John Hancock reports on the move by insurers to outsource claims to companies with particular expertise
Nothing matters more to a policyholder than what happens after they've made a claim, such as that resulting from a motor accident claim.
For many drivers, their car is a valued elements in their life and carries with it a lot of emotion.
If it is damaged, they'll want it repaired as quickly and completely as possible.
So, with a policyholder's emotions and an insurer's reputation on the line, why should insurers trust such a sensitive process as a motor claim to anyone else but its own people?
The answer is that they can focus on their core strengths and let others focus on theirs. In that way, the customer is always served by specialists experienced in the task at hand.
Outsourcing is not simply sub-contracting work to another party.
It involves moving a whole process, including management, and offers a lot of advantages.
By handing over management of a process to someone else, the insurer no longer needs to worry about how best to do that job, or what the latest developments are in that process.
The only requirement is to establish performance objectives and set out any parameters specific to its business - such as how customers should be treated.
From then on, to the outside world, the outsource service provider is a part of the business.
Dane Loosley, motor damage claims manager at Allianz Cornhill, sums it up: "We're a financial institution and expert in our field that comes to arrangements with other businesses which are experts in their fields to deliver, in our name, the best possible service to our customer."
Core business
The customer is probably not aware of any difference in who delivers the service.
For a successful outsourcing arrangement the outsource service user needs to understand its core business and why it is outsourcing, establish its objectives from the outsourced work and define what it wants to achieve.
As outsource service providers work on a limited area of a process for a lot of individual clients, they are often experts in functions that may be only a small part of their client's business process and can therefore offer economies of scale.
So how can outsourcing come into play for insurers' motor claims processes?
The first stage of a claim is notification of loss. Many insurers will outsource this task to a call centre business that can offer a 24-hour response, which enables a policyholder to receive immediate assurance even when a claim is made at 3am.
Additionally, an insurer focused on broker distribution rather than direct selling is able to offer the full service that modern consumers expect but without the need to set up a call centre for claims notification alone.
Appropriate solution
But whether the notification is outsourced or not, there are three distinct stages in the remaining process: engineering, third party capture and uninsured loss recovery. For all of these there will be an appropriate outsourced solution.
Engineering is the part of the claims process involving a policyholder's vehicle after the initial notification of loss. It covers the inspection, costing and approval of the repair as well as the management of down time to control costs such as replacement car hire.
As Nick Brown, chief executive of outsource service provider FMG Support, puts it: "Inspection of vehicles is one of the most critical issues in managing down time, as the cost of a replacement vehicle can potentially equal or exceed the cost of the repair." There are two schools of thought as to the best way to deal with this area.
A growing number of systems employ desktop inspections, outsourcing the estimation of cost to an experienced approved repairer who will inspect the vehicle using a video and/or digital camera to photograph the damaged areas.
The images are loaded onto a PC along with the estimate document itself and the whole package is uploaded to an engineer's PC in the office of an insurer or claims management company.
Repairer networks
Such a system relies heavily on the relationship between the repairer and the insurer or claims manager. In some cases and at some levels of claim, garages may even be able to commence work without reference to the insurer or claim manager.
Most insurers and claims managers now work with approved repairer networks whose members have been scrutinised, are subject to exacting standards and are regularly audited for quality.
Outsourcing claims management enables any insurer, but especially the smaller to medium ones, to access a large and well run network of repairers.
Their claims managers will supply a far greater proportion of business than any of its insurer clients acting individually.
WNS Assistance claims to be the UK's sixth largest purchaser of garage services and the largest, second largest or third customer of any individual garage. This sort of commercial presence can be leveraged to deliver quality, information on the progress of a repair and financial control.
Queries about an estimate can usually be dealt with by the desk-based engineer requesting clarification and further images of specific damage sites.
If previously hidden damage also comes to light during the repair, a similar process is possible. The levels and extent to which this type of remote inspection can be employed will depend on thresholds set by individual insurers.
Such remote systems are usually web-based, so that the repairer, claims manager and insurer picking up the ultimate bill can check progress.
And technology, in the case of a system such as that operated by WNS Assistance, can add a number of other bells and whistles to service: a choice of means of communication with policyholders or drivers whose cars are off the road, for instance.
For quick updates on progress an SMS text message can be sent to a driver's mobile phone, while a more detailed report can be sent by email.
But where there is a problem to discuss or a delay to report, WNS will call the policyholder or driver and speak to them direct - sometimes a personal call is more efficient.
Field engineers
Where a severe bodily injury has been incurred in an accident, there is a possibility that the accident may have a mechanical cause or fraud is suspected, a field engineer will still be sent out to assess the job.
Some insurers have even decided to continue using field engineers, as Groupama's claims director Graham Gibson reveals: "We've looked at various ways of repairing a vehicle and discovered that, for overall cost, the field engineer is best."
Gibson's clear endorsement of the field engineer is not based on sentiment.
On the matter of speed he is equally clear. "We have a maximum turnaround of three days for a field engineer and, with an undrivable vehicle, dismantling work may commence before the inspection."
Groupama still outsources its repair work and is keen to foster a sense of partnership with garages.
