Automated Claims Processing
Claims processing is probably the most important function for any insurance company. This is because this process is where the insurance company actually delivers on its commitment.
The speed and convenience with which the claims are settled have a long bearing on the reputation of the insurance company.
Nowadays, most insurance companies have started automating their claims process. This decision is obvious given the numerous benefits that a company stands to reap after such automation has taken place. In this article, lets have a closer look at these benefits.
Reduced Data Entry
Customers are required to fill in numerous forms as a part of their claims process. The information received from these forms has to be entered into a centralized system. No processing can be carried out unless this information is available in electronic format.
Before automation was extensively implemented in the claims industry, entering this data into the system was a manual, time-consuming as well as expensive process.
However, modern technology has made it possible for software to directly read the information from forms and input it into the system.
Hence, the conversion of data from paper forms to electronic entries can be accomplished with very little manual intervention.
Since data processing is one of the biggest costs which is incurred by any insurance company, reduced data entry goes a long way in saving costs.
Completeness of Application
The lack of complete data is a major hindrance to fast processing of insurance claims. The reality is that in order to claim insurance, different types of documents need to be submitted. The list of these documents varies on a case to case basis.Hence, it is not possible to give a simple checklist which can be verified.
Since the requirements are complex, most insurance consumers miss out on providing certain information in the first go. As a result, their application is sent back, and they are asked to submit more documents.
The process usually goes back and forth a couple of times before the claim is actually processed.
The iterative nature of this process is a problem for both the insurance companies as well as the consumers. This is because the consumers have to wait longer before they can get the money which is owed to them.
From an insurance companys point of view, the continuous back and forth means the efficiency of the back office, as well as front office staff, is compromised leading to higher costs.
Eliminates Need For Storage
As already mentioned in the first two points, the claims process involves a lot of paperwork. Insurance companies are supposed to hold on to this paperwork for further reference. This becomes a problem since it is very difficult to maintain a physical archive.
With increasing automation in the claims processing industry, physical archives have now become obsolete. They are now being replaced by electronic archives.
Electronic archives are easier to maintain. This is because the process of archiving as well as retrieving documents can be automated. This means that considerably less manpower and money needs to be spent on maintaining the archive.
Also, since electronic archive does not occupy much space in the real world, the real estate costs are also saved.
The best part about automating the claims process is that the audit becomes extremely easy. If any insurance executive has accessed a particular claim file or has performed any action related to the claim, their information is automatically recorded by the system.
The software, therefore, creates a trail which can be easily checked while conducting audits. This feature is extremely valuable to insurance companies who have lost a lot of money in the past due to the connivance of their support staff with outsiders.
Visibility to the Consumer
From the consumers point of view, the entire claims process is a black box. This means that the consumer doesnt know what is happening to their claim until they receive the money. This creates a feeling of ambiguity and uncertainty.
Consumers do not mind waiting for some more time as long as they are in the loop regarding what is happening with regards to their claims.
New and advanced automated claims processing software makes it possible to provide this information to customers in a timely manner.
Customers are often provided with a flowchart to explain the various stages that their claim will have to go through.
A dashboard provides real-time to updates to customers whenever they log in to the system. Hence, automated claims processing software not only reduces costs by also enhances customer experience.
Identification of Fraudulent Claims
Automated claims processing software also has the ability to detect patterns in data. Hence, whenever auditors detect a fraudulent claim, they are supposed to flag it to the system.
Over the course of time, the software has its own database of fraudulent claims. The system can then run analytical operations on this data in order to identify patterns which were common amongst those fraudulent claims.
This data can then be used by the software to flag new claim applications which follow the same pattern and therefore may be fraudulent. Most claim processing software have the capability to continuously learn as more and more data points are added to their database over an extended period of time.
To sum it up, automating the claims settlement process has become a norm in the software industry. Companies that do not automate this process in the next few years may not survive since their administrative costs will be much more as compared to their competitors.
|❮❮ Previous||Next ❯❯|
Authorship/Referencing - About the Author(s)
The article is Written By Prachi Juneja and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.
