BP Learns Claims Lesson the Hard Way

I don't want to utter an environmentally karmic dare, but it seems clear that the disaster in the Gulf of Mexico caused by the explosion of BP's Deepwater Horizon oil rig will be the claims story of the year. As of July 5, BP reportedly had spent more than $3 billion trying to stop the leak - and, according to the company's website, had paid out $149 million in claims.

That seems out of proportion, and not surprisingly, BP's performance as a claims administrator has been panned as thoroughly as its performance as an oil rig operator and risk manager. In his June testimony before the House Committee on Small Business, Kenneth Feinberg, head of the Gulf Coast disaster's claims fund, noted with understatement, "It is not sufficiently efficient."

Still, BP gamely offers other information about its claims-paying capabilities: As of early July, the company says, 96,300 total claims had been submitted, 14,700 of which had been submitted online. There has been a six-second average call wait time for each of the 114,000 calls that have been received, BP adds. And there has been an average five-day period from "claim to paid" for individuals who have received checks; the average claim-to-paid time period for commercial entities is eight days, according to BP.

Not to cut BP any slack, but the firm is discovering what insurance companies have known for years: Claims processing is hard. Even when claims are handled with the utmost efficiency, speed and fairness, there are customers who will be unhappy with the outcome and observers who will cry foul. In fact, insurer claims-paying best practices will be the de facto standard for BP, just as companies such as Zappos and Nordstrom set the standard for customer service. Rather than an occasion for gloating, however, insurers should view this as an urgent argument for claims systems modernization.

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio