to receive bad news. Whenever possible, claims professionals should contact policyholders by phone and provide – with respect and empathy – clear information about the adverse decision being made on a claim.

Claims teams have valuable insights on how products play out in reality. They know the pain points of contracts, the terms that are confusing, and the type of misrepresentations or non-disclosures that result in denied claims. Wherever possible, develop feedback loops so product development teams can use those insights to make needed changes.

For example, frequent non-disclosure issues could indicate an insurer needs to redesign their forms or consult with behavioral scientists to develop questions that illicit more fulsome customer disclosures. Claims teams should also have access to a formal process for sharing concerns about policy wording.

Declined claim analysis can provide helpful data – and not just about how an insurer’s outcomes compare to its competitors. Discovering why claims are denied can lead to impactful changes and improvements in product development and application design. But those outcomes are only possible if claims professionals are empowered and enabled to provide actionable feedback.

It is never easy or enjoyable to deliver bad news to a customer. But the right to manage claims – and make difficult claims decisions – is and always will be central to an insurer’s business. By investing in claims teams, dealing directly and fairly with customers, and tying claims outcomes to overall business strategies, insurers can slowly and surely turn the tide on public perception and achieve our industry’s goal of protecting people when they need it most.