Fraud threat excuse to trim payouts overturned by brokers

Research among 350 British Insurance Brokers’ Association (Biba) members has revealed that nearly two-thirds (58%) say insurers are trying to cut or delay claims payments.

Most brokers have won extra payments after a low offer from insurers and 58% said they had to fight harder to get claims paid during the recession.

Brokers regularly negotiate up to a 20% increase on claims offers made by insurers.

Key findings from Biba brokers:

  • 91% have secured an increased payment for a claim on behalf of a client, following an initial lower offer from the insurer
  • 58% have had to fight harder on behalf of clients to get claims paid during the recession
  • 87% regularly negotiate up to a 20% uplift on claims
  • 91% negotiate a claim payment uplift either often or occasionally
  • 94% overturn a claim rejection occasionally or often.

Eric Galbraith, Biba chief executive, said: “This is strong evidence to demonstrate the value of the broker. I also recognise that, with fraud being a major issue, particularly in the current recession, there is a need for insurers to validate claims.

“However these statistics seem to suggest a too frequent reduction in the amount offered in claims settlements – a position that could ultimately lead to more customers believing they need to inflate claims in order to respond to what they expect will be the insurer’s initial offer.”

Examples from the survey

  • House fire insurer offered £12,000 but broker won £18,000
  • Insurer tried to reduce a fire claim to £6,500, claiming not all the damage was caused by the fire. Broker secured £30,000
  • Water damage claim rejected. Broker won £20,000
  • Motor claim upped from £19,050 to £22,000
  • Flood damage offer of £12,000 raised to £17,377
  • £32,400 offered for stolen fleet truck settled at £51,000 – insurer apologised and compensated the client with a cheque for £500
  • Business interruption claim increased from £12,000 to £60,000
  • Miscalculation by a loss adjuster on a loss of profits claim raised payout from £180,000 to £250,000
  • Commercial vehicle policyholder offered £6,700 eventually paid £27,000

Insurer response

Roy Hebburn, divisional claims manager at Allianz, said: “We recognise the value of professional intermediaries and we have positive relationships with our supporting brokers upon which we continually strive to improve. We support the intermediary market and are very keen to ensure that our service delivery matches and exceeds customer expectation.

“The fraud threat is a very real one that increases during recession, but it is vitally important that our counter fraud activity does not impact upon the service delivery to our honest customers, who are far and away in the majority. We will happily engage in any subsequent debates.”

Inflated claims are fraud

A spokesman for the Association of British Insurers (ABI) said: “Recession or no recession all insurers will deal with genuine claims as quickly and fairly as possible, regardless of whether the claimant is using an intermediary or not.

“Insurers believe that fraud rises in a recession and will certainly, in the interests of honest customers, be extra vigilant for suspected fraudulent claims. Being tempted to inflate a genuine claim is fraud, and runs the risk of harder to obtain and more expensive future insurances and credit.”