‘There's no failsafe. If someone enters £200,000 instead of £20,000, no one knows until later’.
This candid admission from a claims leader during our research into UK specialty insurance operations reveals more than a data validation gap. It exposes a broader truth: most claims organisations focus on obvious costs - salaries, software licences, outsourced services - whilst systematic operational friction silently erodes millions from their budgets.
Why should insurers or claims organisations care about friction costs?
The mathematics of operational friction compounds brutally across high-value, low-volume specialty claims. Unlike motor or household insurance where individual claim costs are relatively modest, specialty lines involve claims that can run to hundreds of thousands or millions of pounds. Even small inefficiencies multiply dramatically.
Consider the typical specialty claim lifecycle. A professional indemnity claim might require:
- Coordination between claims handlers, brokers, surveyors, and legal advisors
- Review of extensive documentation across multiple systems
- Complex reserving decisions with limited precedent
- Compliance evidence for regulatory requirements
- Multi-party communication across organisations and jurisdictions
Our research found that 30% of claims professionals cite collaboration and communication challenges as primary obstacles to meeting strategic goals.
When a marine claims director told us ‘we’re doing six steps just to process one payment – it could be three’, this wasn’t describing a failing system. It was highlighting systematic friction that affects every transaction, every day.
The Clyde & Co MGA Opinion Report 2025 found that 77% of Managing General Agents believe claims processes require fundamental improvement – a dramatic increase from 59% just two years earlier. This isn’t dissatisfaction with claims outcomes. It’s recognition that operational friction has reached crisis levels.
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What are the ‘hidden costs’ that a claims friction audit process aims to expose?
A comprehensive insurance claims audit process examines more than compliance and decision accuracy. It identifies seven systematic friction points that collectively represent substantial operational waste.
1. The payment processing tax
The friction: Multiple manual steps, system handoffs, and approval workflows turn straightforward payment processing into time-consuming administrative burden.
A marine claims director participating in our research described the problem succinctly:
‘We're doing six steps just to process one payment. It could be three’.
The friction manifests in multiple ways:
- Manual data entry repeated across payment authorisation systems
- Multiple approval stages that add administrative steps without improving control
- System limitations requiring workarounds that triple processing time
- Reconciliation complexity when payment data doesn’t flow automatically between systems
The hidden cost: Specialist claims handlers – whose time is valued for their expertise – spend hours weekly on payment administration. More critically, payment delays can strain broker relationships and create unnecessary friction with policyholders during already stressful claims experiences.
2. The data re-entry burden
The friction: Information captured in one system must be manually re-entered into others, creating duplicated effort and introducing error risk.
As one claims handler explained:
‘Everything you do has to be manually re-entered... I don't trust the system’.
The fragmentation typically occurs across:
- Initial claim notification systems
- Core claims management platforms
- Document management repositories
- Financial and reserving systems
- External communications platforms
This isn’t just about inconvenience. Our research found that claims professionals consistently report having to ‘clean up the data before you can even think about progressing the claim’.
Expert capacity that should focus on complex claim assessment instead gets consumed by data housekeeping.
The hidden cost: Beyond wasted time, data re-entry introduces inconsistencies that can affect reserving accuracy, regulatory reporting, and ultimately claim outcomes. When handlers don’t trust their systems, they rely on memory and personal records – creating knowledge silos that increase business continuity risk.
3. The priority blindness problem
The friction: Claims management systems typically sort by date received or alphabetical order, providing no intelligent indication of which claims require urgent attention.
‘You can't tell which claims are actually sensitive just from the list’, explained one TPA claims handler. Another added: ‘There's no way to see what's urgent on the file’.
Without intelligent prioritisation, claims handlers must:
- Manually review multiple claims to identify urgency
- Rely on institutional knowledge about broker expectations or claim types
- Respond to the ‘squeaky wheel’ of broker calls rather than systematic importance
- Risk missing genuinely urgent claims whilst handling routine ones
The hidden cost: Service level breaches on genuinely urgent claims can damage broker relationships and policyholder satisfaction far more than delays on routine matters. The inability to identify and escalate sensitive claims creates both operational inefficiency and strategic risk.
