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When is a Claim Really a Claim?

Colm O’Connor, Business Consultancy Team Lead EMEA, FINEOS

On a daily basis hundreds of thousands of different insurance claims are registered across multiple lines of business via an ever-increasing set of communication mediums. This continuously expanding volume of data prompts many questions for the insurance industry; not least a potential need to more clearly define the very essence of what actually constitutes an insurance claim.

One basic interpretation is that an insurance claim is the formal request to an insurer for payment based on the terms of an insurance policy. This  however raises an immediate question – what is a ‘formal’ request? Is it the completion of a claim form or is it the initial contact with the insurer to notify of the loss? Furthermore, does the ease with which claim notifications can be made, make this too loose an interpretation in the modern instant communication era helping to fuel a perception of a rampant claims culture?

Conversely – what if a formal claim request is never actually made and all monies due remain unclaimed as beneficiaries remain oblivious to the fact that they have legitimate entitlements? Recent estimates in the US place the volume of such monies at $1 billon within the Life Insurance industry alone (NBC News / ConsumerReport.com; March 2013). Insurers are obliged to and do make appropriate proactive efforts to identify such beneficiaries, but what is less clear is how these scenarios are incorporated into claim volumes.

Hence, defining what constitutes a claim is certainly a challenging question, but certainly one worth posing.  Given the range of products and industry diversity, it is difficult to see industry consensus being reached quickly on this question; it is essential however that the individual insurance carrier has an answer to this question which is both clearly measurable and accurate.  This can then be used as a principal when implementing controls around key claim decision points such as:

  • Distinguishing between requests for information and formal claims.
  • Allocating claims for review to appropriately qualified staff.
  • Quickly closing and categorizing claims which are without foundation – in particular those for which no policy coverage exists. A conservative approach to this is to deny the claim, but potentially it may be appropriate to simply close and not render a denial decision.
  • Fraud controls.
  • Proactively managing beneficiary information when it is known an insured has passed away.
  • Ensuring compliance with national, state and other regulatory authorities.

Claims management is continuously evolving –within this context it is important that the insurer evaluates their definition of what constitutes a claim to ensure that legitimate claims receive the attention they require, erroneous claims are quickly identified and efficiently dealt with via intelligent business rules and proactive steps are taken to ensure that all potential sources of claims are identified and followed-up.