With the wide range of issues affecting claims handlers today, customer service has never been more important. Keith Mahon runs through the list of areas….
The developments taking place in modern claims management are designed to tackle one overriding issue – that of customer service. This is no bad thing. The aim of the changes is to dramatically speed up customer service. In these post-Woolf times, the earlier the contact with the claimant, the greater the possibility of containing the costs of even relatively routine claims.
Anyone working in claims, whether they be an insurer, broker, or an outsource provider of claims services, has to adopt the principle that they are there to solve people's problems. That is not to say technical expertise is no longer required, but these skills need to be applied in a customer-friendly way. Meanwhile, we all have to keep costs closely under control, far more than ever before. That's the real challenge.
There has been a dramatic rise in the number of outside organisations encouraging higher claims costs, and they need to be reined in.
I do not agree with the view sometimes expressed that the insurance industry is to blame for this increase by failing to offer better services. In fact, the industry had begun to realise that customer service needed sharp improvement long before the credit hire operators and their like came on the scene. One example is the provision of courtesy cars, which insurers have been organising for a decade.
It is now possible to provide better service without delays, but still pay attention to the essential tasks behind the scenes.
I am ambivalent about credit hire organisations. They seem an unnecessary presence to me, but at least they are no longer a significant threat. It's unacceptable to pile on costs to accident insurance claims, as credit hire companies have often been accused of doing. However, as long as insurers settle claims quickly and contact third parties at the outset, it should become less necessary for motorists to rely on credit hire arrangements.
The Woolf reforms
The changes brought in by Woolf are now two years old. The reforms are well founded and have sped up claims and simplified the process of claims handling. The trouble is that the lack of clear rules on legal costs and conditional fee arrangements has created confusion. The government expects practitioners to solve the problem. Certainly, we are working on this and there is now less litigation. However, it is not yet clear that there are savings on legal costs overall. The financial benefits have not really had time to come through.
The Association of British Insurers' (ABI) claims code is a step in the right direction. Claims handling is about solving people's problems, but moving paperwork through within a certain timescale is only part of the story. Insurers should have nothing to fear from the code as long as the right structures are in place, namely staff need to have the right tools and training to do their jobs properly. Ultimately, though, it is good to have a printed code where nothing existed before.
Fraud and detection
The public would like to believe that insurers are working away behind the scenes to prevent fraud, as most people understand that the cost of fraud comes out of their premiums. On the other hand, they do not want their claim to be delayed by any noticeable detection process.
Recently, insurers have been able to tackle fraud much more effectively in a way largely invisible to the customer. The industry is changing its image here. The claims process goes ahead, but a number of checks and controls are initiated which highlight claims that deserve closer attention. They can then be assessed by specialist in-house units for speedy decision-making.
Many insurers would like to see the courts and police give more priority to the problem of uninsured motorists. We have seen the cost of the Motor Insurance Bureau levy on motor insurers grow from £39m ten years ago to its present level of £265m. In addition, insurers directly meet the cost of thousands of claims where effective insurance is not in force but the insurer of the vehicle is identified. That is why I welcome the introduction of the Motor Insurance Database in July, and the planned later inclusion of motor fleets and motor trade vehicles. The benefits to premium-paying policyholders, to insurers and the law enforcement authorities will be considerable and I look forward to a substantial reduction in the incidence of this so-called victimless crime, which, in fact, hits the pocket of every motorist.
Structured compensation needs a major boost in the UK. Lump-sum payments are still the norm in most high-value personal injury settlements, but all too often the money runs out too soon or someone, other than the victim, eventually ends up with a windfall.
The industry desperately needs new annuity type products which can provide a tax-efficient income stream. At the moment, these products have to be invested in gilts which, while solid, do not give the best returns. No one investing in normal circumstances would do it this way. This needs to change and we can learn much from the American approach.
On personal injury generally, insurers need to question why 90% of motor personal injury cases in the UK involve some aspect of whiplash or related soft tissue injury, when the ratio was less than 20% in 1980. This is a far-reaching problem for the industry, and there are moves to look more closely at the medical aspects.
The industry is also looking at the design of head restraints via Thatcham and improvement in the assessment and treatment of whiplash injuries.
In my firm, through the Allianz Centre for Technology, we are also examining the technical and medical aspects of soft tissue injuries.
The idea has gained currency in the last two years that it is not only best for victims to get them back to a decent quality of life and fit for work quickly, but best for insurers as well. This means speedy payments and sometimes the decision must be taken to spend money now to get the right result. In the past, rehabilitation has focused on the most severe cases, but it now stretches across the whole range of personal injuries.
We can see there is much happening in the field of claims. Perhaps the biggest change of all is that claims managers are now, more and more, controlling the consequences of accident or loss instead of reacting to it.
One thing is certain. There are more of these changes ahead and the industry is going to have to prepare itself to meet these new challenges.
This brings us back to the concept of solving customers' problems. The best claims handling is proactive. But it has to be right for insurers too. We know the quicker we settle a claim, the lower our ultimate costs. The goal is to provide a better service, with sharper claims cost control. This is the ultimate test for those of us involved in what is a sensitive negotiation process.