Lorega in the News
Publication: The Broker
Author: John Sims
Job Title: Chief Executive Officer
Date: 8/10/08
All of us in insurance at some point will have pondered and complained about the lack of public affection for our industry. While some would say this is because insurance is a grudge purchase, I would argue that this is more to do with the fact that for too long claims service for UK customers is often extremely poor. A policyholder’s skepticism at the point of claim is not entirely unfounded as the whole area of claims is one that could and should be a lot better than it is. The reality is that at present and for some time the UK industry has not treated customers as fairly as it ought to.
However, like any problem there are options and potential solutions and certainly there are alternatives to the unsatisfactory status quo with claims. As the regulators Treating Customers Fairly initiative increasingly requires renewed efforts from our industry to do just that, it is fast becoming time for UK insurance to look at long-term fixes to its problems with claims.
By contrast in Continental Europe, where things operate only slightly differently, customer experience and expectations could not be more different to that of their UK counterparts. I don’t know what the Dutch phrase is for treating customers fairly but that is exactly what they are doing.
This approach to TCF is not only found in the Netherlands as it is commonplace in many parts of continental Europe. The reason customer experience is so different to that of UK policyholders’ is because insurers there provide customers with a professional advisor to help them through a claim. In the UK customers get a much rougher ride because in a claim situation here there is the insurer and loss adjuster on one side, with the client and their broker on the other; hardly a level playing field.
Certainly the Netherlands is one place where it is standard practice, when customers make a claim, that they are provided with the services of an independent loss adjuster. In addition 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, for example, if the insurer spends €3,000 on fees that is what the insured is entitled to spend. This system works in much the same way as loss recovery insurance (LRI).
European insurers acknowledge that it is unfair for professional advisors to act on their behalf while the policyholder, with exception of some help from their broker, does not have access to the same level of expertise. 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, although there is nothing to stop the adjuster setting a higher fee than the tariff. There is a flourishing industry around this in these countries and the system works extremely well. It may seem an obvious and fair thing to do by European insurers but UK insurers have yet to recognise this as a major gap in the claims process; with one exception.
Sterling Insurance has recently taken a lead with its new high net worth offering Executive Plus, by adding a claims concierge service – a contre-expert equivalent. Sterling saw the very clear opportunity from this gap in the market and now places an independent chartered loss adjuster at the broker and clients’ service to prepare and manage the claim on their behalf. This bold step provides a link between the customer and Sterling’s claims department which enables them to pay claims quickly and fairly while negating any need for the customer to do all the running. Which insurer will be the first to pick up the baton for the commercial customer remains to be seen.
Often the complexity of commercial claims can be greater than in the mid and HNW market. In my experience, HNW claims tend to be more about project management, hand holding exercise – doing all the running around as rich people do not want to be getting estimates for repairs and replacements. The claims concierge service at Sterling fulfills precisely this role.
However it would be wrong to view this as a service that only adds value to the policyholder. HNW insurers do regularly overpay, in the spirit of wanting to provide exceptional claims service, because they look for ease of repair and replacement. However, as continental experience shows, the contre-expert, or in Sterling’s case the claims concierge, looks to settle a claim with speed, ease but cost effectively. So, by ensuring a fair price via the contre-expert, this also helps insurers to avoid over-paying and therefore keep tight control of claims costs.
It would also be wrong to view this as a threat to brokers who are good advocates for their clients. But there comes a point where brokers simply do not have the time. They are not getting paid to do this; it is a drain on their business and with complex claims they sometimes do not have the expertise to give clients the right advice. In many cases the broker would be perfectly able to assist clients but the analogy I use is that if you feel unwell you visit your doctor. Most of the time your GP can provide the remedy but sometimes, in complex cases, they may not have the expertise so would refer you to a consultant.
In an insurance context the automatic inclusion and entitlement to specialist help not only benefits policyholders but brokers and insurers as well. In short it genuinely has the power to turn around the poor standards in claims in the UK which have been deteriorating for years. For brokers the Continental system not only removes the burden of dealing with insurers’ claims departments to resolve clients’ claims, it also allows them to earn additional commission on the sale of a Loss Recovery policy.
As TCF takes hold many brokers are already using LRI as a clear demonstrator of TCF at its best. LRI certainly has the potential to become standard market practice in the UK – as it has on the Continent – in much the same way as Legal Expenses started life 15 years ago as an occasional nice to have but is now mainstream and written into most policies.
The fact that using independent experts at claim time allows brokers to focus on more profitable activities while keeping their client happy also makes this attractive for brokers. So there are genuine industry benefits all round. The advantage to policyholders is also obvious so, in terms of impact to public perception, this is one continental import that could put a welcome smile on the industry’s public face.
