Our business friends across the Big Pond talk about the “Elevator Pitch”. This is where you should be able to tell a complete stranger what your business does and its benefits whilst riding the lift to your floor (assuming, of course, you’re not located on the 1st floor). With this brevity in mind, Lorega’s Chairman, Malcolm Harvey, gives you his “Pitch”. So, door’s closing, 9th floor beckons, and over to Malcolm.

Thanks for watching.

Sian Allan, Lorega Update

Publication: Brokers’ Monthly
Author: John Sims
Job Title: Chief Executive Officer
Date: 9 March 2009

There is much debate about how the credit crunch will affect our industry but the reality is it has already hit insurers hard and sadly an inevitable consequence is the customer will also suffer. The recent news that Royal & SunAlliance is to cut 1,200 jobs highlights the massive pressures insurers are under at the moment. Cost pressures have been building as the insurance cycle softened, but this has been compounded by falls in the stock market and the lowest interest rates in history, which, all combined, have had a punishing impact on insurer’s investment income.

The effects of the crunch have also been felt by insurers in the dramatic increase in claims costs due to rising fraud. Obviously fraud costs both the industry and policyholders and this pressure combined with others means insurers are looking with renewed focus on how to cut costs. However there is a limit to how much insurers can reduce costs by offshoring and cutting jobs. Insurers are looking at cost cutting across all areas and inevitably this involves the biggest area of expense which is the amount they pay out in claims. In the days when they could rely on investment income combined operating ratios of +100% were acceptable. However, as one senior member of a large insurer told me recently, in previous years a COR of between 98% – 102% was satisfactory but now many are targeting 92% – 94%.

The fact that insurers’ share prices are down and that the stock market will heavily penalise them if they produce poor results poor returns is focusing minds on ways to pay out as little as possible and as slowly as possible. It is even suggest by some that loss adjusters that work on behalf of some insurers are incentivised to reduce overall quantum, have a percentage target for repudiation and are actually paid a bonus for this and delaying any payment as much as possible.

All of which does not bode well for the service policyholders receive going forward. In the face of this, one could argue, there has never been a greater need for the customer to have a champion. Obviously brokers do a great job for their clients but, as I’ve mentioned before, this is not an activity brokers are paid for and the reality is it is a drain on their time. A complex business interruption claim or a £500,000 fire claim that goes horribly wrong can easily consume a vast amount of time for the broker and for the majority it is not their core skill to deal with claims like this.

Being brutally honest, for all the reasons mentioned, a broker would be swimming against a strong tide in the current climate in trying to influence this and other types of claim. In situations like this there comes a point where both the broker and client need the additional help and advice of an independent specialist. This is no reflection on brokers that do a great job for their clients but an honest acknowledgement that there comes a point where the mantle of customer champion needs to be passed to an expert in claims. This is where a chartered loss adjuster funded by loss recovery insurance can really make all the difference.

So, while I would challenge brokers to be realistic about where in a claim this point occurs for them, I would also in the same breath point out the many benefits of having a third party ensure their clients get a fair settlement. This is not only the advantages of commission on the sale and enhanced client retention but also that brokers will get the kudos for this as often clients perceive this is part of their service anyway. Brokers regardless of size can claim this as part of their service and certainly for smaller brokers this allows them to punch above their weight in terms of the service they can offer.

A chartered loss adjuster would very quickly know what is right and reasonable, according to the legal contact the client has with their insurer, and has the experience to push through a settlement that is fair. Given the considerable pressures on insurers to cut their claims spend, and the knock-on effect this will have on policyholders, I would argue there has never been a time where they are in need of a champion more than now and believe this is rightfully the broker with the assistance of a claims adjuster.

Publication: Suffolk Business Magazine
Author: John Sims
Job Title: chief executive officer
Date: 20/01/09

With the credit crunch now having a tangible effect on the Suffolk business community it is vital to check adequate insurance protection is in place. Why? Because insurers’ margins are in dire straits, which is currently focusing their minds on reducing the amount they pay out in claims.

Despite insurance being a promise to pay, the ructions caused by the credit crunch are forcing insurers, like so many others, to take drastic measures. Part of the problem is the UK insurance market is extremely competitive and price undercutting between competing insurers, which was being funded by investment returns, has been fierce in recent years. However those returns have now been decimated by falls in the stock market and insurers must cut their main outlay which is claims.

Nevertheless there is a way businesses can get their full entitlement, should they make a claim, and it is a system that has worked well on the continent for many years. There insurers provide their customers with their own professional advisor in the form of an independent loss adjuster to help them through a claim.

This is becoming more widely available in the UK from some insurers and specialist brokers such as Ryan. This service is provided through loss recovery insurance (LRI) which, for genuine claimants, not only helps ensure a fair settlement but also speeds up the whole claims process

In a downturn such as we are all now experiencing Suffolk’s businesses may well be tempted to cut their insurance spend. However in such times businesses that do not have a first class broker and LRI could find themselves up against the insurer and their loss adjuster trying to pay as little as possible. LRI, for only a minimal outlay, could make the difference between fast and full reimbursement and a potentially devastating financial predicament.

