Lorega in the News
Publication: CIR
Author: John Sims
Job Title: chief executive officer
Date: 05/11//08
Insurance is a promise to pay and at some point during the claims process a policyholder will discover if their insurer will keep that promise. Sadly in the UK most policyholders approach this moment of truth with trepidation. If a survey asked the public how they felt about making an insurance claim I would wager a high proportion would be expecting the equivalent of a Spanish inquisition followed by a mugging.
However, if the same survey were carried out in mainland Europe the customer response would be vastly more positive. I don’t know what the Dutch phrase for treating customers fairly is, but the fact is that’s exactly what they’re doing.
This approach to TCF is not just confined to the Netherlands. In many parts of the continent, insurers are providing their customers with a professional advisor in the form of an independent loss adjuster to help them through a claim. This service is provided through loss recovery insurance (LRI). Back in the UK customers get a much rougher ride because the process here has the insurer and loss adjuster on one side, with the client and their broker on the other – hardly a level playing field.
European insurers recognise that it is simply not fair for professional advisors to act on their behalf while the policyholder, with the exception of some help from their broker, does not have access to the same level of expertise.
Certainly in the Netherlands it is standard practice when customers make a claim to be provided with the services of an independent loss adjuster. The client is also entitled to spend the same amount of fees to prepare and submit their claim as the insurer is on the adjustment by their loss adjusters. So if the insurer spends €3,000 on fees that is what the insured is entitled to spend.
All policies in the Netherlands and the majority in France and Belgium contain a contre-expert clause entitling the policyholder to their own adjuster. The fees, or barême, are a tariff set by the insurers. There is a flourishing industry around this in those countries and the system works extremely well. It may seem an obvious and fair thing to do by European insurers but UK insurers, by and large, are still coming round to the idea.
On the continent this service is a standard section of cover issued by the insurer. In the UK it is also available at the moment from a limited number of insurers on the same basis but LRI is also sold as a standalone policy by select brokers.
As continental experience shows, this also benefits insurers as the LRI adjuster looks to settle a claim with ease but cost effectively. So, by ensuring a fair settlement this also helps insurers to avoid over-payment and therefore keep tight control of claims costs. The fact that an LRI adjuster spends so much time with the client also benefits both insurer and client as this helps them to fast track legitimate clients while picking up any irregularities from spurious claimants. All of which helps ensure there is enough in reserve for bona fide claims.
Certainly for insurers and the industry as a whole the current economic conditions mean an increase in claims costs, due to rising fraud, is on the doorstep. Groupama recently reported £1m worth of arson claims in July 2008 compared to zero in the same month in 2007. Axa has seen an 80% rise in the detection of fraudulent claims while Airmic has further warned that: “the credit crunch is a breeding ground for fraud”.
Obviously fraud costs both the industry and in turn policyholders, which continental experience shows LRI can help to hedge against. UK insurers are slowly starting to take a leaf out of the insurance manual of their continental cousins and, if they continue to do so, this is one continental import that could eventually put a welcome smile on the industry’s public face.
