ILC ARTICLE

Managing claims for maximum benefits

22nd June 2023

Managing Claims for Maximum Benefits

Claims management has always been an uneven landscape. The introduction of Consumer Duty next month will only add complexity – and, for insurers, jeopardy.

Here, Nikki Ceko, Strategic Client Director – Insurance, Davies, considers the impact the new regulations will have on the sector and identifies the key considerations towards achieving compliance.

Insurance claims management is changing. The introduction of Consumer Duty by the Financial Conduct Authority (FCA) in July not only represents one of the greatest regulatory changes within the claims industry for years but has necessitated the transformation of claims management.

Although it is merely the addition of a single Principle, it has a far-reaching impact across the complete claims journey, influencing and underscoring the FCA’s other 11 existing Principles for Business (PRIN), and placing the emphasis firmly on fairness and the customer.

However, while Consumer Duty is not to be considered a fiduciary duty or a duty of care, Principle 12 does mean that insurers are now being forced to adopt a new approach to claims management, one that puts customer care and clear communication front and centre. So, how can this be done in an effective but cost-efficient way? 

What does it mean for insurers?

The FCA described Consumer Duty as ‘… a significant shift in [our] expectations of firms. It introduces a more outcomes-focused approach to consumer protection and sets higher expectations for the standard of care that firms give customers.’

While we all like to think that customer care has long been a priority for our businesses, when you work within the field of insurance, it’s easy to overlook how bewildering much of it can be to a layperson. Jargon-packed communications, inadvertent misrepresentation, and mis-selling to vulnerable customers all still happen.

While customer vulnerability is a particularly important point of focus, with all insurers needing to take greater care over the identification and service of the vulnerable, Consumer Duty calls for a more proactive approach to all customer care, one that ensures that the FCA’s designated outcomes – whereby insurers always act in good faith, avoid causing foreseeable harm, and enable and support retail customers to achieve their financial objectives – are always achieved.

To do this, insurers must provide adequate support that meets the needs of consumers, throughout the lifetime of the product or service. This means that it should be no more difficult for a customer to make a claim than it is for them to buy a policy.

When customers have queries, there should be simple, easily accessible means for them to find the answers they need and when consumers wish to file a complaint, insurers should have clear processes in place to support that action. There should be an overriding ethos of taking auditable steps to avoid causing foreseeable harm, always recognising that one size can no longer fit all, necessitating the creation of a multi-channel approach.

So, that’s the theory. But what does this mean in terms of everyday claims management?

What does it mean for claims

For most insurers, Consumer Duty will require a complete review of all claims management practices, placing particular focus on:

• Timeliness of service – How quickly are claims (and other customer enquiries) dealt with? Are customers left waiting for the information they need? How long do customers typically have to wait before receiving a decision on their claim – and the actual pay-out? Excessively slow service is no longer acceptable. With artificial intelligence (AI)-powered claims assessment, claims handling can be expedited, making a particularly significant impact during times of surge. Through the automated analysis of historical claims data and policy information, AI algorithms can provide accurate and consistent assessments, leading to faster claims processing while ensuring fairness and adherence to Consumer Duty principles.
• Quality of service – There are so many areas in which customer service can fail; telephone systems, websites, or chat services can be difficult to navigate. Poorly designed websites that make it difficult for customers to find key claims-related information online can feel like deliberate obfuscation, while under-resourced customer helplines can not only lead to long wait times but to harried service. Limited access points for customer service can also impede customers from reaching the help they need. Self-Service capabilities can support changes in this area, with digitisation empowering customers to self-serve in certain claim-related tasks, such as submitting claim documentation online to initiating minor claims through automated processes.
• A lack of cohesion – Distribution and claims handling processes typically involve customers needing to deal with multiple parties in a chain. This not only opens the door to endless repetition and frustration but provides a clear scope for things to go awry.
• Deliberate discouragement – When an insurer prioritises pre-sales over after-sales and claims, they are sending out an overt message that the customer doesn’t matter, that profit is the priority and once they’ve gained the customer’s money they’re not interested in paying it back out. This message can be achieved through unnecessarily complex claims processes. The introduction of enhanced communication channels, and technology alongside an empathetic, highly-trained claims team can enable customers to interact with insurers effectively, and in a way that suits them.
• Smokescreening – Poor service can also be categorised by a lack of clarification. If it is unclear where or how a customer can access support, the process becomes unnecessarily stressful. With transparent claims tracking through online platforms or mobile apps, digitisation can enable real-time tracking of claims for both insurers and customers. Policyholders can easily track the progress of their claims, view updates, and receive notifications, promoting transparency and reducing uncertainty.

