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Underwriting and Claims

Multiple Shades of Grey: Claims Management Challenges - Real or Imagined?

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It is no secret that life and health insurers have an image challenge.

Carriers may like to believe coverage and claims decisions are black and white – yes or no, covered or excluded, right and wrong. And yet, for policyholders, the motivations behind these decisions can appear murky and the interpretation of policy language full of shades of gray.

To foster confidence, insurers must deliver clarity – to become known for treating people with dignity, communicating with integrity, and making fair and understandable decisions. Trust is the currency of insurance: the product is a promise. Trust is most often gained – or lost – at the time of claims. And yet, products have never been more complex, so how many insures can say their coverage limits are understood by policyholders, and how clearly communicated and credible are decline decisions? For many insurers, it may be time to shine a bright light and reveal the full spectrum of claims functions.

The Need for Clarity in Claims Communications

Declining some claims is unavoidable, but coverage levels should be clear, the time to issue a claim should be unambiguous, and the reasons behind any claim decision should be fully explained. In other words, insurers have an obligation to communicate clearly to policyholders.

Yet reasons for an adverse decision are often anything but obvious. Insurers fail to prepare the claimant for a negative response, and feelings of shock or anger generated by an unpleasant surprise can be compounded by confusing or legalistic notification language. Policies can be loaded with jargon that invites misinterpretation and leaves the policyholder feeling misled at claims time.

Relatively few declines can create a disproportionate problem. When an insurer’s answers appear to contradict a claimant’s beliefs about a policy, he or she can suspect the insurer of misrepresentation, and the claimant is far more likely to broadcast complaints in social media and on ratings websites, where these posts can gain attention and damage the brand. After all, evidence shows that when making insurance purchases, potential customers are more likely to ascribe value or authority to opinions of individuals in a social network over corporate or institutional statements. Increasingly, too, customer complaints can attract the attention of media and regulators.

Banishing the Grey in Policy Language

A lack of clarity also has more direct implications. A foundation of international contract law, the “contra proferentem” doctrine states that any clause considered to be ambiguous should be interpreted against the interests of the party that created, introduced, or requested that a clause be included.

In other words, the onus is on insurer to prove, on balance, that an exclusion has been directly communicated and applies to a case. Insurers would do well reassess exclusion language. Some basic recommendations include:

  • Stating clearly the need for an accurate application disclosure and establishing consequences of not doing so.
  • Ensuring clear headings, particularly for critical illness coverage restrictions.
  • Offering all existing policyholders the option to update critical illness policies every time new critical illness definitions are introduced to ensure this content is always up to date.
  • Reassessing policy exclusion definitions. In a product with an alcohol and drug abuse exclusions, for example, identify how the insurer evaluates whether someone is under the influence or defines “abuse.”

Pre-existing exclusions are particularly prone to dispute, so think critically and communicate directly to prevent policyholders from arriving at the wrong expectations. It can help to establish very specific language.

While many policies omit necessary information, the opposite is also true: some are packed with onerous, unnecessary, or overly vague language. For example, the act of taking part in criminal activity normally excludes a person from making an insurance claim – so why specifically identify this exclusion? Is it necessary to exclude overseas critical illness claims in policies that require local evidence? In addition, many policies refer to “unreasonable failure to seek or follow medical advice,” without establishing how to assess what is unreasonable. Also, how easy is to use this exclusion in real life?

Exclusion language is rarely as reliable or protective as many insurers think, particularly when it is poorly drafted. But by keeping in mind a few simple tips, and employing common sense, claims functions can avoid reputational damage and protect the insurer and the policyholder alike:

  • Keep exclusion language simple.
  • Get legal review.
  • Expect a fight (even if you don’t get one), and make sure you have internal support for a decision.
  • Weigh whether performing underwriting at claims stage is fair to your claimant, and consider any implications of an adverse decision on long-term underwriting processes.

Remember, the goal should be to fill holes in coverage, not add more.

Putting the “I” into Insurance

Perhaps the most powerful means to clarify communication, break through mistrust and minimize disputes is for the individual claims analyst or supervisor to put himself or herself into the position of the claimant and ask questions:

  • If you do not regularly read the fine print for your latest XBOX, is it realistic to expect consumers to read details of policy documents?
  • Is the policy language understandable enough that a friend or relative could easily understand what is covered and not covered?
  • Are you sure you have all the facts – and do those facts make sense?
  • If a reporter called you up, could you defend your claims decision – and would a man-on-the-street find that explanation reasonable?

If the answer to these questions is “maybe” or “no,” than it may be time to rethink assumptions and approach a decision or communication plan differently.

No one is pleased when a request is denied, but a little preparation can go a long way toward maintaining the insurer-policyholder relationship. Those insurers that enter claimant conversations prepared with all the facts and ready to address areas of uncertainty, explain clearly why a claim is being declined, and provide options for appeal will enjoy higher customer satisfaction scores and will have a better chance of retaining or regaining business.

To conclude, it is essential, that we have our policy terms and conditions clearly worded. Keep the language simple and easy to follow. And if for any reason a particular claim is to be denied, ensure the communication is very clear and that references to the relevant clauses in the policy terms are made in the communication.

Communication and expectation management are key. These could go a long way to help improve the image of our industry, as a whole, and build trust among our customers. 

At RGA, we are eager to speak with clients about any support needed as we confront this challenge together. Contact us to learn more about the resources, solutions, and insights available. 

The Author

  • Dr. Dhiraj P. Goud
    Executive Director
    Regional Underwriting & Business Solutions
    RGA Asia


The RGA India office was delighted to host over 380 clients at our two-day virtual RACE (RGA Academy of Continued Education) webinar series. Conducted annually (but cancelled last year due to the pandemic), the event featured multiple in-depth presentations over the span of two days, including:  

  • COVID 19 Pandemic and Insurance: The Way Forward (Dr. Sheetal Salgaonkar)
  • COVID 19 Pandemic and Insurance: The Way Forward - Underwriting Approach (Dr. Nutan Wane)
  • Congenital Heart Disease: An Approach to Underwriting (Dr. Rajdeep Agrawal)
  • Multiple Shades of Grey: Claims Management Challenges - Real or imagined? (Dr. Dhiraj Goud)
  • Reading research papers - The basics of evidence-based insurance medicine, and RGA Global Underwriting Manual (GUM) - Precision Calculator (Rahul Nawander and Dr. Reema Nathwani)


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