The traditional UK loss adjusting market is shrinking, forcing the major players to evolve. Insurance Times talked to the top five firms about the future.
The loss adjusting sector is evolving fast. Private equity firms are circling, looking for investment opportunities, while individual firms are under increasing pressure to develop from ever more sophisticated and discerning clients.
Loss adjusters no longer see themselves as loss adjusters, but as claims solutions service providers.
“Many loss adjusting businesses have gone far beyond traditional roles and become broad based providers,” says Phil McNeilage UK chief executive of Cunningham Lindsey. “Loss adjusters are evolving at a faster pace as clients are evolving at a faster pace.”
The market leaders, Cunningham Lindsey and Crawford & Co, are pushing ahead looking for new markets and new services, investing heavily in technology and processes.
Crawford, for instance, recently rolled out a service for dealing with catastrophic claims, while Cunningham Lindsey is targeting London market business as a key area for growth. It is also developing its buildings claims service.
Meanwhile, others are in the process of modernising their businesses in order to position themselves for the next stages of growth.
AMG’s new chief executive Richard Webster has a brief to restructure the group into a scaleable business, integrating its disparate companies and changing the culture. “We don’t want to be biggest; we are not driven to be the lowest cost operation. We want to be able to offer that personal touch, which is important,” says Webster.
And Davies Group, the fourth largest loss adjuster, has completed a £27m management buy-out that will modernise its business structure.
Investing in new technology is also recognised as playing a key part in growth, with adjusting companies looking at new ways to handle the claims and interact with the customer.
Ian Muress, recently promoted chief executive of Crawford’s UK, Europe, Middle East, Asia and Pacific business, says: “The idea of dealing with an insurance claim based on filling in a paper form will be anathema in the future.”
There is talk too of consolidation in the loss adjusting sector, in the wake of acquisitions within the wider insurance market, but so far, with the exception of AMG’s acquisitions of Carr Greenwood Smith and Sigma, there has been little movement.
Kieran Rigby, chief executive of GAB Robins UK, says consolidation is likely to occur among the smaller loss adjusting companies.
“Consolidation among the larger loss adjusting firms is difficult to envisage because the panels are selected by the clients,” he says.
Insurers are unlikely to support a move that would concentrate power in the hands of fewer service providers, he argues.
But he adds that insurers’ panel selections have a major impact on the sustainability of a loss adjusting company and that the sector is likely to see more consolidation among the smaller niche firms, which have difficulty affording the latest technology and electronic claims systems.
Last year Cunningham Lindsey delisted from the Toronto Stock Exchange, in a move that saw private equity group Stone Point Capital take a majority stake in the global loss adjuster.
Stone Point acquired a 51% stake for around $80m in a new holding company, while existing shareholder Fairfax reduced its stake to 45% and injected $30m into the group. The groups senior management owns 4%.
UK chief executive Phil McNeilage says that securing the right financial backing is vital for long term growth. It is more important than ever that service providers are securely financed. Having the right funding in place is a pre-requisite to long term partnering.
But despite recent interest in the loss adjusting sector from private equity firms, McNeilage does not believe it is more attractive to investors than other parts of the insurance market.
There has been regular speculation about consolidation within the loss adjusting community and some smaller acquisitions by rivals, but McNeilage does not expect much consolidation to occur. From time to time consolidation occurs in all sectors, but I do not see a greater likelihood in loss adjusting,he says.
Cunningham claims to be the UKs largest loss adjusting and claims management services provider with revenues in 2007 of 112m, having grown in size by about 50% in the past five years.
McNeilage says: Our strategy is simple: working closely with existing customers, broadening our services and selling to new customers. That is one of the reasons why we are investing in the London market.
The London market is a key area of growth for Cunningham Lindsey this year.
The changing demands of customers means loss adjusters need to adapt and evolve quickly to keep up.
The loss adjusting sector is as vibrant and strong as ever. Many loss adjusting businesses have gone far beyond traditional roles and become broad based providers, says McNeilage.Loss adjusters are evolving at a faster pace, as clients are evolving at a faster pace. Clients are buying specific benefits and they are more discerning about business outcomes and in measuring the business benefits.
McNeilage adds that data is increasingly important for clients. They want a [high] level of transparency and detail, increasingly so for global clients.
Technology is key to Cunningham Lindsey growth plans. We have invested heavily in IT, minimising touch points and allowing customers to choose how they interact with us, says McNeilage.
The company has created online claims forms, text message and e-mail alerts, and a policyholder claims tracking site.
The latest thing is to enable customers to make claims online self-service without human interaction. They could make a claim at 2am and have it settled the next day without having to speak to anyone, says McNeilage.