Insurance experts push for improved transparency in claim payment process

Cynthia Ezekwe 

Consumers often have a negative perception of insurance companies, believing that they are slow to pay claims or even that they never pay them at all. This perception has developed over time due to bad experiences or negative stories heard from others. One of the most common negative notions held by consumers  is that insurers ‘low-ball’ claimants, offering them less money than they are entitled to. 

In reality, insurers have a legal and ethical obligation to pay claims fairly and accurately. There are a number of checks and balances in place to ensure that this happens, including state regulations and independent third-party claims adjusters. While it’s true that insurers sometimes make mistakes, these are usually honest errors rather than deliberate attempts to underpay claimants. 

Another negative notion is that insurers deny claims without reason. In reality, there are usually valid reasons for denying a claim. For example, the claim may not be covered under the policy, or the evidence provided may not support the claim. In some cases, the claimant may have made a mistake when submitting the claim, such as providing incorrect information or failing to meet a deadline. Whatever the reason, insurers will usually provide an explanation for why a claim has been denied. This helps to ensure transparency and fairness in the claims process.

It is against this backdrop that insurance  industry experts converged for the 2023 Claims Advocacy Conference, organised by Carefirst Ltd, a claims management and risk management outfit, to enlighten consumers on the procedures of claims payments in the industry.

Gus Wiggle, founder and principal consultant of Carefirst Ltd, in his welcome address at the conference  tagged “Understanding Insurance Beyond Claims Payment,” noted that claims will remain the anchor of the insurance business, and will remain on the front burner, while communication will become the point of impact for expressing customers’ impressions. 

Prisca Gbemisola Soares, former secretary general Africa Insurance Organisation (AIO), described insurance as the backbone of any economy, noting that the conference is aimed at minimising consumers’ mistrust of insurance. 

According to Soares, the true measure of a good insurance company is its ability to pay claims in a timely and fair manner. She averred that in most business transactions, money is exchanged for products or services, but in the case of insurance, money is exchanged for a promise that the insurer will compensate the insured if an insurable event occurs. 

“The taste of a good insurance company is the payment of claims. Under normal circumstances, you exchange money for products. In the case of insurance, you exchange money for a promise that when the event you insure against occurs, the insurers will compensate you. Unfortunately, the insurance industry does not have a good image. The impression of the public is that insurers don’t pay claims,’’ she said. 

Soares said it’s unfortunate that the public perception of the insurance industry doesn’t reflect the reality of how much insurers pay out in claims. Citing a 2022 report by Nigerian insurance regulator, NAICOM, she noted that insurers collected a total of N726 billion in premiums and paid out N318 billion in claims, representing 43.8 per cent of total premiums collected,indicating that almost half of the money collected by insurers was paid out to policyholders who had claims.

“This is unfortunate because according to NAICOM, the gross premium income for 2022 was over N726 billion, and claims were over N318 billion, which is a whopping 43.8 percent. Practically half of the income went out in claims payment, but unfortunately, bad news spread quickly,’’ she added. 

Speaking on the mismatch of the information concerning claims payment, Soares faulted the low awareness of the insuring public, lack of understanding of what insurance is, and the slow procedure for claims payment. 

She pointed out that it causes a lack of trust, which is a big challenge for players in the industry, stating that a major way to rectify the wrong impression is to educate the insured public to understand what insurance is about, and how claims are processed. 

The first female managing director of the National Insurance Corporation of Nigeria, noted further that the major constraint  in claims payment is incomplete documentation and insufficient or incorrect information.

Soares stated that it is the responsibility of the insurance company to ensure that claimants understand the documents they need to produce, given the specific time frame.  

“Sometimes, the claimant has no control over when and how documents are issued, so they need to be informed, and on the part of the client also, they need to comply to provide adequate and correct documentation,’’ she added.

According to her, the 1997 NAICOM Act that set up the commission gave the commission the responsibility to ensure the effectiveness of the vision, control of the insurance business in Nigeria, and also the protection of the policyholders.

She further said that the Sections 69 and 70 of the Insurance Act 2003 stipulate that when a claim has been filed in writing and the insurer has accepted liability, the claim must be settled within 90 days, adding that insurers that fail to comply with these provisions are subject to penalties under the Act. The purpose of these regulations, she emphasised, is to ensure that insurers adhere to best practices in their dealings with clients and policyholders and to reduce mistrust between the two parties.

