The costs of dealing with property damage claims are just too high, and this year's insurance company results, indicating that the days of underwriting losses on property claims are over, are making dismal reading for consumers and insurers.
Massive capital over-capacity in world markets has also served to disrupt the traditional insurance market cycle.
Change in the world of international insurance is accelerating as some companies develop internal economies of scale and others take on business at existing or lower premium levels.
Therefore, if competition is such that increasing premiums is out of the question, the answer must lie in cost control.
Claims managers, claims handlers and loss adjusters know that somehow costs must be cut: restoration, direct replacement and indirect expenses must be more tightly managed. At the same time, service standards must be maintained.
Tougher management
Some areas of claims, such as motor and subsidence, have been revolutionised, as insurers initiated tougher standards of management.
Perhaps a similar review and revolution is needed in general property claims.
Can the solution be found with existing suppliers?
There are approximately 10,000 companies, from multi-nationals through to sole traders which service the £1 billion plus industry of property restoration.
The vast majority of these companies are involved with rebuilding and replacing property.
Controlling and reducing costs means tighter control over schedules of rates and weighing up quality versus price with suppliers.
Hard negotiation will reduce costs, but will it compromise quality, and will it provide the improvement in results necessary to give both a sustainable cost advantage and higher service standards?
What are the key cost drivers that affect the costs of property claims?
1. The cause and extent of the damage:
The extent of the damage is often a function of the communication chain.
Every hour counts and increases the cost of the claim.
2. The length of time the claims handling process takes:
Who does what, where and when?
During this decision time while varying amounts of action and inaction are being taken by policyholders, both direct and indirect costs are increasing.
3. The length of time taken from incident to when restoration work starts:
Choosing the supplier.
In recent years, many major UK disasters have taken place outside normal working hours and over holidays.
Many suppliers market a 24-hour service, but are response times and service standards consistent?
During the time it takes a supplier to get to the accident/disaster and start work, clear-up costs are increasing.
4. The actual work carried out:
What work is the appointed contractor trained, qualified and regulated to do?
Is the right action taken at the right time?
What other work needs to be done before, during and after?
Speed, quality, co-ordination and objectivity are key to controlling the claim cost and once again if things are not right the costs will continue to increase.
How many times have we seen the insurer having to settle twice because the first restoration job soon showed the tell-tale marks of damp and a "penny wise pound foolish" job?
Immediate action
By taking the correct course of action in the first few hours of the claim, potential claim costs can be reduced by 90%.
Within 12 hours costs can be reduced by up to 70%, and within 24 hours costs reduced by up to 50%.
After 48 hours and with the onset of deep damp the claim costs will not dramatically be reduced by speed of response.
5. Level of disruption for the policyholder:
Indirect costs increase dramatically in direct relation to the length of disruption encountered by the policyholder.
Loss adjusters pride themselves on their skills and expertise in keeping business interruption costs to a minimum.
Does the same level of thought go into keeping domestic interruption and subsequent costs to a minimum?
6. The level of service provided:
Responding quickly.
Taking the appropriate action and doing the right thing, the first time.
Caring about the expectations and priorities of the policyholders.
Pleasing the customer
All these actions not only avoid consequential direct and indirect claim costs but they provide true customer care and more chance of customer loyalty.
Each of these areas has the potential for real improvements in service delivery and enormous reductions in eventual claim costs.
It isn't only the marketplace that is forcing insurance companies and their claims handlers to improve their service standards on property claims.
This year's Insurance Ombudsman Bureau Annual Report looked at the insurers' responsibility towards the quality of repair.
It states: 'If the work is unsatisfactory then it must be rectified entirely at the insurer's expense.
"Where appropriate I (the Ombudsman) may also make an additional award for delay or inconvenience."
In some European countries, insurers have capitalised on the idea of suppliers entirely focused on damage restoration, not purely rebuilding and replacing.
In the UK these skills and areas are still to be exploited to the full - but the market is dynamic.
Those restoration companies with the expertise, technology, speed of response and the attitude of providing the right solution, rather than the one that is most profitable are proving themselves against traditional methods in the market.
The clock is running, winter is almost upon us and the costs are getting higher by the hour, it will be interesting to see how long it will be before the time bomb goes off.
