IBM and The Innovation Group (TiG) sponsored a round table discussion of ten senior industry figures to investigate the issue of claims leakage. Part one
was published last week. Part two looks at third-party claims.
Third-party bodily injury claims are crippling the industry. A claims-conscious public is bringing more cases forward than ever before and settlements have beenrunning well ahead of inflation.
How can the industry stop third-party claims hurting? Bill Pieroni, general manager of IBM's global insurance business, has a theory. He says we must spend money up front to settle the claim early, in order to save money.
"Our global research shows, for every £1 spent managing a third-party claim, the insurer saves £6. Proactively reaching out and trying to manage third-party loss cost is a money-printing machine," Pieroni says.
And the cash must be spent quickly, he adds. "For every 24-hour period after the loss, there is an exponential increase in loss.
It gives time for the attorneys to creep in."
Bill Trueman of Absolute Customer Management agrees a lot of money can be saved, but says the industry first needs to train people who can deal with claims proactively. "We need to give training in proper trauma management. But it takes time and effort. Direct insurers have shifted the focus from the customer to the event. It's a case of having 20 seconds to deal with that claim, get on and deal with it with a nice voice."
The results of training can be proved, says Crawford & Co vice president Jonathan Clark. "If an insurer spends two weeks training its people rather than two days, it reduces its claims costs by 5% to 8%," he says.
Invest in training
Bill Pieroni says: "Training is a wonderful investment. I think the real dilemma the insurance industry faces is that the area of claims tends to be over-managed and under-led. It is managed by numbers and budgets and what's going on, not by being thoughtful about how balanced the scorecard you are looking at is.
"Leadership is about vision, direction, customer satisfaction, long-term retention and the ability to cross-sell. But the fundamental unit of value for any insurance company is the customer relationship. Don't abuse them through the claims process and then expect them to stay on, because maybe they'll never become cashflow-positive.
Pieroni says world-class insurance companies start with a combined ratio of 136 including acquisition cost in year one, which then lowers to 90 -95. Customers don't become cashflow-positive until the seventh or eighth year.
The Innovation Group (TiG) vice president group design authority Gerald Findon says technology can help free up time for managers to develop the right skills and use them. Findon says: "Technology enablers should remove processing and release time for decision making. The skill set to try and actually develop is tuned to the key decisions."
TiG chief operating officer for Europe, Middle East and Africa, Peter Tillotson, adds: "It's best practice in terms of trying to make sure everybody follows the same process and best practice in trying to make sure everyone understands the rules they have to apply. There are some things people don't have to remember and don't have to learn. That means we can get them to focus on solving the customer's problem."
Halifax General Insurance Services head of household customer service Jim Pittman says: "We believe in trying to develop a process is to take away the fact that everybody tries to reinvent the wheel. So we use technology to drive that process. But you need your handlers to be trained in soft skills, in customer service, give them the confidence to say `OK, we might just do something different here'. That's real customer service."
Clark adds: "I meet claims people who think loss adjusting is a black art. It's not. It is a measured science. And I think what we need to do is use technology to give us all prompts and nudges of the things we don't remember. And then we can focus on areas like interviewing skills."
Royal & SunAlliance (R&SA) UK claims change programme manager Jonathan Colson says the one thing that would improve the performance of claims management is readily accessible policy records.
" If there is one tool I would have it is a rapidly available policy, because that way we wouldn't harden the attitude of the person on the other side," he says.
Colson adds: "`I don't know if your claim is covered because I don't have your policy to hand' are the magic words that have probably driven more claims up over the past few years. "
Moving on to fraud, Bill Trueman says there is plenty to learn from other industries: "We can do a lot more on the data-sharing side of things. The databases we have at the moment are not fraud databases. If fraudsters move house often, as they tend to do, current databases cannot flag it up."
AXA claims manager David Harris is a fan of fraud databases. "I would like one. I think we are a long way behind where we should be at the moment. I suspect we may have to start up a new database."
The round table: