July 24, 2018
Sorry State of Life Claims Processes
Four main problems have prevented life insurance companies from embracing digital transformation in their claims processes.
“When my mom passed away, I was aware she had a small life insurance policy. When I started the claims process, I had to keep resubmitting documents and kept getting asked to complete more documents. Finally, after four months of going back and forth, when the money was about to be reimbursed, I wanted the money transferred to my account as direct deposit, but my only option was a check. I’m lucky I didn’t need the money right away for expenses, or I wouldn’t know what would happen.”
Will you consider purchasing life insurance policy from the insurer, I asked? “Hell no,” was the answer.
I was giving a presentation a few nights ago on Benekiva and heard that story from someone in the audience. Throughout my journey with Benekiva, I have been intrigued by all the stories I’ve heard about the nightmares that beneficiaries have faced.
As a new parent and owner of a life insurance policy, I know that ensuring the well-being of our family is critical. The thought of my daughter having to go through a hellish experience to get the money makes me furious and want to act now to fix the problems.
After several years of researching and analyzing the life insurance claims processes, there are four main problems our Benekiva team has identified that have prevented life insurance companies from embracing digital transformation in their claims processes:
Outdated Processes: The life insurance industry is a 258-year-old industry, and, though claims may make it in the top 10 list of issues for the CIO, the focus for the company as a whole tends to be on generating revenue. The claims staff works overtime to come up with various duct-tape systems filled with Excel spreadsheets, Access databases or various systems to balance the needs of regulators, old processes (this is how we have always done things) and beneficiaries. Beneficiaries wind up supplying the same information in multiple documents, sending the same documentation multiple times and chasing down faxes/mails for next steps.
See also: How IOT Will Change Claims Process
Legacy Systems: On average, the claims staff touches four to 10 systems to process one claim. The claims module is most likely attached to policy administration systems in which modules don’t get updated often. To innovate claims processes gives CIOs headaches because they have to rip apart the monolithic and old systems that run the entire business. The mentality – “If it ain’t broke, don’t fix it” — creeps in.
Unclaimed Claims: There is more than $14 billion of unclaimed life insurance policies, and the number keeps growing $1 billion a year. Why is that? Ask yourself one simple question: How many times have you been asked to update your beneficiaries? Ask yourself another simple question: Have you informed your beneficiaries about policies you have for them? One of our co-founders could have been another drop in the bucket for unclaimed claims. He was at his father’s funeral, and one of his father’s co-workers came to give Jason his condolences. The co-worker said, “If you need help with paperwork, please let me know.” Jason said, “What paperwork?” He learned that his dad had a life insurance policy.
Laws Changing: Each state and country has its own governing laws that need to be abided with when processing claims. One state may require a death certificate while another state may ask for additional documentation.
How might claims departments innovate in the face of outdated processes, legacy systems, data that needs clean-up and changing regulation?
There are three key recommendations:
Keep Learning – Insurtech is HOT! Books are being written, conferences are popping up and fresh faces (like me) are appearing. Keep reading, attending and talking to learn what is happening in the space and how to navigate change.
Keep Seeking – Insurtech is HOT! Which means, there are startups that are popping up to help solve complex problems. Benekiva is my startup with three other founders, and we are on a mission to help bridge the gap between life insurance companies and the intended beneficiaries, through beneficiary management and claims automation. What is cool about us – we can work with legacy systems, so you don’t have to pour millions into the work. There are other insurtech startups that are solving other pain points. What’s great about startups – they are small, nimble and hungry, which equates to: They will do whatever you need them to do…to a certain extent. Partnering with startups can leapfrog your innovation efforts and their startup mentality may rub-off on your staff.
Keep Trying – You eat an elephant one bite at a time. I see claims processes as a big elephant, and the only way to improve is by “bitsizing.” What is one area of claims that can be improved? Identify that and try to find or partner up on a solution. Remember: Insurtech is HOT! I’ve seen organizations want to tackle the “elephant,” and unfortunately, those projects can take two years and longer and your strong talent is burned out at the end. What you get at the end is an “old” system – two years is a long time in tech.
See also: Making Life Insurance Personal
To innovate in claims, the C-suite needs to make claims a priority and see it as a customer-experience issue.
My five-year vision is to have the following experience when giving presentations about Benekiva:
“Bobbie, I just submitted a claim, and I instantly received notification that money is available in the account. I also received a text message from an adviser whom my dad was using and who is going to help me plan for my future.”