Insurance Claims Processing Flowchart: From FNOL to Settlement

Claims processing is the moment of truth for insurance companies. It's when policyholders experience the value of their coverage—and when operational efficiency directly impacts profitability. A clear claims processing flowchart ensures consistent handling, faster resolution, and better customer outcomes.

This guide covers the essential elements of claims workflows across common insurance types.

Why claims processing needs flowcharts

Insurance claims involve multiple handoffs, regulatory requirements, and decision points. Without documented processes:

Inconsistency creeps in. Two similar claims get different treatment. One adjuster approves quickly; another investigates for weeks. Customers notice.

Compliance gaps emerge. State regulations mandate specific timeframes and procedures. Without clear workflows, deadlines get missed.

Training takes forever. New adjusters spend months learning "how we handle this type of claim." Institutional knowledge lives in people's heads.

Fraud slips through. Without systematic red flag identification, fraudulent claims blend with legitimate ones.

Customer experience suffers. When no one can explain "what happens next," claimants get frustrated. NPS scores drop.

A flowchart creates a shared reference for claims staff, supervisors, and even policyholders who want to understand the process.

Core stages of claims processing

First Notice of Loss (FNOL)

The claim begins when the insured reports a loss:

Intake channels:

• Phone (call center)
• Online portal
• Mobile app
• Agent/broker
• Email

Information captured:

• Policy number and verification
• Date, time, location of loss
• Description of incident
• Parties involved
• Initial damage assessment
• Injuries reported
• Police/fire report numbers
• Photos/documentation

Initial actions:

• Claim number assignment
• Coverage verification
• Adjuster assignment
• Reserve establishment
• Acknowledgment letter sent

Coverage verification

Before processing, verify the claim is covered:

Policy status:

• Is policy active on date of loss?
• Are premiums current?
• Is named insured correct?

Coverage applicability:

• Does claimed loss fall under policy coverage?
• Are there exclusions that apply?
• What deductibles apply?
• What limits are available?

Decision point:

Coverage verified?
├─ Yes → Proceed to investigation
├─ Partial → Document covered/non-covered portions
└─ No → Issue denial letter with explanation

Investigation

Gather facts to determine liability and damages:

Documentation collection:

• Police reports
• Medical records (injury claims)
• Repair estimates
• Photos/videos
• Witness statements
• Expert reports

Field investigation (when required):

• Property inspection
• Vehicle inspection
• Scene investigation
• Recorded statements
• Surveillance (SIU referral)

Third-party coordination:

• Subrogation potential
• Other insurance involvement
• Attorney representation
• Lien identification

Fraud detection

Claims with red flags route to Special Investigations Unit (SIU):

Common red flags:

• Recent policy changes
• Prior claims history
• Inconsistent statements
• Delayed reporting
• Suspicious circumstances
• Documentation issues

SIU actions:

• Enhanced investigation
• Background checks
• Database searches
• Surveillance
• Examination under oath

Outcomes:

• Cleared for payment
• Claim denied (with documentation)
• Referred to authorities

Adjudication

Determine payment amount:

Damage assessment:

• Actual cash value vs. replacement cost
• Repair vs. replace decision
• Depreciation calculations
• Betterment considerations

Liability determination:

• Fault assessment
• Comparative negligence
• Policy limits application
• Deductible application

Reserve adjustment:

• Update reserve to match assessment
• Document reserve changes
• Supervisor approval if threshold exceeded

Settlement

Finalize and communicate the decision:

Payment authorization:

• Within adjuster authority → Process payment
• Above authority → Supervisor approval required
• Large loss → Committee review

Payment methods:

• Direct payment to insured
• Payment to repair facility
• Payment to medical provider
• Multi-party checks (mortgage companies, etc.)

Documentation:

• Settlement letter
• Release form (if required)
• Payment confirmation
• File closure documentation

Subrogation

Recover payments from responsible parties:

Subrogation potential:

• Third-party liability identified?
• Other insurance coverage exists?
• Manufacturer defect?

Recovery process:

• Demand letter to responsible party
• Negotiation
• Arbitration (if applicable)
• Litigation (if warranted)
• Recovery allocation

Claims flowcharts by insurance type

Auto claims

FNOL → Coverage check → Is vehicle drivable?
├─ No → Towing arranged → Inspection
└─ Yes → Schedule inspection

Inspection → Total loss?
├─ Yes → Valuation → Settlement offer → Negotiation → Payment
└─ No → Repair estimate → Approve repairs → Monitor repairs → Payment

Special considerations:

• Rental car authorization
• Bodily injury parallel track
• PIP/Med-pay processing
• Uninsured motorist claims

Property claims (Homeowners/Commercial)

FNOL → Emergency services needed?
├─ Yes → Mitigation vendor dispatch → Coverage verification
└─ No → Coverage verification

Verification → Field inspection → Scope of loss → Estimate
→ Negotiate with contractor → Approve repairs → Progress payments
→ Final payment on completion

Special considerations:

• Mortgage company involvement
• ACV vs. replacement cost holdbacks
• Code upgrade coverage
• Additional living expenses
• Contents inventory

Health/Medical claims

Claim received → Eligibility check → Pre-authorization verified?
├─ Yes → Medical review → Covered service?
│         ├─ Yes → Calculate benefits → Issue EOB → Payment
│         └─ No → Denial with appeal rights
└─ No → Request authorization documentation

Special considerations:

• Network vs. out-of-network
• Medical necessity review
• Coordination of benefits
• Medicare/Medicaid coordination
• Appeal processes

Liability claims

FNOL → Coverage verification → Investigation
→ Liability determination → Liable?
├─ Yes → Damages assessment → Reserve set
│         → Within limits → Settlement negotiation → Payment
│         → Exceeds limits → Excess notification → Settlement strategy
└─ No → Denial letter (with documentation)

Special considerations:

• Duty to defend
• Reservation of rights
• Excess carrier notification
• Bad faith exposure
• Litigation management

Regulatory considerations

Claims processing must comply with state regulations:

Timing requirements

Requirement	Typical timeframe
Acknowledge claim	15-30 days
Begin investigation	Promptly
Accept/deny decision	15-45 days
Payment after agreement	5-30 days
Status updates	Every 30-45 days

Varies by state and claim type. Check local regulations.

Documentation requirements

• Written acknowledgment of claim
• Written explanation of coverage
• Written denial with specific reasons
• Information requests in writing
• Settlement documentation

Fair claims practices

• Good faith investigation
• No misrepresentation of coverage
• Timely communication
• Reasonable settlement offers
• Proper denial procedures

Build regulatory checkpoints into your flowchart with specific timeframes.

Metrics and performance

A claims flowchart enables measurement:

Speed metrics

• FNOL to assignment: How quickly are claims assigned?
• Assignment to contact: How fast does adjuster reach claimant?
• Cycle time: FNOL to closure
• Touch time: Actual work time vs. elapsed time

Quality metrics

• Reopened claim rate: Claims closed prematurely
• Supplement rate: Additional payments after initial settlement
• Litigation rate: Claims going to suit
• Customer satisfaction: NPS, survey scores

Financial metrics

• Severity: Average claim payment
• Loss adjustment expense: Cost to process claims
• Subrogation recovery rate: Money recovered from third parties
• Leakage: Overpayments identified in audits

Track these against flowchart stages to identify bottlenecks.

Technology integration

Modern claims processing leverages technology:

Claims management systems

• Workflow automation matching flowchart
• Document management
• Payment processing
• Reporting and analytics

AI and automation

• Auto-adjudication for simple claims
• Fraud scoring models
• Image recognition for damage assessment
• Chatbots for status inquiries

Integration points

• Policy administration system
• Payment systems
• Vendor networks (body shops, contractors)
• Medical bill review services
• Subrogation services

Your flowchart should reflect both human and automated steps.

Common problems and solutions

Problem: Claims sit waiting for documents

Cause: Unclear document requirements, no follow-up process Solution: Upfront document checklist, automated reminders, clear escalation

Problem: Handoffs cause delays

Cause: No notification, unclear ownership Solution: System-triggered assignments, dashboard visibility, SLA tracking

Problem: Inconsistent decisions

Cause: No guidelines, individual judgment varies Solution: Decision frameworks in flowchart, authority matrices, peer review

Problem: Customer complaints about communication

Cause: No proactive updates, status unclear Solution: Milestone notifications, self-service portal, clear next steps

Problem: Fraud detection misses patterns

Cause: Red flags not systematically identified Solution: Scoring at intake, mandatory SIU referral criteria in flowchart

Building your claims flowchart

Insurance workflows often exist across procedure manuals, system configurations, and training materials. Use Flowova to consolidate into visual workflows:

1. Start with one claim type: Don't try to map everything at once. Pick your highest-volume claim type.

2. Document the happy path first: Map the standard flow from FNOL to payment. Add complexity later.

3. Add decision points: Where does the process branch? What criteria drive decisions?

4. Include exception paths: Fraud referral, coverage disputes, litigation—map the less common routes.

5. Validate with adjusters: The people doing the work know the real process. Get their input.

6. Align with systems: Flowchart stages should match your claims system statuses.

The goal is a flowchart that serves as both operational guide and training resource.

Related resources

• Patient Intake Flowchart – Healthcare registration process
• Customer Support Escalation – Handling complex cases
• Vendor Onboarding – Third-party qualification
• Change Management Flowchart – Process changes