Scope and time frame may be extended to increase volume of claims

Lloyd’s could be forced to extend the scope and time frame of a pilot project designed to improve claims handling. The pilot, based on the recommendations of the Lloyd’s market steering group, was introduced on 1 January to marine, marine property and casualty reinsurance. The project is one of the market’s priorities for the next two years, as outlined this week.

It is expected to run until 2011, when Lloyd’s will decide whether to roll it out across the market. It is designed to speed claims by segmenting them according to value, and giving the managing agents the option of dealing with claims in-house. Under current Lloyd’s governance, outsourcing claims to service provider Xchanging Claims Services is a mandatory requirement.

Head of the steering group, and director of risk management at Beazley, Nick Furlonge said: “One size fits all is inefficient and the market should focus its involvement on the larger and – generally – more complex claims.”

But the small number of claims going through at present may mean there is not enough evidence to judge the success of the pilot by the deadline. Markel’s head of international claims Stuart Willoughby said: “We have yet to have any claims to put through the pilot. The concern is that the volume is so low at present that if we continue the way we are, we will not really have achieved a great deal.

There are additional concerns that the segmentation of claims according to monetary value fails to account for challenges particular to certain lines, such as professional liability where underlying litigation and bad faith allegations can be common.

“What may happen is that in certain classes, you may have a number of claims that fall into the exception category because of the nature of the business itself,” said Willoughby.

Lloyd’s head of claims Kent Chaplin said: “If there is not enough volume to determine whether the pilot has been a success, it is likely the claims implementation board will recommend extending the pilot by introducing new classes of business in 2011.”