Despite spending billions of dollars on modernizing health insurance operations, insurers continue to face fundamental challenges in areas like claims. Many claims—the transactions at the heart of the business—still require manual review, and the teams tasked with that work are often routing it through inefficient processes.
Take, for example, this typical workflow, which hasn’t changed in years: A manager assigns a claim to an examiner via email. The examiner tracks it in a spreadsheet. A sophisticated claims team might also upload supporting documents to SharePoint. The tools often don't talk to each other or to the underlying system making other claims decisions.
All of this is also happening in a traditional “first claim in, first claim out” model instead of one that focuses on the right claim at the right time, through the right resources.
I’ve heard this story from health plan after health plan. Why in 2026, with all the technology we have, does a fundamental area of the business still operate so archaically?
The scale of the challenge—and the claims transformation opportunity—is significant. Health insurance executives tell me that 15% to 20% of claims require manual handling. Multiply that across the 3 billion claims insurers adjudicate each year (according to a Yale Health Care Affordability Lab study), and even modest efficiency gains can add up fast:
- Fewer staff tied down in manual work
- Less exposure to compliance risk
- Potentially millions of dollars saved annually
What needs to change? And why hasn't it already?
For health insurers, the strain of manual claims processing shows up across economic, financial, operational, and transparency lines.
Health plans operate under strict medical loss ratio requirements. Today, we’re seeing medical loss ratios at almost 90%, according to data analyzed by KFF. In other words, for every $1 a plan earns, roughly 90 cents goes to medical care, leaving about 10 cents to cover administrative costs and invest in areas such as operational efficiencies.
That narrow margin is why insurers are looking hard at claims processing, where inefficiencies are costly and can be reduced.
Health insurers have been able to get to an 80% to 85% (some even 90%) “auto-adjudication” rate. That means that 80% to 85% of the time, the claims engine is able to make a determination on how to process the claim, with a human there to oversee quality control. The flip side of this is that 15% to 20% of the time, the system drops these exceptions that need to be reviewed and solved for.
Across the industry's annual volume of roughly 3 billion claims, that exception rate adds up to a substantial workload.
The cost in money and time rises quickly. Senior executives across the industry say each manually processed claim costs roughly an additional $20 (or even $25) to handle, depending on complexity. Across a large plan's annual volume, this translates to millions of dollars in operational overhead due to people having to sort through email chains, reconcile spreadsheets, and do manual work.
Manual processes can also introduce errors and redundancy. The same claim may be reviewed multiple times, delayed by email bottlenecks, or lost in overlapping spreadsheets.
Claims move across disconnected systems, including legacy claims adjudication engines, email inboxes, Excel spreadsheets, SharePoint folders, and Teams channels. With no single view of where the work stands, plans can't prioritize effectively or track whether claims are being handled within service-level agreements. A high-value claim worth thousands of dollars sits idle while routine adjustments move forward.
Technology sprawl compounds the problem: Integrating legacy systems is expensive, replacing them is risky, and scaling either approach becomes prohibitively difficult. Our approach at ServiceNow is to have the claims engine stay as the system of record and have the workflow and data layer sit on top to help maximize impact at scale.
When work lives in emails and spreadsheets, leadership has no real-time visibility into bottlenecks, cycle times, error rates, or workforce productivity. Decisions rest on hunches. Problem claims go undetected until they breach compliance deadlines. Staffing decisions can’t be data driven.
The cost of a single missed service-level agreement—whether it’s a delayed appeal denial, a missed payment rule check, or a denied claim never reviewed—can be thousands of dollars. At scale, these misses become organizational liabilities.
Claims transformation can help unlock critical wins, including immediate cost reduction, improvement in member and provider satisfaction, and better management of the plan overall. Getting there happens in stages.
Centralize all claims on one platform, where they can be routed automatically and tracked from start to finish. You can then start to route claims to the right people at the right time, thereby eliminating the first-in, first-out model. This alone can free staff time.
Much of the existing cost comes from friction—manual steps and siloed data that force people to manage disconnected processes and information instead of focusing on their expertise in reviewing claims. One ServiceNow customer was able to cut its manual claims management costs by 15% through inventory management alone (tracking, assigning, and coordinating workflow for claims exceptions).
Once the work is unified, you can automate routine decisions. Use AI to help process claims more efficiently (with assistance from humans) based on preset rules, and flag those that need more scrutiny. This can enable examiners to spend less time on routine claims and more time on complex claims that truly require their focus.
It can also give you a clearer view of your claims, showing where a different workflow might function better than the traditional process.
ServiceNow can help automate and make the process intelligent. But the really interesting part of the transformation is when we can start to connect the claims workflow to other key workflows in the enterprise (care management and provider data, for example).
The visibility gained in claims processing can extend to provider network management, appeals and grievances, and payment integrity—functions that depend on the same kind of data and often experience similar bottlenecks.
Rather than treating each area as a separate fix, you can address the root cause once and apply it across your operations. The result compounds: Efficiency gained in one area feeds the next, making the whole payer organization easier to manage over time.
As you enter this third phase of the transformation, you can begin to consider possibilities such as:
- Can we trace recurring problems back to their source so that future claims run more smoothly? For example, claims history could reveal errors in a provider directory, and fixing them would accelerate the processing of subsequent claims.
- Can we spot, within 24 to 48 hours, which claims point to a member who needs help and connect that member to a care management program?
- Can we use each member's claims history to advise them every year whether they're on the right plan?
- Can we work with brokers and agents in new ways, using a client's claims history to help them choose the right plan terms as they advise customers?
Imagine the ways these new frontiers could help members, providers, and employees work through processes differently. They could spend less time on paperwork and more on what matters most: patients. That means getting each person the right care, at the right time, through the right services.
Claims transformation is no longer a nice-to-have. Optimizing legacy workflows and orchestrating modern operations is a must for health plans processing tens of millions of claims annually. The proof is in the field.
Find out how ServiceNow can help transform your healthcare operations.
