Today’s consumers have ‘zero tolerance’ for slow claims payouts

In an age where instant gratification has become the norm, thanks to rapidly advancing technology, a new study has found that modern insurance consumers are far less willing to tolerate slow insurance payouts than previous generations were.

According to a study conducted by InvoiceCloud, 75% of U.S. policyholders are likely to leave their property/casualty insurer over a poor claims experience.

Angela Abbott, vice president of alliances at InvoiceCloud, described this as “the Amazon effect,” where consumers are so accustomed to receiving products quickly that they now expect the same instantaneous results in other aspects of their lives.

“To this day and age, customers’ expectations are shaped by, unfortunately, like Amazon, where you can get something overnight,” Abbott told InsuranceNewsNet.

As an example, she said she recently purchased pencils from Amazon and expected the shipment to arrive by the following day. Instead, the package arrived the same day she ordered it.

“It’s just like our own expectations are being shaped, and so, having to wait a week or more to get a claim check is just unfathomable at this point,” she said.It’s even worse for younger clients, Abbott added, many of whom are accustomed to platforms such as TikTok and Instagram, where technology is on-demand and easy to use at their literal fingertips.

“The people who are buying insurance now are coming up and rolling off of their parents’ auto plans and buying homes for the first time. They have zero tolerance for clunky systems and friction-laden systems,” she said.

In her words, this is why InvoiceCloud aims “just to simplify digital payments for everyone, whether that’s paying a bill or receiving a claims payout.”

Poor claims experience

InvoiceCloud’s Consumer Claims Experiences Survey found that of the 33% of respondents who said they have ever filed a P/C insurance claim, 25% waited over a week to receive their payment. Only 9% received payment within two days.

Thirty percent of respondents said faster payment is the change they’d most like to see, and 22% said they want clearer, more consistent communication on payment status.

The study pointed out that of the number of clients willing to change carriers over a bad claims experience, 44% said they’re “likely” and 31% said they’re “very likely” to do so, which is “striking” because “switching providers is often easier” in P/C than in other lines of business.

“People, if they have a bad claims experience, will more than likely go look elsewhere. Even if they’re locked into an auto pay, if they have a bad experience with their claim, and if they can’t get it fast, people will go look for coverage somewhere else,” Abbott said.

It’s not only that people expect faster service, but also that insurance claims can be “emotionally charged” and make people make emotional decisions, she noted.

“I think more than anything, it’s just that the importance of this is such an emotionally charged piece of the insurance process,” she said. “This is where you’re making good on the promise of all those policies that the premium is paid into. When we’re talking about a claim, this is probably the biggest area of retention risk that a carrier has, that payments ecosystem and the whole lifecycle of the payments.”

Making the case for digital payouts

The study found 52% of respondents prefer direct deposit to a bank account for claims payment, emphasizing Abbott’s point that digital payouts can help give customers a better claims experience.

Abbott noted that not only is check fraud prevalent, but checks getting lost in the mail can also create inefficiencies for carriers on multiple levels. For example, the carrier must manually reverse the payment in their system and then reprint the check, meaning they’ve now paid for those service fees twice.

Meanwhile, the customer is already angry and ends up incurring further costs on their end. Even further, there’s often “no digital footprint,” so customers repeatedly call in for updates while the carrier “doesn’t have a good answer” because the check was already sent out.

“It becomes extremely inefficient and costly to the carrier, who’s now facing a retention issue because the customer is unhappy that the check never came,” she said.

Choice is key

However, Abbott said that effective communication and giving customers a choice matter more than forcing everyone to switch to digital payments.

She noted that the amount of the payment is a major factor in how a client wants to receive their payment, and added that some clients still prefer to receive a mailed check.

“It’s about handling the disbursement as quickly as possible, and it’s about giving them a choice. We’re not trying to push someone into a digital experience if they don’t want it,” Abbott said.

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Rayne Morgan is a journalist, copywriter, and editor with over 10 years' combined experience in digital content and print media. You can reach her at rayne.morgan@innfeedback.com.