Are insurers "dumbing-down" their claims handling? In their desire to cut costs, many professionals who provide essential services to the insurers think they are.
Loss adjusters and lawyers have been particularly badly hurt by ferocious attacks on their fee structure that insurers have recently launched. Both argue strongly that by driving down the cost of their services, the insurers are storing up trouble for themselves.
The argument they make goes like this. Of course, costs must be examined and, yes, reduced. But the new claims systems being put in place seem designed to get rid of claims quickly, rather than at the technically correct level.
Furthermore, to attack the fees of the service providers is to miss the bigger picture. To explain, on a £2 billion annual claims spend, which is the figure that the majors are looking at, the loss adjusters' bill is, say, £50 million. Cutting by 35% the £50m offers far less potential than scrutinising the remaining £1,950m.
The argument is put most eloquently in a feature on pages 20-21. The questions raised by this article are profound. They go right to the heart of what is going on in the insurance industry today. Outsourcing offers the opportunity for insurers to cut overheads and current costs. But how to deliver a quality service at a dirt-cheap price?
This is a challenge for the service provider, and undeniably, the pressure to make economies can produce leaner, more efficient companies. But it is not just a challenge for the providers; the outsourcer's image and business will suffer if its provider cannot do the job properly on the resources allocated. Staff cannot be trained or recruited on the fees being earned. Inevitably, the quality of service on offer deteriorates.
Insurers are acutely aware of these dangers. But with investors crying out for better returns, senior executives are all too prone to go into denial about grim reality. Their careers depend on what's happening now, not what may happen several years down the road.
Overcoming the effects of such short-termism is one of the biggest challenges facing insurers. So far, this is proving to be a losing battle.
