The release of the ABI's claims code for general insurance, which came into effect on January 1 this year, clearly demonstrated that the insurance industry acknowledges its need to provide a consistently high level of service in the claims arena.
The industry also has to deliver its “product” – a promise to pay claims in a given set of circumstances – if customer confidence in the industry is to be improved.
The application of the ABI's code is restricted to the standards to be achieved in the handling of claims made by private individuals.
But the principles leading to its creation are equally valid as far as the claims service expectations of the business community are concerned – after all, the decision-makers involved are also consumers.
The ability of an insurer to meet client service expectations is brought into focus most sharply by its approach to claims handling. In this respect, the ABI code does little more than crystallise the sort of reasonable standards that all insurers should already be achieving.
Although the code is not accompanied by any formal disciplinary measures for failing to meet the required standards, the benchmarking of insurers' performance in comparison to the code and to their competitors should enable companies to identify shortcomings in their operations.
They would be wise to pay close attention to the results of this benchmarking, as any company which fails to deliver on claims is bound to suffer in terms of its customer retention levels and reputation.
However, although the ABI code focuses on deadlines for delivery of information and for the processing of claims, these are only one part of the equation as far as delivery of a quality claims service is concerned.
Meeting tight timescales does not necessarily equate to meeting customer expectations, particularly where commercial clients are concerned. Here other aspects may be more important.
These days a company's brand can be one of its most valuable assets. An extreme example perhaps, but Coca Cola puts a balance sheet value of almost £50bn on its familiar logo and image. Many other companies spend thousands of pounds on creating, disseminating and developing a style that will woo both customers and investors.
The negative headlines generated by a high-profile court case can create seriously adverse perceptions of a brand that may never be totally eradicated. The cost of repairing the damage to the brand may exceed the cost of the claim, as it lives on in the public conscience for a considerable period thereafter, regardless of any more positive news that could have emerged in the meantime.
Effective claims handling, with support and guidance for insureds, can do much to prevent what is basically a commercial conflict or a customer complaint, from escalating into a protracted and expensive legal action during which the company's reputation suffers as the allegations are made public.
The ABI claims code emphasises the need for close and timely communication with insureds or their brokers, and for prompt responses and decisions on claims. It is equally important that claims personnel are able to deal effectively and appropriately with notifications.
They must distinguish those which may be rejected at an early stage from those where a carefully negotiated settlement will need to be agreed, preferably before reaching court. Such skills will also enable the claims team to identify the most sensible, cost-effective course of action at any stage of a claim's lifecycle, thereby keeping potential losses to an absolute minimum.
In some cases, it may well be expedient to agree a rapid settlement, but in others, the insured's best interests may be served by a robust defence. The ability to negotiate sensitively with an insured who insists on defending the indefensible may be required. Every circumstance will be different, particularly when dealing with complex liability claims on behalf of large commercial organisations.
Access to an in-house team of experienced professionals with the authority and ability to make pragmatic decisions on the best approach for individual claims is clearly the way forward.
Not every claim can be settled without the assistance of outside specialists. Clients may not always realise that, when necessary, their premiums are giving them access to the top legal minds in the country.
Access to practical risk management advice is a further benefit for insureds. Through handling claims for individual insureds, claims personnel can gain a real insight into their activities and methods of working. They are therefore well placed to identify areas where changes would bring about measurable improvements in the business.
The ABI claims code lays out some basic administrative guidelines, but if we are going to instil greater confidence in the industry, we also need to focus on the softer issues and demonstrate the other benefits that effective claims handling can provide.
In conclusion, I believe that by deploying expert qualified claims staff working in close collaboration with our clients, insurers can meet their basic expectations as well as adding real value to their clients in terms of their brand.
The insurance industry has, fairly or unfairly, perhaps gained the reputation for claims avoidance, and it is imperative that we all now make a serious effort to be seen to be delivering on our promises.