4. The reserving guesswork
The friction: Claims handlers face complex reserving decisions without structured decision support, leading to conservative over-reserving or risky under-reserving.
As one handler candidly admitted:
‘It's hard to quantify D&O claims. I wish we had a reserving tool’.
The challenge is particularly acute in specialty lines where:
- Each claim may be genuinely unique with limited precedent
- Multiple coverage layers and policy interpretations complicate exposure assessment
- Long-tail development patterns make initial reserving particularly uncertain
- Commercial pressures create tension between prudent reserving and capacity efficiency
Without structured frameworks, individual handlers develop personal approaches. Different intuitions lead to inconsistent outcomes.
The hidden cost: Over-reserving ties up capital unnecessarily, affecting profitability and capacity efficiency. Under-reserving creates later adverse development and damages credibility with capacity providers. Inconsistent reserving approaches also create Consumer Duty compliance risks around fair outcomes.
5. The ecosystem handoff gap
The friction: Specialty claims inherently involve multiple parties – MGAs, TPAs, brokers, surveyors, legal advisors, and capacity providers – yet systems rarely support seamless coordination.
Our research revealed particular pain around these handoffs:
‘We don't even know who to contact on the follow market sometimes’, explained one Head of Claims at an MGA.
The coordination challenges include:
- Unclear ownership when claims span multiple organisations
- Communication gaps when parties use different systems
- Document exchange friction across incompatible platforms
- Duplicated effort when parties lack visibility into each other’s work
- Status ambiguity leaving policyholders uncertain about progress
The hidden cost: Beyond operational inefficiency, poor ecosystem coordination strains professional relationships that are fundamental to specialty market success. Broker and capacity provider confidence depends heavily on smooth claims handling – and visible friction erodes that confidence.
6. The training trap
The friction: Complex legacy systems with unintuitive interfaces require extensive training, creating both direct training costs and opportunity costs from slow onboarding.
Our survey found that 26% of respondents identified training burden due to complex systems as a significant obstacle, with Third-Party Administrators reporting the highest impact at 33%.
As one handler described their system:
‘There's too many different tabs… a lot of it isn't even filled in anymore’.
The training burden manifests as:
- Extended onboarding periods before new handlers become productive
- Ongoing refresher training when staff return from leave or move between roles
- Institutional knowledge dependency when systems lack intuitive design
- Higher staff turnover when frustrated handlers leave for organisations with better tools
The hidden cost: In a market where specialist expertise is increasingly scarce, every month of extended training represents opportunity cost. More significantly, systems that frustrate talented professionals drive them to competitors – and replacing that expertise costs far more than the visible training budget.
7. The compliance evidence problem
The friction: Regulatory requirements – particularly the Financial Conduct Authority’s Consumer Duty – demand robust evidence of fair outcomes, yet many systems struggle to provide comprehensive audit trails.
The challenge compounds across specialty claims because:
- Long-tail claims may face scrutiny years after initial handling
- Complex multi-party coordination requires clear accountability documentation
- Capacity provider oversight demands demonstrable governance
- Regulatory expectations continue evolving beyond legacy system capabilities
Without event-driven architectures that automatically capture decision context, claims organisations face substantial manual effort reconstructing the rationale behind historical decisions.
The hidden cost: Beyond regulatory compliance risk, inadequate audit capabilities undermine capacity provider confidence. In delegated authority arrangements, demonstrable governance is fundamental to maintaining and growing capacity allocations.
Read more about insurance claims on our blog:
How can a friction audit quantify and prioritise these hidden costs?
An effective claims audit process moves beyond subjective complaints about systems to quantified impact analysis that enables prioritisation.
Step 1: Time and motion analysis
Shadow representative claims handlers for complete days, documenting:
- Time spent on each activity type (searching, data entry, analysis, communication)
- System transitions and handoffs
- Interruptions and context-switching
- Rework when initial data quality is poor
This reveals which friction points consume the most handler capacity.
Step 2: Error and rework tracking
Analyse claims that required correction or additional work, identifying:
- Data entry errors requiring correction
- Incomplete information requiring follow-up
- Miscommunications requiring clarification
- Missed service level commitments requiring recovery
This quantifies quality costs associated with friction.
