The Challenges of Catastrophe Claims Processing in 2024

The Challenges of Catastrophe Claims Processing in 2024

As the effects of climate change evolve, the number of catastrophic events is growing. According to the Insurance Information Institute, the 2020 hurricane season produced 30 named storms, breaking the previous record of 28 storms in 2005. 

It’s not only people who are impacted by the rise in natural disasters – the insurance industry has also been majorly disrupted by catastrophes as they are one of the top insurance challenges companies face. All carriers’ annual operating plans and cash flow management get impacted, and new product launches are halted to meet present conditions.

The insured loss numbers, or the amount of money to be settled as claims from carriers, significantly impact the business cycle. The Swiss Re Institute estimates a total of $83 billion loss to the industry from catastrophes in 2020, making it the fifth-costliest year since 1970 – with 2021 trending similarly. According to Fitch Ratings, the frigid weather of February in Texas, Louisiana, and other states could drive insured losses to $10 billion to $20 billion.

What Is a Catastrophe Claim?

Catastrophe claims are contractual obligations to be fulfilled by property & casualty insurers to their policyholders in the event of loss or damage to a home or property as the result of disasters such as hurricanes, tornados, floods, or other natural disasters.

The Challenges of Catastrophe Claim Processing

Apart from business disruption, the biggest challenge P&C carriers face today is meeting rising customer expectations and the surge in claims after a catastrophe.

With digital giants such as  Amazon, Uber, Stripe, etc, in other service industries providing excellent customer support, insurance customers expect similar quick and agile service levels from their providers. As this trend continues, carriers must implement the right tools & processes to improve customer experience or face customer retention issues.

How can a carrier’s improvement in handling catastrophe claims contribute to a better customer experience?

From the customer’s perspective, catastrophic events significantly disrupt their day-to-day routine, property damage, and potential loss of life. They expect a lightning-fast response from insurance service providers to provide due compensation so that they can restart life.

Along with speed, customers also look at alert & responsive communication and seamless compliance & payments processing as acts that help relieve them after a disaster.

3 Reasons Insurance Providers Are Failing at Catastrophe Claims Processing

Here are a few reasons carriers aren’t rising to the challenge for their customers and what they can do to achieve a better customer experience.

1. Legacy insurance applications, systems, and technology

By “legacy systems”, we refer to systems running on outdated software applications and technologies. These legacy systems were deployed decades ago and must be replaced to support innovation, speed-to-market, and meeting customer experience expectations. 

In recent years, new insurance software vendors have emerged for insurance companies such as Guidewire, Duck Creek, Vertafore, and more – all offering modern technology solutions to help bring insurance companies into the SaaS world. Examples include insurance claims management software and life insurance policy administration systems.

For insurance carriers, emerging insurance technology systems not only provide solutions to modern challenges, but also look to the future by leveraging emerging technologies and ecosystem benefits from IoT & AI technologies, cloud-hosted architectures, and external API support.

By investing in insurance digital transformation, incumbents can bring agility to their claims architecture, compete with emerging digital players in the insurance space, and continue maintaining their strong relations with agencies & customers.

2. Manual processes & outdated workflows

In settling catastrophe claims, adjusters are often required to feed in redundant data manually in different areas of their legacy applications. As per estimates, about 40% of the claims processing time can be saved by adopting automation & AI-based guidance, nudges, and tips inside claims processing solutions. 

Along with automation of existing tasks, insurers will also need to re-look at their processes – and create a more customer-centric model with a value engineering mindset. Insurance companies should invest in digital claims analytics to make their existing processes more efficient, develop new techniques, or share adequate communication at each process step to train their agents.

3. Insurance companies lack scalable training tools & practices for processing catastrophe claims

With a sudden spike in claims, carriers resort to different strategies for accommodating the spike in processing claims. They hire inexperienced adjusters and pull in resources from other business units such as the customer support & underwriting departments to process the claims. 

This results in inadequate training and the inability to handle catastrophe claims efficiently – resulting in a terrible customer experience. Even in instances of modern technology deployments, carriers face stagnant returns on investments because of poor software adoption by the new pool of adjusters.

Old training tools & techniques such as classroom-type training, Zoom sessions, and quizzes are not designed to train new adjusters quickly when a disaster happens – and don’t provide in-depth claims processing tutorials that require knowledge of internal company resources, state regulations, and overview of customer data. 

These older training methods have more extended adoption periods & poor retention of training content. As a result, the new pool of adjusters makes errors that cost the carriers.

To deliver a seamless policyholder experience in times of disaster, carriers can now deploy innovative training tools & methods supported by technology that help achieve a world-class customer experience. Insurers stand to benefit from interactive, modern employee training software that provides the means to author, publish, and facilitate customized agent training & development programs through tools like a digital adoption platform.

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Sentry Insurance Provided In-App Guidance for 2,000 Associates and 75,000 Portal Customers With Whatfix

7 Tips for Insurance Providers and Agents to Improve the Catastrophe Claims Process

  1. Create a customer self-service online portal for policyholders and agents to submit and manage catastrophe claims online.
  2. Provide in-portal, interactive guidance to policyholders and customers navigating your online claims processing portal before the storm season arrives.
  3. Keep customers notified and informed of all updates for all digital claims by sharing all claims-related information in this portal.
  4. Use SMS and email alerts to notify customers of new updates to their catastrophe claims.
  5. Create a tier system that assigns priority based on the severity of a claim to get to policyholders in the most challenging situations processed first.  
  6. Create direct lines of communication between agents and customers
  7. Be over-communicative regarding all details of the claims check, including how it will be paid, the deductible, how and when the check will arrive, and more.
Provide insurance agents and policyholders with in-app guidance and self-help support to better manage claims

With a digital adoption platform (DAP) like Whatfix, insurance providers can drive adoption of their policyholder portals and internal claims processes by creating in-app guided content like interactive walkthroughs, product tours, smart tips, task lists, self-help wikis, and more.

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With a digital adoption platform (DAP) like Whatfix, insurance providers can drive adoption of their policyholder portals and internal claims processes by creating in-app guided content like interactive walkthroughs, product tours, smart tips, task lists, self-help wikis, and more.

Dive deeper with more insurance technology content.
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