A chartered loss adjuster would very quickly know what is right and reasonable, according to the legal contact the client has with their insurer, and has the experience to push through a settlement that is fair. Given the considerable pressures on insurers to cut their claims spend, and the knock-on effect this will have on policyholders, I would argue there has never been a time where they are in need of a champion more than now and believe this is rightfully the broker with the assistance of a claims adjuster.

Publication: Suffolk Business Magazine
Author: John Sims
Job Title: chief executive officer
Date: 20/01/09

With the credit crunch now having a tangible effect on the Suffolk business community it is vital to check adequate insurance protection is in place. Why? Because insurers’ margins are in dire straits, which is currently focusing their minds on reducing the amount they pay out in claims.

Despite insurance being a promise to pay, the ructions caused by the credit crunch are forcing insurers, like so many others, to take drastic measures. Part of the problem is the UK insurance market is extremely competitive and price undercutting between competing insurers, which was being funded by investment returns, has been fierce in recent years. However those returns have now been decimated by falls in the stock market and insurers must cut their main outlay which is claims.

Nevertheless there is a way businesses can get their full entitlement, should they make a claim, and it is a system that has worked well on the continent for many years. There insurers provide their customers with their own professional advisor in the form of an independent loss adjuster to help them through a claim.

This is becoming more widely available in the UK from some insurers and specialist brokers such as Ryan. This service is provided through loss recovery insurance (LRI) which, for genuine claimants, not only helps ensure a fair settlement but also speeds up the whole claims process

In a downturn such as we are all now experiencing Suffolk’s businesses may well be tempted to cut their insurance spend. However in such times businesses that do not have a first class broker and LRI could find themselves up against the insurer and their loss adjuster trying to pay as little as possible. LRI, for only a minimal outlay, could make the difference between fast and full reimbursement and a potentially devastating financial predicament.

A chartered loss adjuster would very quickly know what is right and reasonable, according to the legal contact the client has with their insurer, and has the experience to push through a settlement that is fair. Given the considerable pressures on insurers to cut their claims spend, and the knock-on effect this will have on policyholders, I would argue there has never been a time where they are in need of a champion more than now and believe this is rightfully the broker with the assistance of a claims adjuster.

Publication: Insurance Times
Author: John Sims
Job Title: Chief Executive Officer
Date: 01/12/08

Credit crunch offers the opportunity to build bridges

There is no doubt the controversial bail-outs and unprecedented borrowings that have punctuated the latter half of 2008 will continue to attract criticism and controversy for decades. But, whatever your view on the drastic measures taken by the powers that be, this brings home just how deep the fissures are and the lack of an easily prescribed remedy.

Naturally much debate is being had at all levels about how this will affect our industry. The fervent hope is that underwriters will increase prices to help insurers weather the storm and certainly there are welcome signs already that rates are tentatively beginning to harden in some classes. However none of this addresses the most significant impact, namely the increase in fraud.

According to the Arson Prevention Bureau’ fraudulent fires already cost a staggering £50m a week. Groupama also recently reported £1m of arson claims in July 2008 compared to zero in the same month in 2007. Axa has revealed an 80% rise in the detection of fraudulent claims while Airmic has further warned that “the credit crunch is a breeding ground for fraud”. These figures only show the fraudulent cases that have been detected – the real numbers are anyone’s guess.

Unfortunately the industry is ill prepared for an onslaught by fraudsters. Some classes, such as high net worth, have long since dispensed with warranties and proposal forms to make the process more convenient for the customer. At the same time as the industry dropped these vetting processes, fraud has grown worse over the years which has led to greater insurer collaboration to combat it. However now, because the credit crunch has occurred so quickly, insurers are being caught out and it would not be alarmist or even overstated to say that a fraud epidemic is looming.

Certainly the credit crunch has already forced governments and other sectors into a radical rethink. And if ever there was a time the insurance sector should also seriously reconsider its model – a model prone to hemorrhaging money due to fraud – it is now.

The heart of the problem is not just that there are insufficient resources and safety nets to catch out fraudsters; it’s the public’s utter distrust of the insurance sector that they believe will try to wriggle out of its promise to pay at every opportunity. This in turn engenders the contempt that allows people to feel it is OK to commit fraud at varying levels of seriousness.

One way of addressing this is seen across much of continental Europe where claimants are given an appointed advisor to assist them in preparing their claim. As a result public perception there is greatly improved and levels of fraud far lower than the UK.

Whatever the answer is there ought to at least be debate in the UK as a matter of urgency about tackling the rising tide of fraud by addressing the standoff between the public and our industry. Like community policing or military peace keeping the industry should look at client advocacy and support to bridge the gap between those that are otherwise polarised by an adversarial system. While it is true that hardening rates will plug the hole and stop the ship sinking, how much of that will leak straight back out again through fraud? Surely now is the time to explore ways to address the problems at a more fundamental level and on a more permanent basis.

So while the credit crunch can make for some grim reading I believe it actually presents an opportunity for insurers, and the industry as a whole, to address the longstanding issues around the public perception of our industry and the pressing issue of fraud.