Using IT in claims Handling Systems

a. IT offers many benefits, but there are also difficulties when using IT. The general aim of using IT in claims systems are:

i. IT can be used to reduce the cost of claims administration.

ii. IT can also be used to improve the service offered to the client.

b. The main Benefits of using IT in a claims handling system are:

i. Single data entry, avoidance of duplication as well as less manpower in the data processing, fewer errors.

ii. Reduced use of paper files, quicker distribution of data, sometimes more than one insurer is involved. For example, in

Lloyds, files are shared among managing agents electronically. Some general insurers no longer use paper files.

iii. Quicker claims settlement – as the information above is distributed faster.

iv. Electronic authorization of claims payments – this speeds up the claims settlement process, less paperwork involved,

less bank charges and unnecessary re-entry of data, the electronic printing of cheques and bank transfers .

v. Increase in communication channels – emails, social media and live chat (quicker communication, greater customer

service and more efficient claims handling).

vi. Portals and Extranet services allow customers to self- serve and obtain real time updates on claims status.

a. The main Benefits of using IT in a claims handling system cont’d ( other less tangible or associate benefits for insurers hoping to gain a competitive edge):

i. More customers retained is the company’s hope, due to the improved IT service.

ii. Technical assistance and or advice can be given to the claims handler via the IT system (prompts or tactics to use).

iii. Streamline administration – using databases for replacement goods.

iv. Allocation of appointments by the computer system based on priority or date of notification.

v. Automatic checking for fraudulent, exaggerated or repeat claims

vi. Automatic payment of loss adjusters’ fees.

b. Difficulty in using IT:

1. There may be an Increase in claims cost if the emphasis is placed on IT as the ONLY solution.
2. Non – standard or more complexed claims may not fit within the IT system framework.
3. System may be more difficult to operate, less flexible and more expensive then initially thought.
4. Possible cash-flow effects as payments are speeded up but reinsurance recoveries and premium payment may not be.
5. System will need to be serviced and updated which can be expensive.
6. Productivity may increase but costs may be ONLY contained but not reduced.
7. The delivery of a claims service arising from an electronic centralized function, may result with claims being dealt with by process rather than

observation. Personal service may be reduced, removing flexibility and initiative.