Step 3: Stakeholder satisfaction analysis
Survey internal and external stakeholders about:
- Broker satisfaction with communication and responsiveness
- Capacity provider confidence in governance and transparency
- Handler satisfaction with tools and processes
- Policyholder feedback on claims experience
This captures relationship impact often invisible to operational metrics.
Step 4: Comparative benchmarking
Where possible, compare performance metrics against:
- Industry benchmarks for similar claim types
- Internal performance across different teams or processes
- Historical performance before system or process changes
This provides context for whether friction levels are acceptable or exceptional.
Step 5: Calculate opportunity cost
Translate findings into business impact:
- Handler time consumed by friction × cost per hour = quantified waste
- Error rates × average correction cost = quality failure cost
- Broker satisfaction correlation with retention rates = relationship risk
- Training time × new hire volume = onboarding burden
The goal isn’t spurious precision but reasonable quantification that enables investment decisions.
Why this isn't really just a technology problem
Here’s the insight that emerges from comprehensive claims audit work:
most organisations don't have technology failures. They have architecture mismatches.
Core claims management systems – whether Guidewire, Sequel Claims, or legacy platforms – typically function as designed. They process transactions, store data, and generate reports. The problem is that specialty claims operations require capabilities these systems were never designed to provide:
- Ecosystem connectivity: Core systems focus on internal workflows, whilst specialty claims require seamless coordination across organisational boundaries.
- Decision intelligence: Systems store data but rarely provide the context and decision support claims handlers need for complex judgement calls.
- Adaptive workflows: Specialty claims vary dramatically in complexity and handling requirements, yet systems often impose rigid process flows.
- Comprehensive audit trails: Event-driven architectures that capture full decision context weren’t priorities when many legacy systems were designed.
The fundamental issue isn’t that existing systems should be replaced – it’s that they need augmentation.
This is why organisations like Hiscox are pursuing approaches that integrate data from multiple sources into unified views whilst preserving existing system investments.
Streamlining the claims underwriting process with an MVP integrating disparate data sources into a single system
Our MVP will enhance data accessibility, improve user experience and operational efficiency for claims underwriters, enabling future AI-driven developments, including data synthesis and process automation.
How should leadership use the results of an insurance claims friction audit to drive transformation?
The ultimate value of a claims friction audit lies not in documentation but in action. Leadership should use audit findings to drive three levels of response:
Quick wins (0-3 months):
Identify friction points addressable through process changes without system modification – revised approval workflows, clearer role definitions, improved communication protocols. These demonstrate commitment to improvement whilst building organisational change capacity.
Medium-term improvements (3-12 months):
Prioritise system enhancements or augmentation layers that address high-impact friction with reasonable investment. This might include integration middleware, decision support tools, or ecosystem connectivity platforms that enhance rather than replace core systems.
Strategic architecture (12+ months):
Develop long-term technology and process architecture aligned with specialty claims realities – recognising that excellence requires orchestrating complexity rather than eliminating it.
Most importantly, audit results should inform both what to change and how to measure improvement.
Define metrics that track friction reduction:
- Average time from claim notification to initial assessment
- Handler time allocation (analysis vs. administration ratio)
- First-time-right rate for data completeness
- Broker and capacity provider satisfaction trends
- Training time required for new handler productivity
The 77% of MGAs recognising that claims processes need fundamental improvement represent both competitive threat and opportunity. Those who systematically audit, quantify, and address operational friction will gain decisive advantages in handler productivity, broker relationships, and capacity provider confidence.
The question isn’t whether friction exists in your claims operations – our research suggests it’s universal. The question is whether you’re measuring it, quantifying its cost, and systematically addressing it.
That’s what an effective insurance claims audit delivers: not just compliance assurance, but a roadmap for transforming operational efficiency whilst preserving the expert judgment that creates value in specialty claims.
Revolutionise your claims operations with futureClaims™
futureClaims™ is an advanced platform designed to meet the demanding requirements of complex commercial and specialty claims, including the London Market.
