It’s a no-brainer that effective claims management is a critical success criterion for insurance companies. It has a direct impact on their margins through a higher or lower loss ratio. Controlling claims costs is paramount to controlling claims leakage. How can partnering with a provider keep claims costs low and thus plug the leakage, especially with claims leakage in motor insurance? The link in the PDF/Presentation is not working due to some changes in the website. Please refer to the new link http://bit.ly/exC7wi

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The Tricky World of Motor Insurance Claims Leakage and How
BPOs Can Help
By Jeremy Owenson
It’s a no-brainer that effective claims management is a critical success criterion for insurance companies. It has a direct
impact on their margins through a higher or lower loss ratio. Controlling claims costs is paramount to controlling claims
leakage.
So what is claims leakage? In layman’s terms, it is an amount paid on a claim, which should not have been paid.
Two examples would include:
a) Payment for a loss that was not covered in the policy in the first place, including actions such as failing to deduct and
making a payment in excess
b) Payment being made for a loss without proper investigation, which may have reduced or removed the cost of the loss
In the case of motor insurance, a typical claim would involve either of the following scenarios:
1) Accidental damage to the insured vehicle
2) A claim against a third-party where there is more than one vehicle
In the first scenario, claims leakage could occur for a number of reasons:
- Failure to deduct and excess
- Failure to allow for ‘betterment’. For example, where old tyres damaged in an accident are replaced with new ones.
- Failure to control repair costs. For example, over-scoping the repairing damage or repair of non-accident damage
In the second scenario, claims leakage will comprise a more complex set of processes as there are a number of claims-
related parties to contend with. This would include negotiating with other insurance companies to determine liability or the
value of the claim.
Here’s where the partnership with a specialist provider could prove its worth. There are three areas where business
process outsourcing can help insurers in motor insurance claims:
Evidence Gathering: Assessment and decision on the offending party will involve in-depth analysis of the incident and
meticulous gathering of evidence. This will include witness statements, review of any customer sketches of the road and
consideration of case law. Outsourcing can assist in this circumstance by collating the appropriate information and
presenting a complete précis of the accident for the claims manager to make an informed liability decision. Leakage is
reduced as the evidence-gathering is comprehensive and ‘to a checklist’.
Negotiation: Once the faulty party is determined, negotiating with the insurance company can be a drawn-out process.
The longer the process, the more costly it will be. Here again, outsourcing a large part of the negotiation can expedite the
settlement and ensure either rapid recovery of outlay, or rapid settlement of a claim with minimal cost.
Follow-up: Where you are attempting to recover liquidated damages, regular follow-up is the key to preventing claims
leakage. Persistence and adherence to process produce the best recovery results, and an outsourced service provider
can often deliver a better service at a lower cost than an insurer in these circumstances.
A leading insurer has outsourced a large part of their bodily injury claims process to WNS for the last four years. WNS
today manages over 15,000 claims a month while delivering $10 million through fraud savings and $2 million through
litigation avoidance of claims. The operational rigor adopted by WNS has also led to a fraud repudiation ratio (the % of
claims rejected) of 7 % much above the industry average of 3.4%.
Business process outsourcing of claims leakage can not only help reduce costs of claims processing but also improve
profits, as the identified / recovered amount adds directly to the bottom-line.
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