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Digital EditionRetailers Leverage Gift Cards As Part of Claims Management Strategy: Study
Retailers are utilizing gift cards to expedite claims processes and retain customers, with a recent study revealing the outcome of three distinct approaches, according to Gallagher Bassett.
With approximately 90% of retail claims settling for under $1,000, implementing a fast-track adjudication approach, such as offering gift cards to claimants, has proven to be an effective risk management strategy. By settling claims with gift cards during the first call, retailers not only boost customer satisfaction and encourage customers to return to the store but also prevent claims from escalating further, Gallagher Bassett stated.
The findings illustrate that a well-thought-out gift card program can help streamline claims processes, increase brand affinity, and retain customers for long-term business sustainability in the retail industry, according to the report.
Distinct Retail Gift Card Strategies
Gallagher Bassett analyzed gift card usage and outcomes for five retail clients with different approaches, spanning specialty and big-box grocers, personal care and beauty, and specialty retail. Each retailer placed limits on the denominations of gift cards that claim handlers could issue without consultation, ranging from $100 to $2,000.
The study identified three distinct gift card strategies:
- Optimistic strategy: Retailers A and D had a much higher gift card use rate, with gift card closures making up a full one-fifth of their total claim closures. These retailers embraced gift cards as a tool to assist in driving claim closures and controlling costs, Gallagher Bassett said.
- Discretionary strategy: Retailers C and E opted for a more constrained deployment of gift cards, using them on a case-by-case basis instead of instituting a strict rules-based program. The average gift card issuance for these retailers was higher than that of retailers A and D, though the frequency they used gift cards was lower than their peers, the study noted.
- Conservative strategy: Retailer B implemented a prescriptive approach to gift card usage, with well-defined rules regarding the types of claims eligible for gift cards and the gift card amount available to use. Gift card closures for this retailer accounted for only 1% of its entire book of claims.
Several factors were identified that affect overall gift card outcomes, including settlement authority for gift card cases, investigative requirements, release requirements, and claim handler denial authority, according to the report.
Gift card authority for retailers A and D ranged from low to middle levels, and investigatory requirements were limited. Each retailer required signing a release to receive a gift card and an estimate for property damage claims. Retailer A claims handlers had limited denial authority, while Retailer D claims handlers had no denial authority. For Retailer A, claims involving gift cards had an average duration of 38.9 days vs. 91.8 days for non- gift card claims. Retailer D’s results were similar: average duration of 47.1 days for gift card claims vs. 75.0 for claims without a gift card.
Retailers C and E both followed a discretionary approach to gift cards, but with very different philosophies, according to the report.
For example, Retailer C had very high settlement authority for gift card claims ($2,000), claimant-contact only investigations, and full denial authority for claim handlers. This led to an average duration for gift card closures of 28.7 days, which was 78% faster than 127.7 days for non-gift card closures, the greatest differential in the study.
In contrast, Retailer E had low gift card settlement authority ($250), limited investigations, and no denial authority for gift card claims. This approach resulted in low gift card utilization, high average gift card payments, and relatively long gift card claim durations: 133.8 days for claims with gift cards vs. 195.1 days for non-gift card claims.
Retailer B, the only one using a conservative approach to gift cards, set its settlement authority at $100, the lowest among the five retailers studied. “However, due to its low settlement authority, this retailer was able to loosen the reins on the rest of its gift card claims handling practices,” the report’s authors noted.
No estimate was required for settlements less than $250, meaning that $100 gift card settlements would never require an estimate. Also, no release was required on gift card settlements and claims handlers had full denial authority. Retailer B’s average claims duration was 31.4 days with gift card compared to 59.6 days with no gift card.
Keys to an Effective Retail Gift Card Program
A well-designed gift card strategy can lead to several potential benefits for a retailer’s claims management, according to Gallagher Bassett. First, it can streamline the claims process, allowing for faster resolution of claims and reduced durations. The study found that gift card claims settled quicker than traditional settlements for similar claims, with three out of five retailers resolving gift card claims in fewer than 40 days.
Second, an effective gift card program can increase brand affinity and customer retention. According to research cited in the study, two out of three customers will spend 38% more than the value of a gift card when it is redeemed. By settling claims with gift cards, retailers can encourage customers to return to the store, boosting customer satisfaction and preventing claims from developing further.
Finally, a thoughtful gift card strategy can contribute to long-term business sustainability. By streamlining the claims process and retaining customers, retailers can protect their brand reputation and maintain a strong customer base.
View the study on Gallagher Bassett’s website. &
