Inefficient claims processes are costing UK insurers more than £1 billion ($1.6 billion) each year, new research suggests.

Indemnity costs, regulatory pressures and operational costs are also being exacerbated by the lack of a voice at board level, with 40% of insurers stating claims processes are not well understood or accommodated by company executives.

More than half of respondents to the Ernst & Young/Chartered Insurance Institute (CII) survey say claims were “not fully involved in company strategy development”.

Ernst & Young Claims Advisory Head Imran Ahmed says claims has been the “Cinderella function of insurance companies for far too long”.

“[This] seems odd, given it controls the largest spend in any insurance industry,” he said.

“Given the rapidly changing economic and claims environment, it is surprising that some insurers do not review their claims strategy more regularly than on an annual basis.”

In addition to infrequent claims reviews, the survey also found many insurers failed to input customer feedback into process improvements. Nearly a quarter of respondents rarely or never used customer feedback to update claims procedures.

“This should be a relatively straightforward issue to address as the function has such a rich source of feedback for management to learn from,” Mr Ahmed said.