Insurance industry is all about managing risk based on assumptions and pools. Here is a handguide that will walk you through the process of insurance claims processing
The insurance industry, while one of the oldest institutions out there, is today grappling with modernization, dwindling investments, and a near-hostile regulatory environment. Apart from these there are broader challenges out there too, including demographic shifts, changing customer behavior, and emerging markets which are too tough to break into. All this together is shaping the industry's long-term future. At the heart of it all rests what the insurance stands for - offering financial coverage to individuals or companies to cope with losses. Insurance claims and their pay-outs are increasing through every industry vertical - from health insurance to motor and even personal claims.
Insurance claims processing is now much longer, and more time-consuming process, especially given the fact that insurance fraud is also on the rise. Insurance frauds amount up to $80 billion a year in the USA alone, costing 5-10% of claims costs to insurers in the USA and Canada. As a result, it is extremely important to understand A to Z of insurance claims processing and ensure your claim does not get counted as a fraud.
What Are Insurance Claims?
The very fortunate might never have to make an insurance claim, but when things go off the track or there are unexpected disasters or accidents, you can make an insurance claim provided you had yourself or the property that got damaged insured with a registered insurer.
When a claim against insurance is filed, it is a formal notification to the insurance company that a loss or damage has occurred at your end. In one calendar year, about 5% of home policyholders and 16% of motor vehicle policyholders file an insurance claim. Insurers are supposed to review the claim, understand the sequence of events, and explain the risks covered as part of the policy. This is the stage when insurance claims go through the processing phase, where the insurance agents check for proofs and go through the conditions of the policy to work out the value of the claim and the benefits to be provided.
There are various types of insurance claims, each with its own complexity and procedure, but if you ever find yourself asking the question - what is claim process? then the answer is usually very similar for the claims listed below -
First Party Insurance Claims
For insurance policies directly purchased by an individual from an agency.
General Insurance Claims
These claims are usually made for policies which cover various aspects of a person's property, medical history, or personal health. General insurance claims are not very common though.
Car Insurance Claims
One can choose to insure his/her car against theft, third-party damage, and first-party damage and is one of the most common types of insurance claims that companies deal with.
Health Insurance Claims
Health insurance is extremely important in a country like the USA where the cost of healthcare is exceptionally high. These claims usually run into thousands of dollars based on conditions being treated for.
One can insure their homes against theft, property damage, etc. and while this remains one of the most common insurance policy purchases, claims are relatively on the lower side.
Natural Disaster Claims
One can insure their home or property against natural disasters, and such claims can run into millions of dollars.
How to File an Insurance Claim?
Insurance claims can be filed with or without the assistance of claims processing company. The filing process involves collecting itemized invoice and completion of the claim form. One thing to remember is that the turnaround time for evaluation depends on the accuracy of the furnished information as well as the availability of all necessary documents to justify the claim. Once all documents are organized in the correct order, notify the insurer before dispatching. Also, it is a good practice to ask the insurer beforehand if there are documents outside the actual checklist that may be mandatory and the preferred method of file transmission, whether it is by email or fax. A copy of the original receipts must be retained so that any further complications can be dealt efficiently by referencing the copies. In the final step, the sender must inquire the turnaround time for the insurer to complete the evaluation.
How Are Insurance Claims Calculated?
It is to be noted that insurance claims are never paid out in full by the insurer, apart from some exceptional cases. Usually, both the insurer and the insured must split the expenses for a claim, with the insurer paying a bulk of the amount. In most insurance plans, the insurer applies a clause known as the average clause, where the loss is limited.
The actual amount of claim is determined by the formula -
Claim = Loss Suffered x Insured Value/Total Cost
Most insurance companies are expected to swiftly assess the veracity of claims and pay out the assured value that is disclosed in the policy documentation.
Have you ever wondered how long does an insurance company have to settle a claim? According to the General Insurance Code of Practice, insurance companies must respond to your claim within 10 business days and let you know whether they will pay out the claim or not. But to facilitate this, it is imperative that you understand the exact nature of the process.
The Insurance Claims Process Explained
Insurance claims do not depend on only one person. Filing a claim alone does not mark the completion of the process. Before you file a claim, ensure the following are in order -
Take photos, documentation, death certificates, medical reports, property casualty reports, and other shreds of evidence to justify the insurance claim. This evidence will ensure your claim inspector takes the matter seriously and that no one tries to distort the facts.
Check the Time Limit
Different states and policies have different timelines within which they need to honor the claim, but more often than not it is 10 days.
A regular insurance claim process typically has 5 main stages, which are -
Connecting with the Insurer
Whether you took your insurance from a company or a broker, your primary contact will be assigned by them as soon as you make the first call. The insurance provider will need a detailed list of items that you are claiming for, and the adjuster assigned to your case will then follow up for all the other requirements including submission of proof etc.
Once you have reported the claim, the insurance adjuster assigned to your case performs a thorough investigation, determining the loss or damages suffered and those that are covered by the insurance company. If any other liable parties are involved, the adjuster will identify them as well.
Once the investigation is over and all facts have been corroborated, the adjuster goes through your existing insurance policy, checking for any lapses to determine what is and isn't covered by the policy. In case of any deductibles, you are notified at this point in time.
In order to thoroughly evaluate the extent of damage or loss, the insurance adjuster hires a team of appraisers, contractors, etc. which varies from case to case. Once the evaluation is over, the adjuster will also help you with a list of vendors who can carry out repairs and are trusted by the insurer. This can help save time as well for you.
Based on the assessment the insurer directly makes the payout. In certain cases, they can make the payout directly to the vendor carrying out repairs or the hospital involved. In other cases, payouts are directly made out in the form of a check.
Common Matters That Delay an Insurance Claim
While not very common, occasionally there can be delays in the insurance claims process owing to extraneous circumstances such as the following -
Both the claimant and claims adjuster who works on behalf of the insurer needs to be in sync. Not answering calls from the adjuster or not providing proof of the incident when asked can also lead to delays in the claim being processed.
Sometimes, the actual coverage on policy paper might vary from the coverage promised by the insurer. In such cases, the claims process might take longer than usual.
Delays can also be caused when the insurance claim process from a third party, such as hospitals, body repair shops, etc. is exceptionally slow. Documents and proof might get misplaced.
Natural Disaster Claims
Such claims are notorious for delays caused as the insurance company is inundated with similar claims requests and has its hands full dealing with a massive number of requests.
No Cash for Deductible
As discussed before, the claimant needs to arrange for a deductible amount when making an insurance claim. If the money is not readily available, then the process takes longer as the deductible amount needs to be transferred by the claimant before the claim is honored by the insurance company.
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Reclaim Lost Time by Hiring Flatworld Solutions for Insurance Claims Processing
Whether you have a small local insurance company or a large multinational one, customer satisfaction is something everyone is striving for nowadays. With a whopping number of insurance claims to deal with on a daily basis, most insurance companies cannot make time for the actual processes or focus on the more important work. Therefore, we have compiled the A to Z of Insurance Claims Processing to prevent you from getting stranded in the wait state. With Flatworld's modern insurance claims processes, you can save both time and money while providing your customers with timely service. Flatworld Solutions has been a go-to partner for all insurance business process outsourcing. Be it insurance solutions for agencies, carriers, or back-office functions we have you covered. Our cost-effective rates, combined with high-quality services can further your business revenue and customer satisfaction.
Contact us now to know more about our services and how we can help you outsource effectively.