Brokers and claims: the times they are a changin

Brokers and claims: the times they are a changin In association with

section one Claims isn t that the insurer s job? 2

Claims isn t that the insurer s job Claims isn t that the insurer s job? Actually, more and more brokers are disagreeing with this sentiment and instead are taking a far more proactive role in the claims process. New research conducted by Insurance Post and specialist claims outsourcer the Davies Group, has produced some revealing insights into this developing trend. So, why is it happening and what are the pros and cons of brokers being involved in having more control over claims? Certainly many customers can find it enormously helpful if they are supported by their broker, who, as an influential advocate, can advise on the wording, intervene with the insurer and if necessary, challenge any decision. Larger and mid size brokers are now more likely to have a retained claims provider available to process and add value on claims and this can make a major difference to the service offering. The downside of spending more time on claims is the cost of having an in-house resource and it means people not being focused directly on generating revenue. However, there is a counter argument that if the claims service is of high quality, retention will be easier and more business will come in through recommendation. With straightforward claims of relatively low value it may be that an insurer will deal with things to a satisfactory level ie arrange any repairs and settle promptly. But, there are no guarantees. Many brokers will say there are cases where customers have contacted them in frustration trying to get through to contact centres and that delays and administrative errors are commonplace. Customers can also get caught up in trying to understand the intricacies of a policy wording when they have a lack of knowledge and this prevents them from correctly arguing their case. Yet a broker is unlikely to be fobbed off. That is not to say that insurers are trying to avoid paying claims, but standards are far from uniform. Prompt communication from the broker can assert the validity of a claim;they will know the right people to speak to and ultimately, they have leverage on how a claim progresses. Many brokers also find it useful to discover first hand what an insurer s claims service is like how else can they genuinely recommend a particular carrier for reasons other than price? 3

Claims isn t that the insurer s job The rise of the broker-retained third party claims provider When it comes to larger and/or more specialist schemes, a third party claims provider can add significant value whether appointed by the insurer or broker. Darren Coombes, chief commercial officer for the Davies Group, says his firm is increasingly being appointed directly by brokers and other intermediaries. He adds it is particularly common where brokers are operating large schemes and where there may be multiple carriers or where branding and remote access to files are required. It s important that brokers have some control. While third party claims providers are required to remain impartial, if they are appointed by a broker, then they will ensure the broker and potential sub-broker are kept in the loop this does not always happen with insurer appointments. If the broker has more control with the claims service they can leverage delivery and ensure greater customer satisfaction and retention. A broker can also see at first hand the third party provider s capabilities, specialisations, people and systems. It ensures that the service will meet required standards. Coombes continues that it can be difficult to gauge how good or bad an insurer s performance will be: Issues such as poor systems, redundancies, relocation and change programmes can all cause disruption to the claims process and MI. What brokers need is consistency. If the broker has more control with the claims service they can leverage delivery and ensure greater customer satisfaction and retention Darren Coombes There are other advantages to a broker having a retained third party claims provider. As Coombes explains: A broker can use the claims partner to provide an out-of-hours claims notification service and ensure customers have immediate advice and support to address their needs. A broker can also have this service white-labelled for branding if they require and a further benefit is a shared portal, which can be used by the claims partner, broker, client and insurer. This keeps everyone up-to-date on progress. Another benefit of utilising a third party specialist is consistency and focus of claims handling in the event an insurer drops off a broker panel. But are insurers willing to allow brokers to appoint a third party provider? Coombes says often an insurer will welcome it. If it s a specialist scheme for example, the insurer may welcome the broker s recommendation as it will save them the trouble of having to find a firm with that expertise and working in partnership with their brokers should be a key objective. n 4

section two Key findings The research was based on the views of over 100 broking firms comprising large and medium-sized regional, national and international brokers, and smaller (community) brokers. The brokers predominantly transacted commercial business, ie property, liability and commercial motor. Respondents also included around 10% personal lines specialists. 5

n Brokers internal claims functions largely makes decisions Respondents were asked who made decisions regarding claims within their firms. Some 60% of brokers said it was the responsibility of their internal claims function, while 33% said it was their board, while almost 9% said they used an outsourced third party. Who makes decisions regarding claims within your firm? Please select all options that apply Internal claims function 60.5% board 33.1% operations function 16.1% outsourced third party 8.9% a combination of third party and another 8.1% other 6.5% n Claims support is a broker differentiator Brokers were asked about claims and how important it was in terms of client discussions at renewals or for new business. Specifically, we wanted to know if it was seen as a differentiator. A high number approaching 80% - believe it is. How important is claims as a differentiator in terms of discussions with clients on either renewals or new business? the most important factor 8.9% very important 67.0% Important 16.1% neutral (neither important nor unimportant) 4.0% not a major factor 1.6% never a consideration 2.4% 6