- Risk Management - Introduction
- Benefits of Risk Management
- Principles of Risk Management
- Risk Management Process
- Risk Identification and Assessment
- Aspects of Risk Management
- Steps in Risk Management Process
- Approaches to Risk Management
- Risk Management Policy
- Commonly Used Measures of Risk
- Risk Management Plan
- Evaluation of Risk Management Plan
- Risk Treatment
- Role of HRD in Risk Management
- Enterprise Risk Management
- Implementing ERM
- Risk Management and Stock Market
- Outsourcing Risk Management Program
- Risk Management as a Profession
- Anticipating and Mitigating Organizational Risks in the Digital Age
- Challenges Facing the Australian Economy
- The Economic Costs of MeToo
- Automated Claims Processing
- Challenges in Global Insurance And International Claims
- Conflicts of Interest in the Insurance Business
- The Cost Structure in the Insurance Industry
- How Drones Will Impact the Insurance Industry?
- How Is Health Insurance Funded?
- How Self Driving Cars Impact Insurance?
- How Stock Market Volatility Affects Insurance Companies?
- Insurance Agents vs. Insurance Brokers
- The ABCs of Insurance Fraud in India
- Technological Advances in the Insurance Industry
- The Basics of Unemployment Insurance
- The Pros and Cons of Unemployment Assistance and Why it Matters in the Present Times
- The Role of Insurance In #MeToo Movement
- Why the Flood Insurance Market should be Privatized?
- Basics of Pet Insurance
- Cannabis Insurance
- Challenges Facing Cryptocurrency Insurance
- Evolution of Insurance Regulation
- Food Delivery Apps and Insurance
- How Does Captive Insurance Work?
- On-Demand Insurance
- Reinsurance vs. Double Insurance
- Solvency Regulations in the Insurance Industry
- Terrorism and Insurance
- The Basics of Microinsurance
- The Basics of Reinsurance
- Types of Captive Insurance Companies
- What is P2P Insurance?
- How Risks Affect Companies Providing Financial Services
- Risk Management Information System
- Disadvantages of Risk Management Information Systems
- The Known-Unknown Classification of Risk
- Operational Risk: Definition and Drivers
- How Regulations Have Affected Operational Risk?
- Identification of Operational Risks
- How to Identify Operational Risks
- Using Internal Loss Data to Mitigate Operational Risks
- External Loss Data in Operational Risk Management
- Risk Control Self Assessment (RCSA)
- Scenario Analysis in Risk Management
- Key Risk Indicators
- Basel Approaches in Operational Risk Management
- The Basel Risk Categories
- Cause Categories in Operational Risk Management
- Loss Distribution Approach
- The COSO Framework for Internal Control
- Mistakes to be Avoided While Building a Risk Management System
- Credit Rating Terminology
- Types of Exposures to Determine Credit Limit
- Types of Credit Events
- Active Credit Portfolio Risk Management
- Metrics to Measure Credit Risk
- Credit Derivatives: An Introduction
- Credit Linked Note
- How do Credit Default Swaps Work?
- Why are Credit Default Swaps Dangerous?
- Total Returns Swap
- What are Collateralized Debt Obligations and How do they Work?
- Collateralized Debt Obligations: Advantages and Disadvantages
- Mark To Market Accounting
- What are Recovery Rates? - Different Types of Recovery Rates
- Netting, Close Out, and Acceleration
- Expected Default Frequency (EDF)
- Expected Default Frequency: Advantages and Disadvantages
- Altmans Z Score Model
- Unexpected Loss and Economic Capital Buffer
- Stress Testing in Credit Risk Management
- Provisioning in Credit Risk Management
- How Corporate Governance Impacts Credit Risk
- Exit Strategies In Credit Risk Management
- What is Market Risk? - How its Measured and Sources of Market Risk
- Why is Market Risk Management Important?
- Introduction to Value At Risk (VaR)
- The Three Types of Value at Risk (VaR)
- Marginal, Incremental and Component Value at Risk (VAR)
- How Value at Risk (VaR) is Implemented?
- Backtesting Value at Risk (VaR)
- Advantages of Using Value at Risk (VaR) Model
- Disadvantages of Using the Value at Risk (VaR) Model
- How Margins Are Calculated Using Value at Risk (VaR)
- Market Risk Limits
- Tail Risk
- The Upside of Market Volatility
- Relationship between Volatility and Risk
- Importance of Data Quality in Risk Management
- Impact of Using Poor Quality Data and Metrics to Measure Data Quality
- Enterprise Risk Management (ERM) vs Traditional Risk Management
- Benefits of Enterprise Risk Management
- Corporate Risk Governance
- International Risk Governance Committee (IRGC) Framework
- Failure of Market Risk Management
- Mistakes to Avoid in Risk Management