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Claims satisfaction: The most challenging insurance metric?
How a claim is handled can be the most important factor in determining client satisfaction, yet it appears insurers in general may not be correlating claims satisfaction with individual customer retention. Is claims satisfaction the most challenging metric in the insurance industry?
Whoever coined the business maxim, "The customer is always right," probably never had to investigate an insurance claim.
Whether because of a dispute over policy language, the circumstances surrounding a loss, or the potential for outright fraud, claims professionals have a delicate balancing act. They need to pay legitimate claims in a timely manner, which should keep most customers satisfied. But they also have to hold the line if their investigations justify lower reimbursements than requested, or result in outright rejection—even if that means going to mediation or litigation, which could make the relationship adversarial and raise the reputational and financial stakes even higher.
If adjusters are too strict or overly suspicious, they may drag out or deny valid claims unnecessarily. In such cases, even if they eventually pay up, any delays or unnecessary hassle may still leave policyholders with a bad taste in their mouths. This could undermine retention and may prompt complaints that go viral over social media. There even might be regulatory implications. Yet if adjusters are too trusting, lenient, or eager to please, they risk giving away the store and sending a carrier’s loss ratio through the roof, even while customer satisfaction ratings rise.
How to reconcile these two conflicting missions—to protect insurers from invalid claims while keeping customers happy during the moment that matters—was a major point of discussion among chief claims officers during a recent summit I attended in Baltimore, MD organized by the Claims and Litigation Management Alliance (CLM), part of The Institutes' family of organizations.
Claims satisfaction: A challenging metric in the insurance industry
This isn't a new topic, to be sure, so why hasn't this paradox been resolved? Frankly, because claims people have a really hard job—often stuck between a rock and a hard place. Even if they do exactly what they are supposed to, and are totally in the right, their fair and reasonable decisions may very well leave customers dissatisfied. That’s why claims personnel require perhaps the most diverse skill set in the industry. As they gather and assess evidence, interview claimants and witnesses, and review policy language, they must be part detective, part defense attorney, and part psychologist—a combination of Sherlock Holmes, Perry Mason, and Sigmund Freud. Try incorporating all that into a "Help Wanted" ad! More importantly, they are also part customer relationship manager. Indeed, they are the face of their insurer at the worst moment for a policyholder—when a loss occurs. How a claim is handled can be the most important factor in determining whether buyers renew their policies, how they characterize an insurer to family, friends, and colleagues, and whether a dispute escalates into outright confrontation in court. Yet it appears insurers in general still haven't quite gotten the hang of determining how satisfied their customers are about claims handling, and what impact that may have on their business.
For example, I was surprised to hear that many carriers may not be correlating claims satisfaction with individual customer retention, which would seem to be an important metric.
I also learned that many insurers don't survey those whose claims are denied. Most likely they assume such policyholders will be disgruntled and therefore can't be trusted to provide a fair assessment of how or why their carrier decided not to pay them. But doesn't surveying only those claimants who get paid skew satisfaction levels higher than they really are? Or are insurers assuming that all denials not only are proper, but also well-handled? Even if the feedback from "denials" often turn out to be no more than sour grapes, it might be valuable to hear the policyholder's point of view—unless perhaps fraud is suspected or already proven.
In addition, if a claim was rejected for lack of specific coverage for the event, it may mean the sales process was not clear in what is covered, while presenting an opportunity to sell additional coverage or a rider, which could be beneficial to the customer relationship.
It was also odd to hear that many carriers don't survey agents about customer satisfaction with claims handling. Agents are often the first contact for clients who suffer a loss, as policyholders may be confused or intimidated by the claims filing process. If a claims delay or dispute arises, it's usually the agent who gets an earful and is asked to intervene. Agents should therefore be a prime source of market intelligence in this regard. What's more, I would think an agent who gets too many complaints about an insurer's claims handling is more likely to move business away from that carrier—so wouldn’t it be better to hear about problems sooner rather than later?
In addition, there was little mention of what is being said about insurer claims handling on social media. Is such feedback being captured and factored into a carrier’s satisfaction assessments? Given how much weight people seem to put on social media reviews for all sorts of products and services, from restaurants to contractors to doctors, it might be wise for insurers to pay close attention to this key barometer.
Customer relationship management: A work in progress
When push comes to shove, people are generally aware of insurers (outside of the initial sale and renewal quote) only if the ultimate moment of truth arrives—that is, something bad happens and they need help, financial or otherwise. An unsatisfactory claims experience can make a bad situation worse, while a good one can save the day.
I opened with one business maxim, so I'll close with another—what gets measured, gets done. Tracking satisfaction with claims handling is no exception. The more information insurers gather, correlate, and leverage, the better. It may be unrealistic for carriers to always keep customers satisfied, given the nature of their business. But claims satisfaction should remain a critical component of an insurer's overall customer relationship management challenge, even if it's still a work in progress.
What gets measured, gets done.
QuickLook is a weekly blog from the Deloitte Center for Financial Services about technology, innovation, growth, regulation, and other challenges facing the industry. The views expressed in this blog are those of the blogger and not official statements by Deloitte or any of its affiliates or member firms.