Lorega in the News
Publication: Post Magazine
Author: John Sims
Job Title: Chief Executive Officer
Date: 19/02/08
Ten years ago, insurance for rich people was known in our industry as ‘non standard’. Those early policies for the wealthy were littered with warranties and average clauses. Most brokers dreaded having to deal with them because there was nothing riskier than being asked to deal with the home insurance of your biggest commercial client, never mind his or her motor cover. But today, non standard policies have transmuted into what we now know as mid and high net worth (HNW) products – well thought-out policies that are all risks, warranty free and backed by pretty good claims services. Things have changed for the better in personal lines, but what about the commercial market?
Over the years, the epithet ‘evangelical’ has occasionally been applied to me – and, indeed, my feelings about the need to improve HNW product offerings have been strong. But during recent years, some of my zeal has been drawn towards the commercial market, which is suffering from some of the issues that once dogged the HNW arena. In particular, commercial insurers, even specialists, appear to have great difficulty in differentiating their products in the way that household insurers have done with a degree of success.
The reality is that no matter how fancy the policy wording or the marketing brochure, the only real differentiation in commercial insurance comes from the claims service. And, indeed, how many senior industry figures have hailed claims as ‘the shop window of our industry’ or ‘the proof of our service’? But, in contrast to that, how many commercial claims services are actually able to live up to this corporate hyperbole?
In our price sensitive, increasingly commoditised marketplace, claims services have suffered as insurers have sought to keep costs down. Their ability to maintain service levels has clearly been put under pressure. Now this fact alone is troubling; combine it with the sheer complexity and laboriousness of many commercial claims and the potential for problems grows exponentially. If claims are our ‘shop window’, then the window is dirty and cracked.
During last summer’s floods, the industry’s under-investment in claims came perilously close to catching up with it. Insurers responded by pushing for cash settlements, which they claimed were a success, but I would argue that in many cases this was tantamount to a cop out. Why? Because clients were not advised how to mitigate losses or get their businesses back on track, in the main, for some weeks. Granted the circumstances were exceptional, but exceptional circumstances are what insurance exists to deal with.
Brokers are also encountering problems in their management of claims: with softening rates and reduced commissions, it’s difficult for them to devote resources to non-revenue generating areas of the business.
For all of these reasons ensuring a commercial client gets their full entitlement quickly is often fraught. But there are ways of speeding up the process. Increased investment is one; better technology another, but from my perspective, the use of an external specialist to help is a sensible option. This is where a claims advocate can really help.
A claims advocate – ideally an independent chartered loss adjuster – works for the broker and acts on behalf of their client to manage the claim and bring it to a speedy resolution. The key to achieving this is the quality of the advocate. It’s a common misconception in the industry that advocates are akin to loss assessors but that’s not the case: things would falter pretty quickly if they behaved like the fire engine chasers seen recently in Camden.
Consider the usual claims equation: insurer and their adjuster on one side, broker and client on the other. Even with the best will in the world the latter pair will always be outgunned in terms of expertise and resources. What the claims advocate does is place adjusting expertise at the broker’s disposal which balances the equation and ensures the customer is treated fairly in both colloquial and regulatory senses.
Resistance from some insurers to claims advocates is understandable; brokers tend to resort to the exhortation “hang on, that’s my job!” But for every broker who responds negatively, there are three who admit they can’t fulfil the role as well as a specialist. It’s also clear to me that brokers who control their clients find it easy to embrace advocates while brokers whose clients control them find it difficult because they worry the client will see using an advocate as an admission of failure.
In the early days of the HNW market, I encountered similar resistance followed by a sharp learning curve. Composite insurers struggled in HNW at that time, and many still do. They had to be brave enough to find ways to pay claims faster rather than resisting them – a very different mind set. When a claims advocate is used they can be onsite within 24 hours giving a claim the best chance of speedy settlement from the outset. Because the specialist effectively project manages the claim, this also greatly enhances claims quality and customer experience.
If as an industry we accept that the quality of our commercial claims service has diminished, then half the battle is won. The question is how we rectify the problem. We must invest in people – that’s a given. We also need to take a long hard look at what we are doing to loss adjusting; if we continue to squeeze the margins, the profession may never recover.
External claims advocates can be part of the solution – if the industry is bold enough to challenge its own preconceptions and open its eyes to the potential benefits. HNW specialists went through their own Road to Damascus conversion a decade ago and the results have been spectacular. The commercial market now needs to ask itself some searching questions about the future of its claims service and whether or not it is really serving its customers in the manner they have paid for.