n Insurers claims service brokers see it as very important Brokers were asked how important an insurer s claims service is when placing business. While only around 6% said they believed it was the most important factor, approaching 80% said it was either very important or important. As Coombes comments: Price and the most suitable cover remain as crucial factors for many but the high figure saying they view claims as very important shows that brokers are monitoring the service from insurers and they are discussing it with their clients. How important is an insurer s claims service when placing business with an underwriter? the most important factor 6.3% very important 68.8% Important 19.6% neutral (neither important nor unimportant) 3.6% not a major factor 1.8% never a consideration 0.0% 7

n New legislation brokers ponder impact The Enterprise Act and the Insurance Act are two significant new pieces of legislation that are poised to have an impact on the claims landscape. How prepared are brokers and do they have sufficient understanding? Overall, the research showed that brokers remain cautious about the new legislation and will be sitting on the fence until more evidence materialises. The Enterprise Act passed in May 2016 and creates a legal obligation for insurers to pay claims to businesses within a reasonable time, among other measures designed to improve the business environment (such as boosting apprenticeships and establishing an independent Small Business Commissioner to help SMEs resolve issues such as late payment). The research asked brokers how prepared they were for the introduction of the Enterprise Act. While around 40% said they were well prepared, more brokers - approaching 50% - said there was still work to be done and worryingly, just over 7% said they had not heard of the Enterprise Act. How prepared is your business for the introduction of the Enterprise Act? well prepared 41.1% still work to be done 47.3% not prepared at all 4.5% what is the Enterprise Act? 7.1% 8

n Most brokers prefer to avoid insurers that apply average The Insurance Act meanwhile, has been widely publicised and brokers have received plenty of information about the new responsibilities. A core aim is to modernise insurance law and ensure more claims are paid. This involves making a fair presentation of risk to the insurer and so results in obligations for brokers to ensure their client understands the importance of disclosure and of providing accurate information. It also provides more scope to avoid underinsurance. Subsequently, some insurers have announced they will no longer be applying average to their business policies providing they receive sufficient information about the risk from the broker in good faith, even if the policyholder is under insured. The survey asked brokers if they would be more or less likely to place business with an insurer that will no longer be applying average to claims. A little under 70% said they always or preferred to place business with an insurer that did not apply average. However, some 30% said it made no difference, which suggests that brokers may feel price is the dominant issue or that they are confident in insuring their clients for correct sums insured. In terms of the introduction of the Insurance Act, would you be more or less likely to place business with an insurer that will no longer be applying average to claims? always look to place business with an insurer with no average 6.3% prefer to place business with an insurer that does not apply average 58.9% no difference 32.1% prefer to place business with an insurer that applies the average 0.9% don t know 1.8% 9

n Insurance Act will mean some reduction in underinsurance We then asked if brokers believed the Insurance Act would reduce underinsurance being discovered at the time of a claim because of a better exchange of information. Brokers are somewhat sceptical as none believed the Act would totally eliminate underinsurance and some 16% said it would have no impact at all. But, there is belief that the new law could bring benefits, as around a third said underinsurance would be reduced by between 50% and 74% - the most popular answer. To what extent do you think the Insurance Act will reduce underinsurance being discovered at the time of a claim due to better information exchange? totally remove the problem 0.0% In over 75% of cases 8.9% between 50% and 74% 33.9% between 25% and 49% 17.9% between 1% and 24% 23.2% no impact at all 16.1% 10

n Insurance Act most brokers expect little change We also asked how contentious (i.e. more or less) claims should be since the introduction of the Insurance Act. The expectation was that brokers would be positive, expecting more claims to be settled without disagreement. However, it appears that the reception is lukewarm. While 16% said they thought claims would be less contentious most of the time, just over half of brokers said no more or less contentious than before the Act. However, Coombes adds that it remains early days for both the Acts. We need to see some case law established. Once this starts happening, I would expect more informal views and new pressures and areas of focus developing for brokers,insurers and third party claim specialists. Since the introduction of the Insurance Act would you say that claims are now: always less contentious than before the Act 0.0% less contentious most of the time 16.1% less contentious in more incidents than they are contentious 14.3% less contentious some of the time 14.3% no more or less contentious than before the Act 50.9% more contentious than before the Act 4.5% 11