This is more likely to lead to a sense of job ownership that reflects positively in the manner of garage staff when dealing with the insurer's customers. The work itself is carefully graded to avoid over-administering smaller jobs.
Small dents are dealt with either at the policyholder's home or workplace by Auto Restore while, for small or medium panel repairs, Groupama's partnership repairers are pre-authorised to make decisions. An engineer will only arrange an inspection for a major repair claim.
It is also not always advisable for an insurer or claims manager to be penny pinching with repairers.
A lot of garages are small businesses. Forcing them to agree rock-bottom prices every time will make it more difficult for them to invest in the training and equipment that insurers want employed on policyholders' vehicles.
Indeed, this policy threatens the long-term viability of the garage sector as an outsource service provider to insurers. It could have serious consequences for motor accident claims handling, perhaps resulting in fewer repairers, higher prices and slower times.
Costs flexibility
Outsourcing makes a lot of sense in the engineering phase of a claim. In addition to all of the above, there is flexibility on costs.
Insurers need only to pay for outsourced services when they use them, which avoids the costs of staffing levels allocated to cope with claims peaks, for instance during poor winter weather.
The next phase of a motor claim is third party capture. Not so alarming a process as it may sound, this refers to capturing data about an injured third party as quickly as possible so they can be offered an appropriate service. Where their own policyholder is at fault, some insurers will want their outsourcers to endeavour to bring injured third parties into their own claims settlement system.
There are a number of sound reasons for doing this: the main ones being that it helps to manage costs as well as the insurer's image.
Where an injured third party with a clear-cut loss is left to their own devices, there is every possibility that they will fall into the hands of a credit claims business.
Such a business will make the claim for them, often on a 'no win, no fee' basis. By their nature such businesses have little or no interest in managing claims for either efficiency or speed.
Insurers would rather bring such third parties into a system that works for them. This way they can control the cost of any repairs by applying the same standards to damage to a third party's vehicle that they would apply to their own policyholder's vehicle.
Equally, any replacement vehicle can be organised within the parameters of the insurer's own scheme and, very importantly, any medical and injury matters can be dealt with through the insurer's outsourcer's own qualified service.
Medical assessment
As Tim Rankin, managing director of WNS Assistance, points out: "Some insurers and large fleets are keen to maintain their reputation and brand by asking us to be proactive in tracking down and contacting an injured third party and fairly assessing their loss to offer them our support."
Here, the outsourcer will further outsource to a specialist independent medical expert, such as Bupa or Rapid Trauma Assessment, for assessment of injuries and to get treatment under way as soon as possible.
The injured third party will be offered the opportunity to speak to a qualified nurse, who will initially diagnose the condition and start the therapy.
This approach marks a considerable change in the way that insurers handle claims - it has been made possible by the advent of outsourcing.
Debbie Thornton, director at Rapid Trauma Assessment, sums it up: "Insurance companies used to sort out the car and leave the injured claimant to sort themselves out.
Financial settlement
"Now we can handle the whole process right through to rehabilitation because insurers encourage third parties to contact them and seek their restitution from the liable party's insurer."
While a financial settlement may also be appropriate, if the injured third party feels well treated, any financial claim is less likely to be pursued with any sense of grievance.
This will possibly reduce the cost of any settlement, probably improve the process and speed with which that settlement is calculated and delivered and certainly maintain or even improve the insurer's brand image.
Overall, most insurers believe they can offer as good a service or better via their own system (whether or not outsourced) to a third party than would be available from a claims specialist, which might add cost but not necessarily value to the process.
Uninsured loss recovery has been described as the mirror image of third party capture inasmuch as it is about the other, and at fault, party to an insurer's claim when its policyholder is not at fault.
Policyholders expect their insurer or its agents to deal with their claim whoever is at fault but, when the dust has settled, the insurer will wish to claim its own expenses back from the 'at fault' party or their insurers as quickly as possible.
Rankin makes the case for outsourcing this specialist work to those who are organised, trained and incentivised to deal with it.
"It needs a specialist debt recovery type of approach, a specialist and people-intensive area where speed is essential to identify and confirm the at fault party followed by persistence to get the money back."
These people can be fast and dedicated, as speed is always a key element for successful debt recovery. Also, being used to the work and doing a lot of it, outsource specialists can offer guaranteed recovery rates and commitments that will make the insurer's management task easier.
Life grows ever more complex, consumers make greater demands from any service that they use and insurers, like all businesses, seek to focus their efforts on their core capabilities in order to be competitive in the market.
Actuarial skills
Outsourcing enables insurance companies to concentrate all their efforts on being great financial institutions with innovative actuarial skills and strong underwriting.
At the same time they can handle the myriad tasks that ensure good delivery of their service promise to firms that concentrate all their efforts on being great at those jobs.
Also, because outsourcing operates on several levels and outsource service providers work for many customers, the system is much more sensitive and flexible to cope with fluctuations in any insurer's claims experience.
They can arise during quiet or busy periods or for different types of claim.
Lastly, outsource service providers can apply the best and latest technology appropriate to their part of the process because it is cost-effective for them.
It might not be cost-effective for an insurance company doing this as a small part of its overall process.