KPI Benchmarks : Claim Settlement Cycle Time (Life)
- Benchmark Range
- Benchmark Average
- Benchmark Sample Size (n) 20
* Is High or Low Best: Low is Best
Claim Settlement Cycle Time (Life)
Life insurance claim settlement cycle time measures the average amount of time required to settle and close an insurance claim, from first notice of loss until settlement. This KPI is extremely important, from both a customer experience and loss control perspective. Extended settlement cycle times may be an indicator of claims leakage (i.e., losses paid out are higher than they should/could be), which impairs the organization's profitability and standing with shareholders. Furthermore, lengthy claims cycle times are a leading driver of customer turnover. Major factors that drive longer claim settlement cycle times include poor claims triage procedures (i.e., claims not prioritized properly, routed to improper adjusters, etc.), lack of inbound data quality (e.g., claims submitted with missing information, etc.), subpar claims adjuster training and high turnover among adjusters.
The average amount of time (measured in calendar days) required to settle a life insurance claim, from the time the claim is reported (i.e., first notice of loss, or FNOL) up until the claims is formally settled by the insurer.
KPI Best Practices
- Assign complex claims to more experienced processors
- Proactively communicate with customers throughout settlement process
- Define acceptable levels of claims backlogs based on predictable historical closure rates
KPI Calculation Instructions Claim Settlement Cycle Time (Life)?
The calendar dates of two events are used to derive this KPI: (1) the date that the policyholder notified the insurance company of the loss (i.e., first notice of loss, or FNOL), and (2) the date that the claim was formally closed and settled by the insurance company. For life insurance claims, FNOL typically occurs over the phone. The date of settlement is considered the date on which the claim is formally closed (approved or denied), and any payment is scheduled to be made to the appropriate parties (i.e., policyholder, repair vendor, etc.). The steps between these two start and finish dates (FNOL and settlement) typically include claims investigation, estimate, adjustment and negotiation (if required). Include only life insurance claims in this calculation.
KPI Formula :
(Sum of Claims Settlement Cycle Times) / Total Number of Claims Settled