Covid-19 and its Impact on Life Insurance Claims
Covid-19 has upended the world in more ways than we could ever imagine. For most people it has meant disruptions in how they work, travel, and socialize. Sadly, for many it has meant losing a loved one. As expected, Covid related deaths have impacted the life insurance industry. According to an article in the Wall Street Journal today, the Covid-19 pandemic drove “the biggest increase in death benefits paid by U.S. life insurers since the 1918 influenza epidemic.”  According to the American Council on Life Insurers, death-benefit payments rose 15.4% in 2020 to $90.43 billion, mostly due to the pandemic. In 1918, payments surged 41%. The Delta variant most likely will cause a similar surge in death benefits in 2021.
For most of the years I’ve worked at Celent, claims systems have been low on the investment priority list for life insurers. In 2019 and 2020, Celent’s North American life insurance CIO survey results showed about 10% of life insurance CIOs were looking to replace their claims systems. That changed in 2021 when the percentage of CIOs looking to replace their claims systems jumped to 20%. Our preliminary results for 2022 show that number jumping to 25%!
This increase in interest in claims systems has many implications for insurers.In our 2015 report on life insurance claims best practices, we learned that
· Life insurance companies typically underinvest in technology for claims compared to operational areas responsible for revenue generation.
· Operational best practices are not as mature in claims as in other operational areas.
· Unique differentiators between insurer claims organizations are fairly rare.
We also found that there was considerable room for improvement, particularly in the overall experience of the consumer. We found that insurers could benefit from improving claims workflow, the quality of the underlying data, and reliable interest calculations.Very few insurers had express claims programs to lower the cost of claims processing and expedite the payment of benefits because the insurer’s underlying policy administration systems were aging and had issues with data quality and data access. The insurers also had issues with reporting and analytics particularly focused on trending and understanding the underlying data. Celent surmised that attempts to improve the claims experience would be limited until policy administration systems are addressed as well.
Six years after that report, Celent believes that insurers are at a better place when it comes benefiting from a claims system replacement. Many insurers have invested in new policy administration systems and are realizing the benefits of process automation and digitalization. It is logical that if the insurer is going to digitize the front end sales process, they should include the claims process as well because the beneficiary is a potential new client. A good experience during the claims process could lead to a new sale! Easy to use claims technology will leave a positive impression by accelerating the process for both the beneficiary and the claims staff.
Celent plans to revisit claims technology in 2022 because of the renewed interest in these systems. Reach out to us if you have any questions!
 Scism, Leslie, ‘Covid Spurs Biggest Rise in Life-Insurance Payouts in a Century,’ The Wall Street Journal, December 9, 2021, https://www.wsj.com/articles/covid-spurs-biggest-rise-in-life-insurance-payouts-in-a-century-11639045802, accessed December 9, 2021