Briefing: How to build the best claims team in the industry

Ten years ago, I ran panicked into the claims department first thing on a Monday morning after a weekend spent pulling together reinsurance presentations – and simultaneously pulling my hair out.

I was wearing cargo shorts and a hoodie, providing little reassurance to the besuited claims managers who were suddenly summoned into a room by someone who looked as though they’d arrived from a student union rave with all the nervous mania of a chap who’d spent all weekend panic writing overdue essays – an all too familiar personal scenario.

I’d had the horrible realisation at some point on the Sunday that I didn’t properly understand the granular reality of how claims were being handled.

I understood the figures, or at least where we needed to get to, and off the back of that, the loss ratios, the triangulations, the reserving movements, the large-loss narratives and the broking finesse one requires when asking people with enormous balance sheets – and unimpressed counternance – to keep backing you.

But I didn’t understand the claims journey well enough to feel comfortable speaking authoritatively about it. Call me old-fashioned, but it’s only by understanding something fully that you should opine on it anyway.

Given I was due to fly out to Zurich soon thereafter, I had to be prepared for the inevitable and particular thrill of watching Swiss actuaries forensically dismantle one’s optimism in real time.

The only counter to that was an irrefutable, ground-up approach that could resist their desktop spreadsheet exercises. So, that day, huddled in the meeting room, we broke apart every facet of the claims journey.

First notification. Coverage. Liability. Repair. Credit hire. Injury. Fraud. Reserving. Litigation. Supplier control. Recovery. Audit. Complaints. The bloody lot. It wasn’t glamorous work. But the outcome of the exercise changed the world for us.

I didn’t realise it at the time, but what had been a typical Toby-esque last-minute hachet presentation job ultimately became a crusade to transform the claims department – and our fortunes with it.

Proper insurance

For all the success that meeting led to in hindsight, the starting position was not encouraging.

We had roller filing bursting with 12,500 open, bulging paper claims files, impressive only because it faithfully recreated the oppressive, administrative atmosphere of late East Germany.

But within a few years, that was eventually cut down to a paperless operation. More importantly, the culture shifted.

We cut deals with challenging credit hire firms and some even became good mates.

We tightened supplier management, tackled leakage, improved audit capabilities and the feedback loop. But most importantly of all, we promoted internally rather than parachuting in expensive external saviours, who no doubt would have proffered some meaningless transformation roadmap.

We backed the people who knew the work, gave them authority and held them to standards and expectations benchmarked against the best in the industry.

And, rather annoyingly for those who prefer cynicism, it bloody well worked.

The team went on to win multiple claims team of the year awards – and deservedly so.

It became one of the things I was proudest of, not because it was easy, or particularly well understood from the outside, but because it was proper insurance work. Detailed, human and bloody relentless.

And we had fun. For the team were, like most claims professionals, possessed of a wry and brilliant sense of humour – and nearly always totally irreverent.

Second order impacts

This whole exercise transformed how reinsurers saw us. For there’s nothing quite like sitting in front of capacity providers and demonstrating not merely that you have claims data, but that you understand it down to the rivets.

Reinsurers can smell waffle the way claims handlers can smell fraud. Once they believe that you have command of the claims machine, that you know where money leaks and how to stop it, the conversation changes and the commercials improve for everyone.

As we enter the age of AI, automation and outsourced claims models, the temptation will be to assume process can replace understanding. I don’t think it can.

A third-party administration arrangement may be perfectly sensible, but outsourcing the work must never mean outsourcing the brain and the hard-won experience behind it.

You still need to know what’s happening at the file, journey, supplier and portfolio levels. Otherwise, you’re also outsourcing your best shot at getting and retaining the capacity you need.

And our lesson was that other parts of the process were just as vital, such as the need for ruthless auditing.

For that, you need both qualitative and quantitative data. Thereafter, you need actuaries who can turn operational improvement into evidence.

But, above all, you need claims people who have seen enough human behaviour to possess the industry’s most valuable commodity – a highly tuned eye for BS.

And, ironically, no person can quite yet challenge AI on its penchant for producing BS!

Claims handlers are some of the best people in insurance. They see the promissory note becoming real. They experience the oddities and the tragedies, the frauds, the chancers, the genuine catastrophes and situations where paying quickly and properly can relieve the stress and strain on a claimant.

It’s also worth remembering that underwriting profits are hard-won. Pricing is competitive, cycles are a pain in the proverbial and capacity can be whimsical.

But with claims leakage, you can find it, grip it and reduce it with discipline. A pound saved in unnecessary claims spend is a damn sight easier to realise than generating the underwriting profit in the first place.

So yes, claims are the oft-quoted shop window.

But they are far more than that, because they’re where insurance delivers tangible value to its stakeholders.

They’re where reputations are made, reinsurers are reassured, customers are retained, fraudsters are frustrated and, ultimately, the final boss of balance sheet protection.