n fraud controls brokers have more work to do Fraud is one of the main challenges facing insurers, with many investing over 200m each year to help tackle the problem, according to the ABI. But while insurers can be clear about having a zero tolerance approach, for brokers it may be less straightforward. While brokers have regulatory obligations to guard against financial crime, insurance fraud is not always clear cut and without evidence, brokers still act as the agent of the customer. Traditionally, insurers have been the bastions against fraud but with brokers taking on more claims responsibility, their roles are changing. Brokers need to both be mindful of fraud once a claim is reported and equally, potentially tighten up procedures at the point of sale. This could be through verification checks, for example, and also through investing in counter-fraud databases. Some brokers are already doing this, but it is certainly not happening across the board. The research asked brokers how they would describe their fraud controls. It appears many are prepared to admit they could do more the most popular answer at 45% was good but could be improved. Meanwhile, it is alarming to see that almost 6% said they had no fraud controls, seeing this as the insurer s job. Coombes says: With brokers taking more involvement, all parties have a responsibility to ensure they try and prevent fraud. A specialist claims firm can help in this area as they are independent and often have significant awareness of fraud indicators and as such, can speak to the broker about their concerns. If necessary, they can advise that the insurer conducts further investigations. How would you describe your fraud controls? very thorough 42.1% good, but could be improved 45.1% okay, with room for significant improvement 6.9% sub standard 0.0% we don t have fraud controls, that is the insurer s job 5.9% 12

n partnerships in claims are valuable for brokers and their clients The research looked at how brokers value partnerships with third-party claims specialists, notably loss adjusters. The figures show that this is becoming a significant factor for brokers almost 70% said it was either important or was useful some of the time. How much do you value partnerships with a third party claims specialist? It is key to everything we do 2.0% It is important to how we run our business 27.5% It is useful some of the time 42.2% It is neither important or unimportant 14.7% It provides no added value 12.7% It is a waste of time 1.0% 13

n Choosing an adjuster more brokers call the shots When it comes to selecting an adjuster, we asked brokers how much influence they had it is surprising to note that around 90% had at least some influence. In particular with more specialist claims, most brokers can recommend an adjuster of their choosing. When it comes to selecting third parties for claims, how much influence do you have? total control 17.6% ability to select preferred supplier most of the time [75% of cases] 22.5% a majority of times [above 50%, but below 75%] 17.6% some of the time [above 25%, but below 50%] 17.6% only in some cases [below 25%] 15.7% always use insurers preferred suppliers 8.8% 14

n Brokers have good awareness of outsourced claims specialists Brokers were asked how they would describe their awareness of outsourced claims specialists and this was relatively high 44% said they had good awareness of the major brands and 36% said they knew a few brands. In terms of awareness of outsourced claims specialists how would you describe your knowledge of the market? very good, I know all the players 7.8% good, in terms of an awareness of the major names 44.1% okay, I know a few brands 36.3% poor, I have a limited knowledge 10.8% I always default to an insurer and their panel 1.0% 15

n What brokers look for in a retained claims specialist specialisation over relationships Brokers were then asked what they felt were the most important factors when choosing an outsourced claims specialist to work with. Specialisation is a key factor, as was being approved by the insurer. The benefits of freeing up other broking staff was also recognised, allowing an outsourced claims specialist to manage the claim enables the broker to focus on their core business. Other preferences included real-time claims details, covering multiple product lines and supplying risk management guidance. But interestingly, only around 30% mentioned long relationships as being important. Historically, the people aspect within the insurance market has been crucial, yet the research shows brokers are looking beyond established relationships and are becoming more discerning. However, low on the list of priorities when dealing with claims are the emerging technological services available such as data analytics or using drones. This may be because brokers are adopting a wait and see approach yet also, this should act as a reminder that brokers should beware against ignoring the impact of technological advances and data. While drones continue to have their detractors and are not in widespread use, data does present huge opportunities. 16

70.6% 63.7% In terms of outsourced claims partners, please select the FIVE most important factors you consider when choosing a third party? 53.9% 52.0% 45.1% 39.2% 38.2% 32.4% 31.4%29.4% 20.6% 14.7% 8.8% They are a specialist in a chosen market They offer tailored solutions, rather than off-the-shelf offerings They are approved by an insurer Allows us to focus on our core business They can provide clients real time access to their claims details They can deliver solutions across multiple product lines They can offer a risk mitigation service for clients A regional footprint We have a long relationship Tailored MI Anti-fraud capabilities Data analytics capabilities New technologies such as drones and video streaming Coombes concludes: Brokers with an eye to the future will be mindful of the benefits of using data for quality management information and analytics. There is a wealth of this in claims, from understanding their clients businesses better to seeing cross-sell opportunities and using it to understand customer NPS scores. As brokers seek to provide complete solutions, partnerships and involvement in claims, a retained claims specialist will ensure the broker has the exact tailored MI they need. n 17