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The Human Element in Claims: Why Empathy Still Matters

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If you have read my blog, I think you know I  am a huge fan of the need and benefits of technology. While technological advances like AI and automation have revolutionized processes, there still remains an undeniable truth: the human element is irreplaceable. While automation has enhanced efficiency, accuracy, and speed in claims handling, the importance of empathy and human interaction in the claims process cannot be overlooked.

Customers don’t just file claims—they are often dealing with personal loss, uncertainty, or crisis. It’s in these moments that the true value of human empathy in claims handling is revealed. Let’s dive into why empathy still matters, even in an age of AI-powered claims systems, and how it can make the difference between a successful claims experience and a damaged relationship.

The Role of Technology in Claims Handling

In recent years, insurers have made great strides in leveraging technology to streamline the First Notice of Loss (FNOL) process, as highlighted in my previous article on optimizing FNOL​. AI and automation can handle routine tasks, flag potential fraud, and even triage claims. The efficiency these tools bring is undeniable, reducing operational costs, speeding up claims resolution, and allowing insurers to manage high volumes with ease.

However, while automation helps manage the how of claims handling, it cannot fully address the why—the emotional connection and understanding that customers seek when dealing with a loss.

For all the advancements in claims technology, there remains a profound need for human empathy. After all, filing a claim isn’t just about getting a payout; it’s about reassurance and support during a time of need.

Why Empathy Still Matters

1. Building Trust in a Time of Vulnerability

    When a customer files a claim, they are often in a vulnerable position. Whether it’s a damaged home, a car accident, or a health issue, their sense of normalcy has been disrupted. In these moments, trust becomes paramount.

    Empathy plays a key role in building this trust. A well-trained claims handler who listens attentively, acknowledges the customer’s concerns, and responds with genuine care can significantly ease the customer’s stress. Customers are more likely to trust that their insurer has their best interests at heart when they feel heard and supported.

    The FNOL process, while streamlined by technology, is also a critical touchpoint for establishing this trust. A personal touch, especially in high-severity or emotionally charged claims, can transform a customer’s experience from transactional to relational.

    2. Emotional Intelligence in Complex Claims

      Not every claim is straightforward. Some involve sensitive situations—bodily injury, total property loss, or even death. In such cases, human judgment, emotional intelligence, and adaptability are essential.

      Empathy in claims handling isn’t just about offering sympathy; it’s about understanding the customer’s situation deeply and responding appropriately. For instance, a customer dealing with a severe injury might need more than just logistical updates on their claim. They may require a thoughtful explanation of next steps, reassurance about their coverage, and flexibility in managing timelines.

      AI can assist in categorizing the severity of a claim, but it cannot provide the nuanced understanding that a skilled human claims handler brings. Especially in complex claims, empathy allows adjusters to navigate difficult conversations, de-escalate frustrations, and ensure that the customer feels valued as more than just a policy number.

      3. Enhancing Customer Satisfaction and Loyalty

        As the insurance industry becomes more competitive, customer satisfaction has never been more critical. Research consistently shows that a customer’s experience with the claims process significantly influences their decision to renew a policy.

        While AI-driven claims systems can process claims quickly and efficiently, the human touch is what turns a satisfactory experience into an exceptional one. Empathy, patience, and personalized communication create emotional connections that technology alone cannot replicate. This emotional connection fosters long-term loyalty and transforms customers into brand advocates.

        An example worth noting is how insurers, despite leveraging AI extensively in claims handling, emphasize the importance of blending technology with empathy. While those embracing advanced FNOL processing can handle a significant amount of business in an automated fashion, in complex or sensitive cases they still hand them off to claims professionals for that crucial personal touch​.

        Striking a Balance: The Human-Tech Partnership

        So, how do insurers strike the right balance between leveraging technology for efficiency and maintaining the human element for empathy?

        1. Designing a Hybrid Approach: For many claims departments, the solution lies in a hybrid model. Use AI and automation to handle routine tasks and fast-track straightforward claims but ensure that human agents are readily available for complex or sensitive cases. This approach frees up human resources for where they are most needed: providing empathy and support during emotionally charged situations.

        2. Training for Empathy: As insurers integrate more technology into their workflows, it becomes even more critical to train staff in empathy and emotional intelligence. Claims adjusters should be equipped with the tools and training to handle difficult conversations with care, ensuring that they can deliver not just a resolution, but peace of mind.

        3. Empathy at Every Stage: Empathy should not be limited to the FNOL or final settlement stages of a claim. From the first interaction to the final follow-up, every touchpoint is an opportunity to demonstrate care and understanding. Building this consistency can help insurers stand out in an increasingly automated world.

