Managing Claims
In these days of sky high premium rates a sales person needs an edge when trying to close a sale. Many firms are adding extra services to woo new clients and retain the existing ones as well. These ideas are great. However, what seems to be overlooked is the client’s expectations for buying insurance in the first place.
Insurance is bought to cover the insured for potential future losses. The client expects a fair and fast payout from the insurance company after a loss. Therefore, perhaps the most critical service that an agency can provide to clients for their premium dollar is the proper handling of claims. Thus it is extremely important that the function is well managed—no matter what the process.
Even if the agency does a great job on their end, outside parties, such as the insurance company needs to follow through as well. Poor claims handling by agency personnel or by an insurance company adjuster can cost the agency accounts. If a client who suffers a loss is not covered or when the claim is handled poorly, then damaged public relations could be the least of the problems created.
Even though the insurance company may be at fault, and even it the agent can finally get the claim properly handled and paid for, nine times out of ten, it will cost the agency the account due to the client suffering stress and strain. Also, poor claims management will cost a firm future clients as well.
The claims process
Often the claims function in an agency or brokerage firm is handled by the CSRs. However, producers sometimes handle the client’s claims from start to finish. Some firms have a separate claims department that handles all aspects of the claims process. Which is the way to go?
As consultants, we do not feel strongly one way or the other about whether an agency needs a separate claims department versus having the CSRs responsible for claims. It is up to agency management to decide whether or not they feel that the clients are better served in their hour of need, by having the person they know take the claim (the producer or CSR) or by having a competent claims person handle the claim.
We do suggest that a separate claims department should exist in the following situations:
– If the agency is poorly automated;
– If the firm has a large concentration in targeted classes of business;
– If there is a concentration in certain coverages and special expertise is needed; and
– When the agency regularly uses draft authority and there is a need for tight controls for the issuance of claims checks.
Proper follow-up must occur to guarantee client satisfaction. It is also advisable that the agency personnel keep track of how the carriers are responding to claims to ensure proper and timely service. Keep an on-going claims log by company, in chronological order, so that agency management can stay abreast of how losses may affect carrier relations and contingency checks.
Do not rely on carrier claims records. Often, companies make mistakes in calculating contingencies, setting loss reserves, coding claims information, etc. Agency created records will prove to be good ammunition and can alert management to a claims problem developing with a particular carrier.
Claims information needs to be recorded in the client files so that CSRs and producers are aware of claims activity when a separate claims department exists. This is not only important for marketing and underwriting, but also for communication with clients. It can be quite embarrassing if the CSR or producer is not aware that a medium to large-sized claim occurred when dealing with the customer.
Utilize automation when taking claims. The client files must contain all the current information with sufficient detail to be meaningful. Most software computer systems can pre-fill the claims ACORD forms. Claims information should be input directly into the computer when the client calls. This will not only speed up claims processing and cut down on duplication of work, but will also help reduce mistakes and omissions problems.
Create customized templates for the word processing software to speed up the flow of claims correspondence between the agency, claimants and insurance companies. E-mail is a powerful tool that allows the same message to be sent out to several people at the same time, keeping everyone informed of the current status.
Keep in mind that the first contact is often the most important. When a client calls in with a claim, there already is a certain level of stress on their end. Reassuring and competent phone service is mandatory. The agency needs to make sure that there is back up for claims phone calls, so that clients can report claims in a timely fashion and receive professional assistance.
The disaster plan
Under normal conditions all agencies should be able to handle the typical flow of claims. But what if disaster strikes? What can an agency do if hundreds or thousands of claims come in at the same time?
Those agencies that have had to handle natural disasters, such as hurricanes and earthquakes, understand the importance of being ready when a catastrophe hits their areas. Many, if not all, clients may need to report claims and obtain assistance.
It is important for an agency to have a Disaster Plan. Keep a list of names of retired employees or friends who would be willing to help out. Discuss with the carriers what their approach would be. Keep backup computer files offsite. Pick an offsite facility incase the agency’s office is destroyed.
Following the guidelines in this article will improve the claims function in an agency. Proper claims management will result in improved productivity of the servicing staff and, most importantly, will help retain accounts.
Bill Schoeffler and Catherine Oak are partners in the international consulting firm Oak & Associates based in Northern California. The firm specializes in financial and management consulting for national and international agencies, including valuations, mergers, acquisitions, clusters, sales and marketing planning, as well as perpetuation planning. For more information, call (707) 935-6565, or e-mail catoak@sonic.net.