Malcolm Harvey is no stranger to controversy. Since launching his loss recovery insurance product, he has been outspoken in his belief that only qualified loss adjusters should be allowed to operate in the general insurance market.
While The Loss Recovery Group (LRG) operates in a part of the market that has traditionally been the domain of loss assessors, the managing director only employs chartered loss adjusters.
“There is a paradox in the fact that loss assessors, who do not have any insurance qualifications, are allowed to operate in such a heavily-regulated industry,” says Harvey.
“Many of them survive by chasing ambulances and fire engines and that is morally wrong. We, on the other hand, market ourselves by conventional means.”
Finding a niche
Before setting up LRG, Harvey spent 17 years in information technology and was responsible for setting up a software house specialising in legal systems.
He launched LRG – initially a risk management business – in 1983, with his wife Judy. She has since left the business and, five years ago, Harvey re-engineered LRG and established a panel of small chartered loss adjusters, many of whom had been dropped by major insurers when they downsized panels.
The insurance product is sold by brokers as a tie-in with household and commercial insurance. LRG deals in larger claims, as Harvey believes that in the case of smaller claims, bringing in a third party can slow down the claims process.
But, he adds, when it comes to complex business interruption claims, the insurance industry could be more efficient.
“Anyone involved in claims will know that if you mention what you do at a social gathering or the pub, you will be inundated with so-called horror stories of individuals not receiving their full entitlement,” he says. “So we provide the public and the broker with a resource to make things easier.”
Over the past three years, LRG's book has expanded by 53% and its annual income tops £1m. But Harvey maintains that, in order to grow further, LRG still has to overcome a lot of misconceptions from insurers, brokers and even loss adjusters themselves.
“Brokers tend to think that they will lose control of the claims process if they bring us in to manage the claim but, in fact, the broker is in control because the public never needs to know that we are involved,” he says.
“By speeding up the claims process, we help to improve the broker's service levels and improve customer retention. Brokers nowadays need to have added value and we provide that.”
Guaranteed service levels
LRG is keen on promoting its ethical ethos. Levels of service at the company are guaranteed, as they are subject to a service standard agreement which guarantees the minimum response time and professional standards, even down to such details as how the adjusters should introduce themselves to the client.
There are now more than 100 loss adjusters working for LRG across the UK, who have an average of 15 years experience of working with insurers. “In joining us, they have become skilled in working for the benefit of the policyholder while still maintaining the highest professional standards,” says Harvey.
“Wherever our own service standards might end, the Chartered Institute of Loss Adjusters by-laws and code of conduct kick in.”
Harvey says that LRG helps to cut costs for brokers, as those who deal with claims handling themselves have significant underwriting costs. He adds that brokers are not necessarily equipped to deal with claims and calling in experts can make sure that the customer receives the most efficient service.
Level playing field
LRG has received a wary response from loss adjusters. One loss adjusting company went as far as admitting that they had even “blocked” a number of brokers from using LRG's product.
“Beforehand, they only had to deal with assessors and it was like pitching a barrister against a solicitor,” Harvey explains. “But now we have created a level playing field – each adjuster puts forward their own case and there is no confrontation, as professional courtesy can be afforded to each side.”
Insurers have also been concerned that the involvement of LRG in claims will push up their loss ratios. But Harvey maintains that this is not the case, as the service that loss recovery triggers is one which traditionally the broker has been obliged to provide free from his own resources.
However, he has spoken to a number of insurers who have recognised that the business could be used to enhance their own products.
“The fact is, if the claim goes right, you have a client for life. Those on the marketing side of insurance realise that what is good for the public is good for their business.”
Over the next three years, there are plans to significantly increase LRG's revenue – he estimates that there is a potential untapped market worth £300m in annual income.
In the next few months, the service of three more loss adjusting firms will be taken on board and the company is moving to larger offices in London to accommodate the growing business.
LRG has also received enquiries from brokers in North America and expanding overseas remains a goal for the future. At present LRG is just scratching the surface of the market but Harvey is already well on the way to convincing brokers of the necessity of this service.