When it comes time to manage a claim, the process should be simple and straightforward: claim lodged, assessed, and resolved.
That’s the expectation of the person making or managing the claim. The reality in insurance is that it’s only when a claim is made that the true value of insurance is understood.
Of course, claims are often more complex than the idealistic scenario painted above. Specialists may be needed to assess damage, reports may be required. These can take time, and understandably so.
However, much of the claims process is a combination of fragmented, disjointed tasks, undertaken manually and by legacy software, which creates significant inefficiencies throughout the whole process.
While tech has been used to varying degrees of effectiveness across the claims process for a couple of decades, the picture today is one of a patchwork quilt of outdated software, manual processes, workarounds and legacy processes, which are inefficient and expensive in the short, medium, and longterm.
The need to deliver an exceptional claims experience
For both the insured and the insurer, an exceptional claims process is vital.
Acquiring a new customer for an insurer is relatively straightforward – often, a combination of effective marketing, brand perception, and price.
Retaining the customer, however, is more challenging. If a claim hasn’t been required, retention – as long as price is acceptable – can be simple.
If a claim has been made, however, how that process has been handled will determine whether that customer stays with the insurer, or moves elsewhere. In that scenario, price isn’t the major factor.
Research from PwC backs this up. It says that while having a robust claims process is critical to the health of an insurer’s book, the reality from the claimant’s side is often an opaque and time-consuming claims process.
PwC’s global surveys have found that as many as 87% of policyholders believe the claims experience directly influences their decision to renew with their insurer, and 80% would be willing to switch providers if they encountered an experience that was not user-friendly.
This is not a hypothetical concern but a tangible business concern. To illustrate that point, in the 2024-25 financial year, the Australian Financial Complaints Authority (AFCA) received 34,231 general insurance complaints, up 17% on FY23/24. Figures from FY23/24 were up 50% on the previous year, too.
The importance of delivering an excellent claims experience is underlined by research from Choice, which shows a direct correlation between claims experience and customer retention in car insurance.
The hidden cost of tech debt for claims
For insurers, by relying upon legacy technology and inefficient systems, the actual cost of claims can significantly increase.
PwC research found that claims leakage can range from 3% to 25% depending on the type of claim – this equates to billions of dollars in lost value across the industry.
The post-Hayne Royal Commission placed claims under heavy scrutiny, while ASIC’s Report 768, which reviewed claims handling of 218,000 home insurance claims, identified systemic weaknesses across customer communications, project management, vulnerable customer identification, resourcing, and complaints handling.
In addition to unnecessary human hours spent on claims, human error, and loss of customers due to a poor claims experience, fraud is also a key driver in claims leakage.
The traditional, human-led methods of fraud detection are inadequate against the sophisticated techniques used by fraudsters today – like the use of fake or synthetic IDs.
In 2023, the Insurance Council of Australia (ICA) detected $560 million in opportunistic insurance fraud, but this figure is dwarfed by the estimated $400 million in undetected fraud that goes unnoticed annually.
This multi-hundred-million-dollar problem is a direct cost to insurers, and traditional fraud prevention methods are too time-consuming and prone to human error to combat this effectively, leading to costly delays in processing and payouts.
It’s clear the whole claims process needs a significant, tech-led overhaul, which can deliver efficiencies across the whole process, while at the same time increasing accuracy.
Cloud-based platforms are the key to establishing new processes that are not only fit-for-purpose today, but will continue to be so in the future.
The benefit of cloud-based platforms
Whereas in the past, on-premises systems were viewed as being the best solution for businesses, today, cloud-based platforms are built for the future.
Having the right tech foundation is critically important to achieve operation agility, reduce costs, and deliver superior experiences for customers and employees – ultimately, speeding up the claims process, reducing points of friction, and reducing the cost of claims.
Cloud-based platforms are inherently scalable and flexible, and are continually updated and enhanced to ensure they’re secure and delivering exactly what’s required today.
For the insurance sector, the path to a resilient future lies in a strategic transformation of the claims function. By leveraging tech and automation – and embracing the challenge of creating a fit-for-purpose claims process – the main causes of inefficiency and claims leakage can be tackled.
Those that can succeed in achieving this will be best placed to grow market share. The competitive advantage in the Australian insurance market will be won not on the basis of the lowest premium or the most aggressive marketing campaign, but on the strength of the brand promise. That promise is demonstrated by an insurer’s ability to consistently deliver a claims experience that meets and exceeds a customer’s expectation.
Unlike legacy systems that require costly upgrades and manual workarounds, cloud platforms evolve continuously — like a living system that adapts to your needs in real time.
Discover the power of ClaimsGateway.
If you're ready to simplify your claims process, reduce tech debt and streamline your workflow, get in touch with us today.
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