Life Insurance Claim Management Process Vulnerability using FMEA: an Iranian Insurance Company Case study

Identifying and ranking Life Insurance Claim Management Process Vulnerability, causes, effects and solutions

Failure Mode and Effects Analysis (FMEA)

20 failures are identified and prioritized for the life insurance Claim Management process. Six items, including "customers’ lack of information at sale", "insurance vendors skills shortage and disregarding the product to fit customer needs", "Inaccurate risk assessment at the time of underwriting, especially in large group contracts", "customers failure to read contract’s terms and conditions", "lack of access to a reliable source for comprehensive information on Life Insurance contracts and their features" and "lack of appropriate risk assessment and underwriting" are the most effective failures according to FMEA Methodology. In fact, failures originated from sales network, failures related to information deficiency, management sector failures and failures originated from claim settlement employees are ranked as the first to fourth priority, respectively. Experts were asked about remedies for the identified failures. Accordingly, solutions were provided for each failure. Most Important solutions for prioritized failures include "providing sufficient training to vendors and motivating them for optimization of their performance based on the long term vision", "performing accurate risk management and requiring more than one risk assessor for assessing large group contracts at the time of underwriting", "Prioritizing perfect advisory in order to fully informing clients", "Providing periodic feedback from claim management to the sales network and underwriting sectors", "Establishing insureds’ health database ", "Compiling and reviewing Periodic Required Internal Standards”, “determining Quantitative and Qualitative Indicators for Employees’ Performance Assessment based on Standard Responsibilities and Required Training in an Effective and Transparent Manner" and "Facilitating Communication between Insurance Stakeholders by Upgrading Software Systems and Timely Updates", among the suggested solutions have been identified.

Findings show that a significant part of the problems of claim management are related to the inattention at the time of sale and underwriting. It seems there is no effective feedback from the claim management to the sales management. Therefore, not paying enough attention to modify customers' expectations when purchasing a product and misunderstanding problems have a significant role to play in customers’ satisfaction failure at the time of claim. Based on the received solutions provided by the experts, it seems that strengthening the interactions between the claim management and sales management as well as between the staff and line staff, along with formulating standards for task division and training and evaluating staff performance, and also promotion of tailor-made and failure-related training can play an important role in enhancing insurance companies' claim management.