Cognitive technologies in complaints management for insurers

Published: February 25, 2018

Applying technology to address complaint management and compliance for Insurers

The Problem

According to the National Association of Insurance Commissioners (NAIC), there were more than 138,000 confirmed closed complaints in 2016 in the United States. It is important to recognize that these are the complaints that:

  • were investigated by the insurance department of the relevant state and given a resolution code and
  • belonged to the category where the insurer/ licensee was in violation of a law or the policy contract

This means the actual number of complaints handled by insurers is significantly higher than this count as not in all instances will the state department file a complaint. In many cases, policyholders themselves can file a complaint directly with the insurer.

Due to the regulatory nature, a complaint needs to be analyzed carefully by several departments and senior officers of the company. Let us assume that a complaint takes an average of 3 business days of effort to be resolved. Let us also not factor in the wide variance in the effort, depending on the nature of the complaint. Still, it may be costing the insurer over $700 just in terms of the effort costs @$240/day. By this estimate, insurers may have spent ~$100m in 2016 just in terms of effort costs not considering the other costs, including fines and reputation costs.

Adding to this, the fact that NAIC does not get data from all the states, the actual count and costs may be much higher to make it look like the tip of the iceberg!

The 4 biggest coverage types for 2016 are Auto, Accident & Health, Home followed by Life & Annuity. These are thus, the best targets for improving customer service, operations, and complaint management processes.

Top Coverage Types (2016)

Looking at the reasons why these complaints are made in the first place, the single biggest area for improvement is claims where the complaints are due to delays, denial of claims or unsatisfactory settlement.

The Regulatory Angle

Regulations vary from state to state and from country to country. However, the broad intention is the same across the board, i.e. to protect interests of policyholders and the industry at large.

  • Response Time

This is a common requirement that most regulators have. e.g. Most states, in the US, are required to acknowledge or respond to a complaint within 10-15 working days. The guideline on

time to acknowledge, in some Asian countries, is as short as 3 working days. UK's Financial Conduct Authority, for example, requires insurers to respond to a complaint within 8 weeks.

In short, from an insurer's standpoint, it is most important to comply to these turnaround times, for acknowledgment or response to a complaint.

  • Process

Regulators- intention is to make sure the complaint is resolved in a fair manner. In this regard, some regulators require that the person responsible for complaints or the process for resolving complaints be published, so a prospective buyer can review it before buying a policy from the insurer.

Insurers, therefore, need to have a process in place to be able to comply with these requirements and demonstrate to regulators that they do have a process and that it is followed in a fair and transparent manner.

  • Fines and Litigations

Regulators often impose punitive fines to combat non-compliance with regulations. These, not only result in financial costs but also the loss of reputation. In many instances, insurers are taken to court. This is expensive and hurts the reputation of the insurer.

The long and short of it is that insurers need to have a process and a supporting system to be able to manage complaints effectively avoiding non-compliance, fines, and litigations.

The Ideal Solution

An ideal complaint management solution should come with a powerful and flexible workflow platform that can allow the insurer to implement any variation in the process as per the local regulatory requirements and the internal organizational structure. Here are the key elements that one should look for:

  • One workflow that works across different departments

Given that a complaint will need to be addressed by different departments such as Compliance, Legal, Agency, Underwriting, Claims, Customer Service, and others, it is the most fundamental requirement that the workflow recognizes different work steps, departments, user roles and access permissions at a granular level and allows an insurer to change them based on their specific needs  one size fits all simply does not work.

Top Reasons for Complaints (2016)

Complaint Management System for Insurers Copyright © 2017 Virtusa Corporation. All Rights Reserved.

  • Stringent security and auditing

Given the regulatory nature of complaint processing, it is most critical to ensure the users are allowed only select functions, based on their roles in the organization. For example, the system should control who can create a complaint as only a designated user role should create a new complaint after a proper initial investigation. In addition to access control, the system must audit the activities of the users as to which user performed a given action. This is an important requirement to bring in transparency and to be able to meet the regulatory and internal audits.

  • Business rules to support extensive regulations

Given the complexity of the diversity of regulations from state to state and coverage type to coverage type, the system needs to be able to handle several complex business rules which also undergo changes as the governing regulations change more often than not. It is important that these rules are implemented and changed fast enough to meet the business demand.

  • Integration to internal and external systems

Given that complaints can come from external sources in different forms such as email, web forms, PDF, XML et al, the system should have these technical capabilities to connect with them all and be able to have the complaint management process followed regardless of the form in which the complaint was sent Similarly, the system should be able to integrate with existing systems such as Policy Admin System (PAS), Claims, Underwriting, Customer Relationship Management (CRM) system. This will avoid the need to have a duplicate set of information pertaining to the policyholder, agent et al to be entered into the complaint management system.

  • Collaborative and case management capabilities

Complaint management process is highly collaborative as each complaint needs to be reviewed from different perspectives by different departments. In addition to typical workflow features, the systems should allow users to have:

Supporting documents, emails, scanned images, etc. saved as part of the complaint

Create sub cases so that complaint can be reviewed in parallel by e.g. Claims department as well as the Finance department

Post messages so topics on related items can be discussed within the context of a complaint

Search past complaints based on any keywords

Retain closed complaints about the required duration of the time stipulated by the local regulators

  • Extensive reporting and dashboard

The system should be able to report up to the minute status on complaints open, closed, to be assigned etc. with a clear view of the SLAs to be met. This is one of the most critical aspects of the solution as to how it facilitates users in managing the complaint process in a timely, fair and transparent manner. Reports should meet all regulatory requirements as well as internal management and audit needs.

  • New technologies to improve accuracy and productivity

Typically, a complaint has lots of text and more often than not, the complaint coordinator or complaint officer responsible for complaints must go through the entire text to find that the relevant piece of information is very small.

This is one area where the application of natural language processing (NLP) can yield good results to determine the relevant portions of the text in the complaint so that the complaint officer can focus on the relevant text. The system should be able to analyze a complaint text based on the sentiment and highlight the entire text based on positive, neutral and negative sentiments-ì this feature will help to locate the sections of the text where the writer is not happy with the insurer and has complaints. For example, in one email, the policyholder may be complaining about the underwriting issue as well as the claim settlement in which case the two sections should be highlighted as negative sentiments to prompt the user to have it investigated in parallel by both Underwriting and Claims departments.

These new technologies can reduce the chances of human errors resulting in improved productivity and accuracy of the complaint management process.

Implementation model

The preferred implementation model for a complaint management system should be a subscription, based solution as a service model. The major advantage for business is the low initial investment, which pulls down the entry barrier and implementation risks. It is always a better idea to separate the functional requirements phase from the actual system implementation phase particularly because achieving alignment on functional requirements across departments is usually time-consuming, in most large insurers.

It helps to have functional requirements signed off by all parties before getting on to the nitty-gritty of the actual implementation.

Virtusa empowers Insurers turn customer complaints into compliments

Virtusa combines its insurance industry domain expertise, technology, and global delivery model to help insurers implement business solutions based on their specific requirements. Virtusa adopts a business capability model-based methodology that is technology agnostic, ensures completeness of business requirements and causes minimal disruption to the business.


  1. "NAIC Closed Confirmed Consumer Complaints by Coverage Type As of May 31, 2017"
  2. "NAIC Reasons Why Closed Confirmed Consumer Complaints Were Reported As of May 31, 2017"
Insurance cloud solutions

Accelerate time-to-market and achieve true customer-centricity

Related content