In the fiercely competitive insurance world, customer satisfaction – often indicated by 5-star reviews and glowing referrals – is paramount. One of the most effective – and overlooked — ways insurers can improve customer satisfaction is by modernizing their core systems. A modern core system shares information seamlessly across the organization, reduces errors, and speeds up turnaround times, often through automation. It can be the difference between a frustrating experience and a frictionless, digitally enabled customer experience. Modernizing a core system serves a second significant purpose: reversing costly premium leakage.
Understanding Premium Leakage
Premium leakage is the loss of revenue when an insurer fails to accurately collect the premiums owed by employers for their employees’ insurance policies. Legacy systems require manual workarounds and “temporary” processes to support peak busy seasons, leading to inefficiencies, inaccuracies, and risky processes – causing carriers to leak premium they should be collecting. Besides affecting the bottom line, premium leakage has a direct correlation to dissatisfied customers.
Impact of Premium Leakage on Customers
- Lack of Trust in Insurance Providers: When customers discover that their insurance provider is not billing them accurately, it erodes their trust. Customers who are being overcharged or undercharged may question the carrier’s integrity.
- Administrative Burden: Premium leakage often results from billing errors, such as incorrect calculations or delayed billing. Employers’ HR departments must spend time fixing these inaccuracies, adding to their administrative workload.
- Impact on Employee Satisfaction: Premium leakage can lead to delays in claims processing, frustrating the employees who are relying on these benefits. Predictably, these employees will provide this feedback to their employers. That dissatisfaction will find its way up to senior leadership and negatively impact an insurer’s customer persistency.
Address Premium Leakage at the Core
Modern technology and a transformational mindset can take you from leaking $5 million – $10 million annually to an improved bottom line and happier clients. Here are some key strategies:
- Invest in Modern Technology. Outdated legacy core systems are a costly source of premium leakage. FINEOS found that an estimated 5% to 20% of insurance premiums vanish every year due to the inefficiencies caused by legacy systems.
- Correct Case Setup Inaccuracies. A top culprit for premium leakage occurs when setting up and installing a new employer group on multiple systems that are not integrated. Roughly 5% of annual premium can be lost in this area alone due to workarounds that result in data inaccuracies across systems.
- Examine Enrollment and Eligibility Management. This notorious source of premium leakage can make or break a carrier’s year. Whether the carrier or the employer is responsible for managing eligibility and enrollment, relying on legacy systems or repurposed solutions (i.e., using a pension system for anything in the life, accident and health market and vice versa) leaves the insurer ill-equipped to properly manage enrollment and claims eligibility. This results in millions of dollars lost.
- Consider Data Analytics and AI. Implementing data analytics through artificial intelligence and machine learning helps insurers detect patterns of premium leakage and fraud, and flag potential issues before they become major problems.
A Modern Core System Eliminates Premium Leakage
Investing in modern technology can go a long way toward reducing errors and improving the overall experience for customers. A modern core administration system enables a carrier to be a reliable source of truth for current plan and policy information. Premium calculations for both employers and carriers are based on the same source of truth. Further, when an employee is enrolling for coverage, the benefits and provisions are accurate and truly reflect what is eligible. This turns into an accurate premium being billed to the insured, and most importantly, the right benefits being paid when they are needed.
To address premium leakage and simultaneously enhance customer satisfaction, forward-thinking carriers must prioritize updating their core systems. With this proactive path, insurers can enhance trust, retain customers, and thrive in a competitive market.