A driver hits the back of the parked car. A storm ruins the windows and the roof. In such moments, policyholders don’t think of the premiums they paid; instead – they think of how fast their claim will be resolved by an insurance company.

Claim handling converts a simple policy document into a real promise that would be either kept or broken. And most customer complaints are related to this very process. Policyholders want to get transparent information about how an insurance company processes their claims: receive regular updates and on-time responses to their questions.

Thus, the claim handling process plays an important role in customer satisfaction and retention. Conducted effectively, it will earn you a loyal customer. Failed – you will lose a customer, reputation, and revenue. Our article is about effective claims handling, why this matters, and how to improve the process with modern technology solutions.

Explore DICEUS ready-made solutions for insurance

Discover

What is claims handling?

Claim handling is one of the key processes in insurance. First off, policyholders notify an insurance company about their loss. The company should verify the coverage, explore what happened, and decide to pay, deny, or negotiate a settlement. All these activities are not performed by one person. For example, First Notice of Loss is usually accepted by intake teams, investigation is conducted by adjusters, payments are made by finance, and so on. Therefore, each process can be slowed down by ineffective collaboration between the departments.

The claim handling process differs from other workflows in the insurance organization as it is instantly judged by a policyholder. How well this process is organized influences customer retention, loyalty, and overall revenue.

Why effective claim handling matters

Let’s look closer at the three main points why effective insurance claims processing matters:

Ineffectiveness in claim processing leads to customer complaints. Unclear communication, slow acceptance, and delays are the most common problems customers face when dealing with claims.
Claims accepted and processed late cost more. The longer your team resolves the claim, the worse injuries get, the harder it is to find the evidence, and likely policyholders will call a lawyer.
Claim handling experience determines customer retention. Customer experience during the claim management process defines if the customer will renew the policy, refer to a friend, or just cancel the policy.

As you see, a transparent, comfortable experience while resolving a claim means a lot to both a policyholder and an insurer. Let’s find out what a typical insurance claim management process looks like.

Insurance claim handling process

We are sure you already know what this process looks like. However, let’s revise quickly.

Traditionally, claims go through standard phases, starting from First Notice of Loss (FNOL) and ending with a payment or denial.

process of claim handling

Pinch and spread for zoom

FNOL – a policyholder notifies an insurer about the loss by a pre-defined channel (phone, app, website, etc.). From the beginning, the claim intake team captures the full picture of the loss that describes “who, what, when, and what damage occurred.” If this is incomplete, it becomes an adjuster’s problem, taking their time to find out the details.
Coverage verification – adjusters verify the claims against policies. An adjuster should check all the policy conditions, terms, endorsements, limits, and other details before creating a claim file containing all the evidence like photos, documents, reports, etc. If something looks suspicious or needs further verification, the customer should be notified that there is a question that influences the process.
Investigation – during this phase, adjusters review all the evidence and speak with all the parties if needed. Proof of loss is usually required at this stage. After an adjuster receives it, there are three options for resolution: acceptance and moving to payment, rejection, or further investigation until settled.
Decision – as mentioned above, the claim will be approved for payment, denied, or sent for further negotiation. If confirmed for payment, payout calculations will be made according to policy terms. If rejected, the decision will be explained with the reasons.
Payment – after the decision is made, a policyholder is notified of payment, even if some part of the claim isn’t settled.

Challenges in insurance claim handling procedures

Before we talk about best practices, it’s worth talking about what most claims teams struggle with. Those challenges are repeated year after year, regardless of the type of insurance or the size of the company.

challenges in claim handling

Pinch and spread for zoom

Disparate systems and manual work

Traditionally, insurance companies follow paper-based processes and use disconnected systems for underwriting, policy administration, and claims processing. When data isn’t synchronized in real time, an insurer must manually check it across several systems. That slows down every step of the process: from the first claim report to the final payment. It results in increased processing times, more human errors, and higher operational costs.

Fraud that’s becoming more sophisticated

Fraud is calculated in billions of dollars each year, and the schemes become more sophisticated, from staged accidents to exaggerated claims. Identifying fraudulent actions without creating difficulties and inconvenience for honest customers is a constant balancing act. Companies that don’t have modern analytics and experienced investigators either miss fraudulent cases or are overly suspicious of legitimate claims.

Delays that undermine trust

Delays at any stage – from claim acknowledgment to final payment – are a leading cause of complaints and malpractice lawsuits. Delays are often caused not by a single major miscalculation, but by a series of small ones: a file that hasn’t been opened in days, a repeat request for documents that could have been made immediately, a lack of communication with the customer. Each of these small things may seem insignificant on its own, but together they create an experience that will prevent a customer from renewing their policy.

Rising customer expectations

Insurers have grown accustomed to instant tracking in other areas of their lives such as food delivery, online shopping, and they expect the same from their insurance companies. When the only way to find out the status of a claim is to call the support line, frustration grows, even if the decision on the claim itself was fair. Companies that don’t offer self-service or transparent status tracking lose out on customer satisfaction regardless of the quality of the actual work on the file.

Regulatory complexity

Different states or jurisdictions have their own timelines for verification, investigation, and payments. Violating these du...

DICEUS

Message History

Delivery option(s)