Claims leakage, answered
How much does claims leakage cost?
Industry estimates put claims leakage at 5–10% of claims paid, with some audits materially higher. On a book paying $250M a year, that is roughly $12.5M–$25M annually. Use the calculator above to estimate it against your own paid-loss figure.
How is claims leakage calculated?
Leakage is the gap between what was paid and what should have been paid under correct handling. As a planning estimate, apply a leakage rate — commonly 5–10% — to your annual claims paid. This calculator scales that rate by the experienced share of your desk, because overpayment concentrates among less-experienced handlers.
What is a typical claims leakage rate?
Most insurers cite 5–10% of claims paid. Conservative internal tracking often shows 2–4%, while rigorous audits frequently uncover 20–30%, because much leakage is invisible to standard tracking.
Why does adjuster experience affect leakage?
Most leakage is a human-factor problem — error, missed information, and judgment. Audits find overpayment concentrates among less-experienced or lower-performing adjusters, so as experienced staff retire and the seasoned share of a desk falls, the leakage rate tends to rise.
How can you reduce claims leakage?
Standardise the path through complex claims, capture the reasoning behind each decision, and score decisions against how your best adjusters decide — so consistency does not depend on who picks up the file. That is the approach Mysa takes: it captures the reasoning behind every call as part of the decision itself.
What is claims leakage?
Claims leakage is the difference between what an insurer actually pays on a claim and what it should have paid under accurate, consistent handling. It hides in small routine decisions — a liability split set a little too generously, a subrogation recovery never pursued, a reserve corrected late — which is why it rarely shows up as a single line and is so often under-measured.
How this is calculated
The calculator applies a leakage rate to your annual claims paid, anchored on the industry range — 5% at a veteran-heavy desk, up to 10% as the seasoned share falls. The endpoints and direction are sourced; the slope between them is an illustrative model, so treat the output as an order-of-magnitude estimate.
How to reduce claims leakage
Because most leakage is a judgment problem, the durable fix is to make judgment consistent. That is what Mysa does: it reads the whole claim, applies your rules, and captures the reasoning behind every call as part of the decision itself. For the workforce story behind the numbers, see the judgment crisis.
Sources
- Industry estimates on claims leakage — consistently 5–10% of claims paid (some analyses materially higher). Regure; The Lab Consulting.
- CAS Loss Reserve Seminar (CLRS) 2013 — claims-leakage data-mining: overpayment concentrates among lower-performing adjusters, who overpaid each claim by over half its expected loss.
- Insurance Information Institute (Triple-I) / U.S. Bureau of Labor Statistics — insurance workforce aging: ~50% retiring within 15 years.