          Conclusion: The Irreplaceable Human Element

          The insurance industry’s ongoing digital transformation is essential, but it’s crucial to remember that at the heart of every claim is a human story. No matter how advanced technology becomes, empathy remains irreplaceable in building trust, resolving complex claims, and fostering long-term customer loyalty.

          As we continue to innovate and improve claims processes through technology, let’s not forget the fundamental truth that a little empathy goes a long way. The most successful claims experiences aren’t just about efficiency—they’re about the human connection that reassures customers during some of their most challenging moments.

          How does your claims department balance technology with empathy? Share your thoughts and experiences in the comments below!

          Unlocking the Potential: Harnessing the Power of Claims Data Analytics

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          There’s encouraging news in the insurance industry: claims departments are now in possession of vast amounts of data. This development is indeed promising, especially when the data is utilized to enhance operations, reduce costs, or forecast future trends. However, many firms are not yet fully leveraging the wealth of information at their disposal.

          The Data Influx: Opportunity and Challenge

          With the advent of modern claims technology, there’s been an increased emphasis on capturing more detailed information. Claims professionals are now tasked with inputting specific data points, ostensibly for use by other departments within the organization. Additionally, we’re witnessing the emergence of sophisticated data models that integrate claims data with underwriting and financial information. When properly utilized, this combination can provide invaluable insights.

          The key question remains: How can we best utilize this wealth of information?

          At a minimum, your data should serve three critical functions: managing operations, revealing trends, and predicting outcomes.

          Metrics for Operational Excellence

          Fundamentally, your claims system should generate data that aids in effective personnel management. This involves daily, weekly, monthly, quarterly, and yearly metrics that ensure claims professionals and support staff are performing optimally.

          Key areas to monitor include:

          • Claims flow (new claims, closures, closing ratios)
          • Aging reports (processing time, setup duration, open to close periods)
          • Workload management (caseloads and closing ratios by adjuster)
          • Financial indicators (reserve changes, average reserves, total paid amounts)

          Trend Identification: Foresight Through Data

          Your data contains valuable trends – the challenge lies in identifying them. Recognizing shifts in loss frequency and severity can help you anticipate external factors such as legislative changes, environmental shifts, or economic fluctuations.

          Analyzing claims data trends empowers underwriters to refine pricing and terms, allowing the organization to address potential issues before they escalate. Numerous companies have thrived by recognizing claims trends and adjusting their strategies accordingly. Conversely, others have faltered due to a failure to identify warning signs in their claims data.

          Predictive Analytics: Enhancing Decision-Making

          Utilizing data extends beyond trend identification to outcome prediction. Predictive analytics serves as a powerful tool that can process vast amounts of information and draw conclusions more rapidly than traditional methods.

          Effective applications of predictive analytics include:

          • Identifying outlier claims
          • Estimating reserve and settlement values
          • Developing defense strategies
          • Managing litigation expenses
          • Assessing subrogation potential

          Embracing the Data-Driven Future

          Historically, predictive modeling was constrained by limited systems and data availability. However, the landscape has evolved significantly. Most carriers now possess substantial data that could revolutionize their operations.

          Naturally, data integrity is crucial for these models to function effectively. Nevertheless, the potential benefits are too significant to overlook.

          In conclusion, it’s worth considering: How is your organization leveraging data and analytics in claims operations? Are you fully capitalizing on the wealth of information at your disposal? As the insurance industry becomes increasingly data-driven, positioning your organization at the forefront of this trend could provide a significant competitive advantage.

          Staffing a Claims Department

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          So what’s a good staffing ratio?

          Figuring out the appropriate levels to staff a claims office can be a tricky exercise. Having too many claims professionals can have a negative impact on bottom-line financials, however, having too few can also have a more costly impact improper reserves, higher settlement payments, increased loss adjustment expenses. Determining the correct balance of files to handlers is critical to ensure the claims department can serve the company, claimants and customers appropriately. Well run claims department manage their staffing by developing empirical methods to model the correct need. Those models are also reviewed as part of regular management metrics and adjusted to suit changing conditions.  While it may seem cost effective to run a very lean claims department, the truth is if it is too lean costs will go up, claims handling will suffer and the company can be exposed to liability.

          How do you determine what the appropriate staffing level is?  Unfortunately there is no hard and fast rule that defines exactly how many files per handler is appropriate. The nature of the type of claims handled, the company approach to customer service, internal and external variables are going to impact how many claims professionals are needed. For example, the number of claims professionals needed to handle a small fender bender property claim is dramatically different than needed to handle a large commercial property loss.  This can also be said for a standard bodily injury claims versus a complex medical malpractice matter. There are so many factors that go into each type of claim that must be considered prior to developing a working staffing model.

