Claims leakage is a significant issue that affects the bottom line of any insurance company.
In order to understand and ultimately analyze the of claims leakage, one must first observe effects the source of the problem – claims handling and settlement. It is self-evident that carriers must firstly assure there is proper handling of claims on the level of direct claims (how the company manages claims settlements, knowing the cost of claims settlement and managing recoveries). In the area of inwards (assumed) reinsurance ,managers must ensure accurate documentation of data received from ceded insurance companies and follow-up on claim developments.
For ceded reinsurance claims, it must be emphasized that in all cases of incorrect claims handling, the result is financial loss to a carrier’s bottom line. As a result of reinsurance claims leakage, insurance carriers are losing millions in realized revenue.