Soares called on insurance companies to develop clear principles for claims management and to educate claimants about the procedures for filing and receiving claims payments. She opined that by establishing clear and transparent claims management procedures, insurers can help to build trust with their customers and reduce the likelihood of disputes. 

“Insurance companies need to be sure that they communicate all necessary information to the policyholders; we should be fair in the way we treat our clients. When a client picks up a policy, they need to understand what the policy is all about; what is expected of them, and what they can expect to get when the claim occurs,’’ she added. 

In his presentation, Reginald  Egbuniwe, managing director, Metropolitan Loss Adjusters, a loss adjusting company, noted that contrary to the belief of the public, insurers pay claims,  pointing out that there are various stages through which a claim undergoes before the actual payment. 

Egbuniwe explained the role of loss adjusters in the claims payment procedure, stating, “When there is a claim, insurance companies call us to visit the scene; we ask questions, we carry out investigations we make sure that the loss occurred, then we establish the point of view of damage, we make recommendations as to how much should be paid in line with the contract that was signed before we were appointed.’’

He stressed the importance of effective communication in claims payment procedures, stating that the public  rates insurers based on speed and communication.

Explaining the various stages claims undergo before payment, he said, “The first stage is filing a claim, with the insurance company. This can be done by filling out a claim form and providing supporting documentation, such as photos or police reports. Once the claim is filed, the insurance company will begin investigating the claim. They may ask for additional information or inspect the damage. Once the insurance company has all the necessary information, they will decide on the claim. If they decide to pay the claim, they will issue a payment to the policyholder.”

Egbuniwe identified some of the factors that can affect the speed and efficiency of the claims process to include a lack of documentation, poor communication, and the complexity of the claim itself. He explained that with adequate documentation and evidence to support the claim, the process will be easier and faster. 

“Insurance fraud, especially exaggeration of claims, can significantly impact claims settlement payment. As an adjuster when you suspect fraud, you are not going to rush that claim, you keep asking for proper documents, and communicate effectively,’’ he added. 

Speaking on various strategies to mitigate factors that cause delays in claims payment, he noted that clear communication channels are very important to the insurer, loss adjuster, and policy policyholder to the e  claims process free and fair. 

The loss adjuster pointed out that digitalisation and automation makes processes easier, imploring insurers to embrace the trend of Artificial Intelligence (AI) to make the process less daunting and leverage technology such as mobile apps, social media, to facilitate easy claims reporting, and proreal-time time status of things.

Egbuniwe added that efficient claims technical teams, who will respond and respond to clients on time;  dedicated customer support that works alongside claims technical team to address policyholders concerns; collaboration with external parties, and streamlined workflows will make claims payment faster.  

On her part, Rashidat Adebisi, chief client officer at AXA Mansard Insurance Plc, believes that claims are a major selling point for insurers, which is why documentation is essential for the claims process. 

Emphasising the relevance of the insurance sector,she said,”Just recently, NAICOM announced that insurers have paid N550 billion in claims, as at June 2023. That means that we have supported the economy.”

Adebisi however noted that without proper documentation, insurers would not be able to evaluate and process claims effectively.

According to the chief clients officer, insurance has a lot of benefits such as risk mitigation, financial security, business continuity, and investment benefits, adding that documentation is vital in claims payment as it helps to make the process hassle-free.

“Proper documentation makes the process easier for us. It helps us in making decisions, and when we have inaccurate information, it poses a challenge to us as the insurer,’’ she said.  

Adebisi pointed out that the regulation is a bedrock of the organisation, which entails proper documentation to ensure that things are being done properly, adding that insurers need to bring the right information and also engage properly with the people being insured.

She stated further that policyholders should be enlightened to know what their coverage entails, the amount involved, and the processes to make the claims process easier.

In his closing remarks, Wiggle emphasised the importance of effective communication in increasing insurance penetration in Nigeria. He suggested that using local languages, such as Pidgin English, could be a key strategy for reaching those who may not have formal education, particularly in rural areas. 

He concluded that by communicating in a way that is accessible to everyone, insurance companies can help to boost penetration rates in Nigeria.