          What type of claims department are you?

          What type of claims department are you? Do the types of claims you handle require a touchy feely claims department that relies heavily on interactions with clients? Some carriers pride themselves on significant and meaningful customer contact because that customer focus differentiates them in the market place even over the price of coverage.  Other types of insurance companies don’t rely on the customer interaction as the differentiator and as such a customer centric claims department may not be the focus. Think Motel 6 versus The Four Seasons. Both provide a place to sleep but clearly the approach is completely different.

          For example, a homeowner’s claim will require multiple hands on connections with the claimants to build a level of client satisfaction and help to maintain more renewals. Conversely, in D&O insurance, the contact is rarely as interactive and the client is usually more concerned about the financial ability to pay claims and a less expensive premium. Regardless, given the value the claims, the expertise needed to manage a D&O loss versus a property claim and the frequency of losses coming into the office will all impact the number files that can be assigned to any one professional.

          Developing a staffing metric must be based initially on the type of claims organization you are and how much contact with the client is expected. From there a metric can be developed to deal with other factors impacting the time needed to handle a file. Such a metric may, for example, be based upon not just the number of files in the door but on how many touchpoints need to be made on how many claims and over what period of time. Often determining the impact of those touchpoints will require conducting a time study to learn how long each touchpoint takes to complete.

          What are the internal variables?

          Internal variables to consider involve those issues that can be controlled within the company and, like the type of claims department you are, will impact how resources are implemented. Some internal variables to consider:

          • Skill levels of claims professionals needed – Does your claims department manage files with entry level workers or do you require experienced claims professionals with advanced degrees?
          • Support staff and ancillary claims professionals – are claims professionals expected to do everything from sending letters to coding to on-site investigations to state reporting? Or are some of those tasks handled by others?
          • Technology – are you up to date with the latest and greatest automated claims technology or are there limitations to the systems in place? Does your technology help to automate workflow?

          What are the external variables?

          External variables can equally impact staffing levels and must also be considered. These variables can’t be controlled but they can be measured.  The trick is to create metrics to identify trends in external variables that could have an impact on staffing.  Frequency of claims activity is an external variable that can be predicted based upon the number of policies and other events that impact claims being filed. For instance, bad weather during the winter months will likely increase auto property claims being filed compared to in summer months.  Being aware of the natural cycles and predicting trends is an important factor in creating models.  External variables to consider include:

          • Jurisdiction and court delays
          • Claim frequency
          • Claim cycles
          • Regulations and reporting
          • Legal changes

          Creating a staffing model

          Creating a staffing model must take into account a number of factors and there is no one size fits all approach. Understanding the time it takes to handle an issue will be needed to determine an appropriate staffing level. At the very least there must be an understanding of new claims set ups and expectations as well as what is expected to manage a book of claims.

          As an example in the simplest form, a claims department may expect a claim professional to only handle one new claims set up a day. If a department gets 20 claims a week then they would need 4 claims professionals (20 claims/5 days = 4 per day).  This is a basic example because there are clearly more factors to consider for claim professionals to accomplish in a given day.  The model needs to be built by understanding the times it takes to manage particular tasks. If in addition to setting up one file it is expected that a claims professional review 3 files on diary and which includes contacting the claimants and insureds to provide updates, then a picture of how much time needs to be spent to perform various tasks can be factored into the model.

          Conclusion:

          Determining the optimal staffing ratio for a claims department is a complex and nuanced process that requires careful consideration of numerous factors. There’s no one-size-fits-all approach, as each insurance company’s needs and priorities differ. The key takeaways from this discussion include:

          1. Balance is crucial: Overstaffing can negatively impact financials, while understaffing can lead to higher costs and potential liability issues.
          2. Consider your company’s approach: The type of claims department you run (customer-centric vs. efficiency-focused) significantly influences staffing needs.
          3. Analyze internal and external variables: Factors such as staff skill levels, technology, claim frequency, and legal changes all play a role in determining appropriate staffing levels.
          4. Develop a data-driven model: Create a staffing model based on empirical data, including time studies and performance metrics.
          5. Regularly review and adjust: As the insurance landscape evolves, continually assess and update your staffing model to ensure it remains effective.

          By taking a thoughtful, analytical approach to staffing, claims departments can strike the right balance between efficiency and quality service. This not only benefits the company’s bottom line but also ensures that claimants and policyholders receive the level of care and attention they deserve. Remember, an well-staffed claims department is a cornerstone of a successful insurance operation, contributing to customer satisfaction, risk management, and overall company performance.