Claims is a core insurance function. After a policy is issued, the value of the insurance product for the policyholder largely depends on the insurer's ability to settle a claim promptly and fairly. Correspondingly for the insurer, its skills and execution in the claims process have a major impact on its financial results and on its reputation with customers, intermediaries, and regulators. Some of the best known insurance brands-State Farm as a good neighbor, Allstate's good hands- can be understood as giving assurance that customers suffering losses will be paid.New claims technologies and business practices are giving insurers the ability to increase underwriting profitability and policyholder value significantly. Effective utilization of these techniques will be an increasingly important way for insurers to differentiate themselves in terms of financial performance and market perception.
Today, insurers are facing two new kinds of claims issues: a wave of regulations and changing expectations. An alphabet soup of new regulations is affecting claims operations. For example, HIPAA (the Health Insurance Portability and Accountability Act) has major privacy and disclosure implications for medical, disability, and personal injury claims. SARBOX (the Sarbanes-Oxley Act) mandates accurate financial reports - which means accurate reserves based on correct claims information. And state laws addressing unfair claims settlement practices remain in place.
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