One of the major back-office functions in the insurance sector is claims processing. This activity is today growing exponentially, not only due to the regular claimants who find their policies purchased a decade back maturing now but also from another angle which is growing in importance. This is the payouts being made for victims of natural disasters and deaths or disablement from a terrorism-related action. Hence, insurance companies would find their hands full if claims processing was not outsourced. This would also divert their attention from core jobs like devising new schemes and selling them.
What do insurance companies like in outsourcing claims processing? It can be judged from two perspectives –
Reduction in work pressure – Claims processing as is other back-office tasks is supportive in nature to the main work in the insurance sector which is strategizing new policy schemes and selling them. Being in the service sector high standards in customer service has to be the main focus and this would be diluted if attention was to be given to such ardors and laborious tasks like administrative functions, data processing, and claims management. Insurance companies in the present scenario also prefer to outsource policy management along with related tasks.
Reduction in costs – The magnitude of the process of claims administration necessitates huge investments in infrastructure. This includes setting up sophisticated systems and recruiting manpower which can be avoided by outsourcing claims processing to companies that already have the required resources in place. The resultant cost savings can be better utilized in devising optimum priced insurance products which will enable individual insurance companies to retain their competitive edge in the industry. They will have more leeway and flexibility in making product prices more attractive and lucrative for customers.
Claims processing is a continuous process and therefore by outsourcing these section insurance companies reap the benefits around the year. A look at the various factors that make up claims management will substantiate the assertion that insurance companies would like to and want to go for outsourcing claims processing.
Complex claims eligibility assessment – This is a huge field that definitely distracts insurance companies from core tasks. Apart from identifying and solving complex issues regarding the authenticity of claims, settlement in scenarios such as terrorist activities and natural disasters necessitate meeting many statutory and legal requirements that depend on the law of the land.
Quick adjudication and disbursement – A policy is sold on the premise that after maturity, maybe decades later or in cases of early claims made in any untoward situations, adjudication and disbursement will not be a long drawn process. Considering the fact that claims are usually in hundreds of thousands of insurance companies would get bogged down in claim settlement work only instead of focussing on key core jobs. This is a very crucial reason why outsourcing claims processing is always preferable.
There are outsourcing companies that focus specially and exclusively on claims management processing. They are a boon to insurance companies as most, if not all prefer to outsource this activity.