An increasing number of brokers, insurers, and fleet managers are outsourcing their claims management as fleet insurance claims and premiums rise. According to the AA's British Insurance Premium Index, car insurance premiums have risen by an average of almost £100 since January last year – an increase of 17% on the year before, which itself saw a 15% rise. This is in response to an average rise in motor claims costs over the past four years of 7% per annum. The average premium for a company car is currently £602.50.
And now, with fleet industry insurance premiums set to rocket by £300m in the next year (unless the number of claims drops substantially), one accident claims specialist is predicting a boom for the industry.
Business on the rise
Theodore Agnew, chief executive of Ipswich-based motor claims administrator Town and Country Assistance, says that business growth in the fleet sector is increasing at an unprecedented rate as fleet managers look to cut their insurance premiums. The other side of the same coin sees brokers and insurers that deal with the rising number of motor claims turning to outsourced claims management in a bid to streamline their business while offering added value to their clients at the same time.
“Insurance premiums for fleets are rising very significantly as the cost of claims reduces the insurance industry's margins to unacceptable levels,” Agnew says. “This is forcing fleet managers to take a fresh look at their insurance purchases.
“As a result, they're taking on higher risk by increasing excesses and self-insurance in a move to avoid substantial increases in premiums. This means, however, that accident repairs become the company's responsibility, rather than that of the insurance company. This adds considerably to the financial and administrative load they have to bear. Not surprisingly, many are outsourcing.”
Many outsourced claims management firms handle all their clients' insurance claims and vehicle repairs, as well as providing a replacement vehicle. Value-added services, such as accident help lines, uninsured loss recovery and third-party claims handling, are also sometimes available.
Town and Country, which also offers a secure real-time internet tracking service for pending claims, saw its turnover double to £20m last year and its total fleet rise to 250,000 vehicles. Now the company has signed a major new fleet contract with global electronics company Siemens.
Town and Country is responsible for the management of an insurance solution for the Siemens fleet of 5,500 vehicles and for full outsourced claims management of more than 3,000 of these.
“As far as we are concerned, the case for outsourced claims management is well proven,” says Marcus Hall, Siemens group risk and insurance manager. “We would not be able to take advantage of innovative funding solutions without Town and Country's support, and comparison with our operations in the rest of Europe seems to indicate that the UK is leading the way in this field.”
Thrifty Car Rental UK, the world's sixth-largest vehicle rental company, with 75 branches in the UK, is another new Town and Country client. “There is no doubt that more and more of the principal fleets in the UK are outsourcing their accident management,” says Thrifty operations director Mark Brandom.
“In our business, speed and quality of repair is paramount. We want the vehicle back on the road and earning us money as quickly as possible.
Accident management streamlines the process, produces the minimum down-time and deals efficiently and professionally with all aspects of our claim.”
While fleet managers are reacting to rising motor premiums, insurers and brokers are also outsourcing in response to the rising number of motor claims. “Insurers are asking themselves what are the benefits of investing in staff, buildings and IT to provide a service that can be delivered in a more measurable and cost-effective way through external specialists,” says Agnew.
“It also enables them to ride the insurance cycles without being saddled with long-term fixed costs. As sure as night follows day, the current hard market will soften within the next two to three years. The question then will be: is it profitable to keep writing this business? The decision is more easily made if the fixed cost of an in-house claims resource has been translated into a variable cost paid to an external supplier.”
Coordination is key
Town and Country's two most recent wins on the insurance side are international brokers HSBC Insurance Brokers and KGM, a Lloyd's specialist motor syndicate.
HSBC quality standards executive James Lougee says: “Motor policies generate the greatest number of claims which, in the majority of cases, follow a very predictable path. Traditional market processes frequently do not allow for a simple, fast, and effective remedy, which restores damaged vehicles to our clients with the minimum of disruption and red tape.
“What is needed is a fully co-ordinated approach to all the client interests arising from a vehicle accident – with immediate access to data from a single source. We see our partnership with Town and Country delivering the comprehensive, integrated operational systems required for processing claims, while increasing our ability to focus on adding value in the ‘non-process' areas.”
KGM claims manager Allen Alsford agrees. “Insurers are being forced to spend more and more of their resources on complicated third-party motor claims at the moment,” he says. “In such circumstances, it is far more efficient and cost-effective to outsource the initial stages of claims management to a specialist company.”
KGM currently has 90,000 motor policyholders on its books and handles around 7,500 insurance claims a year. The syndicate has the capacity to underwrite £32m of premium income, but has plans to double this within five years, partly by expanding into new markets. In this respect, it sees outsourcing as an essential prerequisite to its growth plans. “Expansion presupposes the harnessing of expertise,” says Alsford.