A volunteer for change

When the Royal & SunAlliance (R&SA) board divided up responsibility for the insurer's key business areas, UK personal lines managing director Steve Broughton volunteered to become the director responsible for claims. This left More Th>n boss Adrian Brown responsible for customer management and UK commercial managing director Duncan Boyle with underwriting.

Broughton says volunteering for the job of Mr Claims was a natural move.

"Commercial is generally more complicated underwriting, More Th>n is dealing direct with the public, while our business is more a claims business than a policy administration business," he says.

"We see the three as the drivers of a successful insurance company.

"IT is important, HR is important, financial control is important, but the core essence is pricing things properly, claims management and how you handle the customer."

Broughton's decision to volunteer for claims has made him even busier. Following the collapse of Independent Insurance last year, R&SA snapped up the insurer's loss adjusting arm, Property and Casualty Services (PCS), for a bargain £3m. The purchase was prompted by the successful work of its Claims Advisory Service (CAS) on personal lines claims. Broughton was at the centre of the deal. Meanwhile, R&SA's reputation on personal lines claims is excellent. As one broker says: "They generally look for a way to pay claims, rather than looking for a way to avoid paying them." Broughton is happy to explain why.

Why are claims so important to R&SA?
Claims and underwriting are the two core competencies of a general insurance company. At R&SA, there's a strong focus on being world class in those two areas. Claims are seen as a differentiator and we aim to be the best.

People only need insurance when it comes to claiming and that's when it's a real test of whether they made the right choice in the first place. It's a chance to prove to people how good insurance companies can be in responding to a problem.

We'd used a mixture of loss adjusters and in-house claims inspectors, as we called them then, for many years, but the bulk of the work went to the loss adjusters. About four years ago, when we really started down the road of what the customer wanted, we got better feedback when our own people went out to claims. It used to be that we'd send someone round to agree a price and pay a cheque but now, when someone goes out to an incident, we're there to solve their problem and do it efficiently and effectively. And we found it was actually cheaper to solve their problem.

So how good are you at claims?
We're ahead of the market on household claims and we're up with the market frontrunners in motor claims. In commercial claims, we're up with the frontrunners and having PCS will push us further ahead.

Was buying PCS an opportunity or a cheap acquisition?
It was an opportunity buy as far as we're concerned, because it became available at scarcely above net asset value. We had already said the Claims Advisory Service was working extremely well on personal lines and that we wanted to move in that direction on the commercial side.

PCS managing director Barry Woodward has gone. Was that the start of big staff changes?
Barry did a good job in helping with the transition and was a candidate for the overall post, but we felt Bob [Fitzsimmons] was the better balance. We've closed branches because it's more efficient and modern that the guys on the road have laptops and work from home, so we did make some administration redundancies. As for the guys on the road, we don't see any redundancies likely and we certainly won't be asking anyone to reapply for their jobs.

Is it efficient to have your own network?
We used to ask for the old two estimates, but, if we send someone in fast to understand the damage, then rectify it through our own network, we can control the quality and cost of what's done and get it at a lower cost because of the volume. We can also take the problem away from the individual and guarantee the work. Just under 50% of our repair network does work and that's a lot of controlled cost and a lot of satisfied customers. But we still use loss adjusters from a top-up viewpoint.

Would it be better to delegate claims?
We're not attracted to delegated authority. If we're the best at claims, you've got to question why we'd want more delegated claims authority. We've actually pulled away from potential business where organisations wanted to do their own claims handling. We insure the Halifax and it does its own frontline claims handling, but when they need field service, our CAS comes in. We'd prefer a situation where we handle the whole of the claim so this is a major exception, but we've worked very closely with them for a long time and know they're of a like mind.

Does putting such an emphasis on claims affect your ratio?
We've never set a target claims ratio that we must get to. We've taken quite a different philosophy from others and it certainly doesn't give us credit where analysts are concerned; CAS is counted as a claims expense because they're in-house staff so it doesn't make our expense ratio look as good.

Can the system of handling claims change any more?
We've been the lead party with The Innovation Group over the last two years in developing a claims system that's totally compatible with our way of thinking, which is solving the customers' problems. It's been a pretty lengthy development and it goes into pilot for motor in the next six weeks or so. We expect it to pilot for household at the end of the year. We've gone ahead with the whole philosophy of claims handling while still using what we'd call old-fashioned systems, but we believe this can be slotted straight into the way the company operates. It's an electric world where we, the customer, broker and repairer can keep up to speed on where a claim sits.

Is there a difference between fraud and exaggerated claims?
Fraud can be divided into two areas. One is where the claim truly occurs and is exaggerated. We can take a lot out of the exaggerated claims by face-to-face discussion. For example, if we repair your roof for you, it removes the chance to exaggerate. On outright, deliberate fraud, we give our claims handlers a list of fraud indicators. If a couple come up, the claim is passed to our fraud team, where we've got about 90 special investigators. About half the claims get processed normally. Others we take a tough line on and, quite often, the claim is just not proceeded with. At that point, we don't often have the evidence to prove it is fraud, but they see the writing on the wall and back off.

Does this tough line on fraud put your customer off?
We don't see that as harming customer service. We don't get any complaints where people see us taking an anti-fraud line and it ends up being a normal claim. We don't find that people object to the sorts of questions that we use for validation. They're quite happy to be tested a bit, particularly if you can make a swift decision and payment.