Warning!! 8 Big Blunders Made by Insurance Companies
Insurance companies contribute to the economic growth of the society to a great extent. It is a procedure that reduces the cost of loss or damage caused by a variety of uncertainties. And we are very well versed with the risks because “Risk comes from not knowing what you are doing”. So similarly various risks are associated with Insurance companies too, such as macroeconomics, regulation, operational risk, data security, availability and cost of capital, that can gradually affect the reputation of the company and lead to insolvency of the business. According to analysis, there are around one thousand life Insurance companies in the US those became insolvent due to improper management within the organization.
Let’s take an overview on the top mistakes made by the insurance companies that gradually have an atrocious impact on the goodwill of the company.
Back office management “Only a few things are really Important” - All the insurance companies emphasize on back office, as it carries out important functions such as settlements, clearances, records maintenance, regulatory compliance, accounting and other administrative work. But they make the mistake of considering back office as an office “behind the scenes”, however, it has a real time impact on customer service. Insurance Companies’ topmost priority is their customers. For Example, if a policyholder claims for health insurance, the team of underwriters accurately check the premiums paid, process and try to settle down the claim quickly, but due to shortage of time and excessive workload the team somehow fails to manage the tasks efficiently, this leads to poor customer satisfaction.
Policy Management “Grow the Core” - Insurance industries are running on the basis of issuing new policies and renewing old policies. Policy functions as the core of insurance business activities. There are several policies prepared by the insurance carriers and so they require a proper format of their framed policies, this is one factor. Secondly, the rules and regulations of every country keep on changing and adapting to these changes is a challenge for insurance companies as they have to amend their policy according to the norms and if the insurance business wants to increase their profits they have to follow one thing “Improving the policy management at every step”. Policy management consists of three sub-categories:
a. Policy Checking- Every insurance company has to prepare a checklist according to their policy requirements such as document verification, renewal requests, etc. are then processed by the underwriting team of the insurance firm.
b. Policy Issuance- Policy issuance consists of information declarations, definitions, coverage, exclusions and creating quotes for the customers. This is a time consuming process and again the team of underwriters is responsible for managing these tasks.
c. Loss Runs Report- It is difficult to prepare this report as there are too many calculations included with every single premium paid by the insured. Loss run is all about depreciating the amount of the premium, when the customer wants to switch its insurance carrier. It’s a type of document that is required by the insurance firm to check the claims history of the concerned person.
Insurance Accounting “Accounting is the language of any business”- Accounting plays a key role in every business. In an Insurance firm, the owners do not have time to look after their insurance accounting tasks because the main focus in this industry is customer satisfaction. So the Insurance firm usually faces hard time due to long calculations of commission for agencies and agents which is calculated on the basis of premiums the Insurance companies have collected. Many fraudulent transactions are held in this process and proper reconciliation is a must. Every record of bookkeeping should be monitored thoroughly to avoid these difficulties.
Claims Management “Every Human has Rights” Claims management is a crucial task to handle, as they have to precisely go through every incident that happened, verify the documents and then they process the claims, again the underwriting team has to look after the claims management process. In simple terms, we can say that claims is a formal request to an insurance company made by the insured against the insurable incident that took place. For example, if a customer meets a car accident and claims for medical insurance, then the underwriting team send his agent to that particular place, thoroughly go through the medical bills, calculate the amount on the basis of the premium paid by the customer and then the claim is processed.
Commission Management “No sale no Commission”- The Commission is basically the reward given to employees as a token of appreciation, but when we talk about insurance sector here the commissions are given on the basis of the policies sold out by the agents to customers. Commission is a challenging task for the insurance companies, as they have to calculate the amount on the fixed percentage. There are a number of agencies under insurance carriers and again an agency has agents who sell the policies. So there’s a long chain and a long process followed for commissions in an insurance firm.
Data Entry “Turn the pain into power”- Every information gathered by the agents from the customers such as what kind of policy they require, what clause should be added and how much is their budget, etc. all this data is fed into the system as a record. In this industry, the data processing is one of the core activities because there are a number of aspects that require to be stored for future references. So yes, no doubt it’s a painful task, but well maintained data is the core of insurance companies can help you at any point of time.
Legal “Law is a very addictive profession”- Every insurance carrier has its own legal department, which is responsible for all the legal activities such as contract review, drafting, summarizing, analyzing, etc. The legal process is confidential, expensive and time consuming. A single mistake in the contracts can harm the business in various ways.
Hiring Experts “Do what you do the Best and Outsource the Rest” – Nowadays, to maintain the competence in the market even the Insurance companies are Outsourcing back-office insurance business activities. Instead of hiring a team of experts, which will cost the company more it is better to outsource the activities and reduce the burden of underwriting team. This can help you to increase the efficiency of your business and you can save your cost and time .
Insurance companies are service oriented and for them customer satisfaction and loyalty is the utmost priority. So its better to avoid the mistakes that can harm their reputation and business processes because “ There is only one boss, the Customer and he can fire everybody, simply by spending his money somewhere else” goes the saying.
