Brokers are divided about bringing claims handling in-house James Sullivan reports.
Recent years have been depressing for UK loss adjusters. Insurers have been reducing panel sizes which has forced consolidation, cutbacks and ever tighter operating margins.
A sector of the insurance world that was once comfortable now looks to be in desperate trouble, and if recent events are anything to go by the dire predicament of adjusters could get even worse.
The merger of Towergate and Folgate, to form the Towergate Partnership, may not exactly have been the most surprising of news, but the revelation that the new company will look to bring claims handling in-house and is interested in buying a loss adjuster is much more so. Does such news mark the start of the end for an already wounded animal?
Cost cutting
One of the key focuses for the new Towergate Partnership will be claims handling, and this highlights one of the industry's long running sores.
Since the onset of consolidation and the ruthless drive to cut costs a perceived drop in the quality of service has long been one of the biggest complaints from brokers.
A recent survey by Deloitte found that UK brokers said that a good claims service is more important than the cost of the premium.
Furthermore, the survey indicated that almost one third of brokers rated the claims service provided by insurers as "poor" - naturally putting the quality of the service provided by loss adjusters in the spotlight.
So is the solution for brokers just to stop moaning and do it all themselves?
Perhaps they should look to their industry partners.
For insurers, bringing claims handling in-house is nothing new. In 2001, Royal & SunAlliance (R&SA) shocked the market by buying PCS, the former loss adjusting subsidiary of Independent Insurance, and since then has stuck doggedly to in-house claims handling, much to the chagrin of adjusters.
And for some of the larger UK brokers, reliance on external adjusting companies has long been jettisoned in favour of an in-house approach.
For example, JLT Risk Solutions has an in-house claims team of over 120 people handling more routine claims, while for large and contentious claims it has established its own subsidiary, Echelon Claims Consultants.
According to Alan Morton, a partner in JLT Risk Solutions: "Echelon is predominantly made up of loss adjusters and is differentiated by its skill base, with all of its staff being members of their respective professional associations. The value of Echelon as a concept is evidenced by the significant amount of non-JLT business it attracts."
Morton appreciates that an in-house approach is not necessarily always the best answer, as the needs of the client come first. He concedes that for some types of claims a more traditional approach may be better.
He says: "Not all claims are of the large and contentious variety. For low-value/high-volume claims, where JLT can offer little in added value, then outsourcing or direct reporting can be the appropriate solution."
Not all brokers are convinced that bringing claims handling in-house is, however, the right move. Pauline Uludag, who heads up claims at broker Stuart Alexander, says that buying a loss adjuster could create a lot of headaches for a broker because of the political tensions it might cause.
She says: "I don't see any answer in buying your own. We put pressure on various insurers we work with to give us delegated loss adjusters, and we work with GAB Robins. But as to buying one, insurers are going to have problems with that because they have their own panels."
Improve service
Nonetheless, she accepts that the relationship between adjusters and brokers is not all it could be, and that something needs to be done to improve service standards:
"We have very good relationships with GAB Robins, but what we've found (with other adjusters) is that it's nearly impossible to get an update or find out what's going on.
Despite such criticisms, important sections of the market are still convinced that they need the skill sets which qualified loss adjusters have, and that an in-house option would be a false economy.
Norwich Union (NU) supports this view by sticking to outsourced adjusters.
A spokesman explains: "We recognise that loss adjusters play a valuable role in the claims process with their expertise, particularly in specific areas such as subsidence. Consequently we think they are a necessary aspect of claims handling."
And would NU consider bringing such claims handling in-house? "We're happy with the current situation," says the spokesman. "I've seen people employ claims handlers to do the job of loss adjusters, but the skills needed to do each of these roles are very different."
For the time being, it would seem, the policy of most major insurers to continue to value the role of the loss adjuster would militate against a wide scale move of brokers bringing such services in-house.
Radical change
But with the loss-adjusting sector itself having undergone such a dramatic transformation in recent years, further radical change is entirely conceivable.
After all, the Chartered Institute of Loss Adjusters recognises that "increasingly chartered loss adjusting firms employ other professionals" such as accountants, surveyors and engineers.
So if loss adjusters are prepared to encroach into the territory of other professions, they can hardly complain if brokers decide to encroach further into theirs.