Moreover, an industry average of 97.4% policies paid out across all products with most players recording record sums. There are many heartwarming stories of the monies distributed supporting families during difficult times showing that the insurer has done their job.
However, underneath this sit genuine challenges in the speed at which these good customer outcomes are and can be achieved. In this article we explore the challenge and solutions enabling insurers to reclaim bereavement as a critical ‘moment of truth’ for the industry and their customers.
On 22 November 2024 the FCA published its findings on the bereavement process in life insurance. The FCA reviewed the bereavement claims process for 15 insurers, making up over 75% of the life protection market1. The FCA has found that, on the whole, there is a significant opportunity for the industry to improve the management, monitoring and delivery of good service outcomes for customers in this space. Many of the challenges were in the area of data, management information and SLA setting and monitoring.
There are numerous reasons for the challenges identified by the FCA but firms in the FCA review identified two consistent challenges:
Resourcing.
Time to receive documentation.
On the first of these, there has been a struggle to recruit and retain experienced claims staff into the sector for a number of years. This is further exacerbated by the sustained increase in deaths post the pandemic. Claims teams have been under pressure as a result. The FCA found that there were some examples of good practice in the industry where firms upskilled existing teams, revisited remuneration for these teams and provided clearer, stronger career progression paths for staff that included claims.
On the second of these, there is a complex balance between managing fraud risk, adhering to probate processes and speed of customer outcomes. Often there is no straightforward solution. The FCA found that there were some examples of good practice where firms accepted medical evidence directly from the claimant instead of needing it from a medical professional, electronic verification of death avoiding the need for death certificates, paperless claims journeys, digital channels to provide evidence and regularly updating customers through the process.
Complex claims processes, with multiple teams needing to contribute to the process with their own standalone SLAs, are often a factor we see when looking at complaints relating to life claims. Transformation is often, necessarily, linked to migration plans.
The FCA was able, through its multi-firm review, to estimate averages for the time to close a claim. However, there were challenges identified in how this data was recorded:
| Product type | Average time to pay claim | Observations |
|---|---|---|
| Term assurance | 53 - 122 days | This tended to take the longest time and had the highest values which drives more rigorous checks and more medical evidence being requested. |
| Group Life | 36 days once received by insurer | There is often a double notification process via the employer which is not reflected in the data. |
| Over 50s | 20 days | Often smaller values but also products have features such as guaranteed claims acceptance which results in claims being processed more quickly. |
| Whole of life | 53 days on average (in half of the firms) | The claims times varied significantly with the smaller value, older books being faster as they are less likely to ask for medical evidence.
|
There is undoubtedly significant variation in how long it takes to process a claim, with some claims taking a considerable time. This plays through our research using Trustpilot reviews for the life insurers in the UK with the most Trustpilot activity which reveals the following insights:
Among the low (0-3) star rating reviews submitted by customers, 12% pertained to life insurance claims.
Of these complaints, 26% were related to delays, 12% to poor communication or customer service, and 6% to the complexity of the claims process.
When timeframes were mentioned by reviewers, 10% reported a wait of up to one month, 17% experienced a wait between one and two months, and 73% indicated a wait of more than two months.
We often see this sort of reaction where customers do not fully understand why a claim is taking so long at a time of emotional pressure. For example, this kind of reaction is also common with home emergency products. We have seen examples of firms using clearer signposting of how a claim process works and how long it may take being a useful mitigant that can drive dissatisfaction down in this area.
Underlining all the root causes identified above is a need to modernise how life insurance claims are processed, considered and paid. Doing this will mean the process is less resource intensive and therefore mean that the resourcing challenge impacts less in the medium to long term.
Based on our experience there are potential insurer specific and industry wide solutions. A number of insurer solutions are planned or in-flight.
Example insurer specific solutions:
Re-design claims service model: Design of a new service model aligning case management practices and case manager capability with case risk and customer needs can have a positive impact on case progression.
Claims talent management: The definition and active management of the claims management career pathway supporting recruitment, onboarding and retention of staff.
Core platform: Where possible, a common core claims management platform, providing a consistent process and controls backbone, data capture and repository for all claims information can support efficiency.
Claims process automation: Supporting more efficient processing particularly for simple claims allowing experienced staff to focus on the more complex cases. A core part of this is improving communications with customers through the claims process - supporting greater transparency and timely evidence submission.
Evidence submission: Revisit the evidence required for different claims and be clear what is mandatory and what the claims handling can take a judgement on early in the process. This should factor in the difficulty of getting evidence and the ask for documentation should be proportionate to the risk firms genuinely face and need to manage.
Claims management: Clear SLAs that all teams involved in claims can work on, improved end to end accountability and improving monitoring and data to better understand customer outcomes.
Stronger communication: Being clear with claimants up front how the claims process will work, the information needed and potential timeframes. This should be supported by updates during the process.
Example industry led solutions:
Standardised documentation across the industry for claims so that claimants are not asked for different evidence to reduce variation in experience. This is likely to also support the streamlining of third party evidence where it is needed if there is consistency.
Industry standard timeframes for claims payouts to support building trust for customers and setting expectations with customers of time to payout. There are complexities to be managed here across different products however this could be a positive step forward for the industry.
A pro-active response is essential for the industry and individual insurers. Some of this is already underway but there is the opportunity to do more to accelerate change. Changing just one thing is unlikely to create the step change needed.
Industry standards, whilst creating initial additional effort, could be useful in driving standardisation and transparency. In tandem these will support insurers delivering on their core promise - namely to be there in the moment of need and to get money into the hands of the claimant as quickly as possible. This is also the core aim of the FCA and Consumer Duty.
1 FCA calls for firms to improve bereavement handling times and shares best practice, November 22nd 2024.
The FCA published a collection of insights on the price and value outcome from its first year of supervising firms against the higher standards of the Consumer Duty, on 18 September 2024. It also published a comprehensive update on its work on fair value in cash savings.
The FCA published findings of a multi-firm review of outcomes monitoring under the Consumer Duty, focusing on the insurance sector.
Making sense of the surge in complaints in Life & Retirement and what is needed to solve the challenge
Lee Clarke
Samantha Jones
