Claims Service Affects Purchasing Decisions

Even though claims service provided by property/casualty insurance carriers represents a major factor in their ability to retain customers and attract new ones, insurers are not providing the level of service that is considered acceptable to corporate customers and consumers, two new studies conclude.Moreover, even well-capitalized carriers that possess the financial stability to support quality claims service appear to be dropping the ball.

Both conclusions were among several key findings contained within two recently released studies that examined the claims servicing side of insurance operations. One report, conducted by Warren, N.J.-based Chubb Group of Insurance Cos., polled 400 risk managers from publicly and privately held companies with annual revenues of at least $1 billion.

Chubb's report, "Influencing the Insurance Purchase," provides an in-depth look at how risk management professionals perceive the importance of claims service when making P&C insurance-buying decisions.

The second survey, conducted by global e-business consulting firm Accenture, examined consumer sentiments surrounding the P&C insurance claims process-from reporting a claim through settlement. Accenture's study was based on a random sample of more than 1,000 U.S. adults.

One common theme linking the two surveys is that quick claim settlement is a higher priority to both consumers and corporate clients than is the claim settlement amount they receive or the cost of the policy's premium.

Chubb's survey, for example, found that 76% of respondents believe claim service is a significant factor-if not the most important factor-in selecting a new property/casualty insurer, while 70% reported that claim service is highly important in evaluating their current property/casualty insurer.

"We know that everyone wants to pay less for coverage, but our survey demonstrates that price is not the driving factor in selecting an insurance carrier," says Mark Korsgaard, senior vice president and worldwide casualty claim manager, Chubb & Son.

Speed Supercedes

"The events of September 11 proved the value of working with a financially strong carrier that also delivers on its promise to pay claims fairly and expediently."

Although consumers may be willing to pay a little more to ensure quick claim settlement, they apparently are also willing to accept a smaller settlement award in return for expediency, Accenture states. Ninety-four percent of U.S. consumers who have filed a P&C claim cited quick resolution of their claim as highly important to their satisfaction with the claims process, while only 74% of respondents stressed the importance of the settlement amount offered.

Failure to heed this consumer mandate is rife with consequences since about 36% of risk managers participating in the Chubb survey reported that they terminated a relationship with a property/casualty insurer because of poor claim service.

Poor claim service is often presumably equated with a carrier's ability-through internal resources-to service the claim. But Chubb found that the problem is indiscriminate: Respondents rating the claim service reputations of 17 major property/casualty insurance companies collectively gave the highest and lowest scores to A++ carriers.

In short, there is no clear correlation between an insurer's financial strength and the quality of its claim service.

"What these professionals also need to recognize is that although an insurer's ability to pay is clearly linked to its financial strength, the quality of its claim service has much more to do with issues such as fairness and speed of payment," Korsgaard says.

Loyalty at stake

Indeed, Accenture's survey also found that the termination of a relationship with a carrier is a very real possibility if claims service is inefficient.

Nearly 90% of P&C insurance policyholders who are satisfied with how quickly their insurers handled their claims are likely to stay with their current insurance companies, Accenture states. Eighty-seven percent of those surveyed who are satisfied with the amount of the settlement are also likely to stay.

The lack of claims efficiency is due to several carrier missteps, explains David Hollander, partner for Accenture's claims solution group.

Customers are frustrated with the length of time and lack of communication involved in the claims process. Forty-two percent of claimants expressed dissatisfaction with the amount of time it took to settle their claims, while 62% stressed the importance of communication regarding their claim status. However, 41% expressed dissatisfaction with their claim rep's ability to keep them informed of their claim status.

"Claims handlers spend nearly half their day on required administrative tasks that have little impact on the outcome of the claim or on improving customer service," Hollander states.

"Insurers have a huge opportunity to improve the speed, accuracy and overall quality of customer service provided by their claims handlers. New Web-based technology can replace outdated claims-processing systems and automate routine processes, so claims handlers can focus on the core activities that have a direct impact on resolving a claim in a more timely manner," he adds.