All of these examples could be in breach of Consumer Duty. So, what’s the solution? How can insurers improve their service, and manage claims for maximum benefit while adhering to the legislation without undue expense?

Technology and talent

Digitisation is crucial for insurers to integrate the facets of Consumer Duty into their claims management processes. The creation of digitised customer journeys can deliver maximum benefits for the consumer and insurer alike, providing fast, efficient, and effective service for customers while offering operational resilience and a complete compliance infrastructure for the firm. Whilst an automated claims process never will be able to replace the empathetic ear of a skilled claims handler, if the right solutions are selected, many of the core sticking points can be automated, reducing service time, and even empowering more customers towards self-service.

But there are a number of key areas of focus for insurers when digitising any system or process:

• Customer buy-in – How many of your customers prefer to pick up the phone and speak to a person when making a claim, over an online solution? Any digital transformation project needs to be managed with the customer front and centre.
• Legacy systems – The gut reaction is to simply rip everything out and start again but that’s not always necessary and it’s not always cost-effective. Working with a digital consultant will help you to ascertain the best way forward.
• Staged and prioritised implementation – You can’t do everything at once. To protect your data and your customers and avoid unnecessary disruption, you’ll need to modernise your tech in phases. So, identify your priorities and create a plan.
• Data protection – Consumer data protection is the priority in any technological upgrade. You need to work out where you will store your data and how you will prepare it to ensure that it is easily accessible and transferrable when required.
• Consider your outcomes – Digitisation is frequently motivated by cost reduction and it can be a significant help in that area. However, you also need to keep other outcomes in mind – customer experience, employee experience, business value, risk/risk reduction.
• Long-term strategy – No digital transformation should ever be embarked upon without a clear long-term digital strategy in mind. Otherwise, you’re setting yourself up for failure. In fact, according to Forbes (2021), 84% of digital transformations fail. This is largely because the needs of the business change and there’s no agility, no scope for scalability. So, look at your drivers for both urgent and longer-term change and review your operating model and what you want from it.
• Team buy-in – One of the most common reasons why businesses of all kinds struggle with digital change is employee mutiny, albeit on a small scale. If your teams lack enthusiasm, even the best training won’t garner the best results. Team consultations and training are invaluable before any significant system changes.

A people-driven approach

While technology has the power to dramatically simplify the onboarding of Consumer Duty, it is essential to combine it with a strong people strategy that meets your customers’ needs and wishes. Contact options are key and team training should be a priority. Relevant oversite planning and processes need to be put in place.

Consumer Duty has necessitated many changes within the insurance industry. The implementation period has been short, leaving many firms risking lack of compliance simply through uncertainty.

With the use of technology, claims management can be simplified and maximised. While it’s not a simple one-hit solution, and digital transformation won’t deliver an all-encompassing panacea, with the right support network, it can provide the adrenalin shot your business needs to get to grips with Consumer Duty in the first instance and to stay ahead as legislation, processes, and demands evolve. 

About the Author

Nikki joined Davies in 2023 to lead the growth and development of clients in the UK insurance market. As the Strategic Client Director for Insurance at Davies, Nikki is responsible for the strategic direction and stakeholder engagement in the General Insurance market.  

Nikki works closely with insurance firms to understand their position and goals, before combining her technical knowledge and problem-solving skills to provide tailored solutions which deliver tangible business benefits.  

Nikki is a regular contributor to Davies’ range of thought leadership and keeps abreast of the ever changing regulatory and operational landscape and the impacts on the insurance sector.

About Davies

Davies are a specialist professional services and technology firm, working in partnership with leading insurance, highly regulated and global businesses.

Davies helps their clients to manage risk, operate their core business processes, transform and grow. They deliver professional services and technology solutions across the risk and insurance value chain, including excellence in claims, underwriting, distribution, regulation & risk, customer experience, human capital, digital transformation & change management.

Davies’s global team of more than 6,500 professionals operate across ten countries, including the UK & the U.S., serving more than 1,500 insurance, financial services, public sector, and other highly regulated clients.

Nikki Ceko
Strategic Client Director – Insurance
E. nikki.ceko@davies-group.com
M. 0789 095 9029
L. https://www.linkedin.com/in/nikki-ceko-78849117/