The new reforms for personal injury claims offer opportunities for insurance professionals to make long term gains. Mike Noonan explains
As a title: Case track limits and the claims process for personal injury claims does not fire the imagination. It has the flavour of civil service speak conjuring up no more than a little administrative reshuffle, a change here, a bit of repackaging there.
Nothing in the title forewarns that the Department of Constitutional Affairs (DCA) consultation paper CP8/07, published on 20 April is really a wolf in sheep's clothing, about to radically change injury claims handling practice in England and Wales.
Businesses that cannot evolve to deliver on the proposals will take heavy financial hits. The ponderous will be penalised – too slow will be too expensive.
Much will be written on the detail and the associated case track limit debate, so no apologies in this article for concentrating on the injury process reforms and the impact on those receiving claims: businesses, clients, brokers, insurers and adjusters.
Don't forget that solicitors, claims management companies and the after-the-event (ATE) insurers will also be taking stock and absorbing the impact.
In addition to the key reforms, (see box below), the DCA is exploring the use of expert systems or expanded tariffs to help with non-contentious assessment of damages for pain suffering, loss of amenity and general damages.
There are no concrete proposals, just the promise of more work on the topic. This suggests non-contentious damages assessment are, in fact really rather contentious, between interest groups at least.
For those unable to respond, decide and act according to the new and challenging timetable, cases will fall out of the predictable low cost regime. Costs will be higher – much higher.
The solicitor lobby will push for higher success fees. ATE insurance can be incepted and premiums recovered. As there will be fewer policies in total there must be more premium per case to cover what is, from a market perspective, the same financial risk. So there will be financial weeping and gnashing of teeth for the less agile.
For insured businesses there will be rewards for those who can capture complete information on incidents as they occur and make that information immediately accessible to partners for pre-claim evaluation and triage. Admission cases can be identified and timescales met upon receipt of the claim.
But why stop there? Reporting facilitates delivery of rehabilitation solutions which is good for the injured party and for claim cost containment.
Insured businesses may want to be built into the claims decision making process but those prepared to give this up, will be saving on claims costs. This is especially important if they retain a direct financial interest in the outcome.
Brokers will need to be aware of the new environment. They can expect insurers to assess the client's ability to capture loss details, to respond and to support early decision making as being an underwriting feature driving premium rates.
Late reported claims are expensive. A good health and safety risk that is slow to report and decide is a poor risk financially. A revisit of claims process will be essential, paying dividends for clients.
Adjusters and outsourced providers receiving claims through the traditional insured-to-broker-to-insurer-to-adjuster chain (there are some) will be getting claims that are dead on arrival from a costs perspective. Compliance will be practically impossible.
The proposals support those already moving to a model where the claims handler is hard wired directly to the insured for reporting, information and handling.
Insurers will be re-engineering their processes. Frontloading resource into claims first response, when the low legal costs opportunities are still live, will be key.
Managing the claim through the timescales puts an even greater accent on robust process, workflow management, procedures and tracking. Compliance will be crucial.
The downside for late response is so extreme as to change the cost benefit analysis used to inform staffing and resource levels. Increased cost of claims management is likely to make greater savings on the cost of claims.
Cultural shifts are imperative. Rapid and flexible responses are needed to get to the settlement figure quickly.
Enabling case handlers to make decisions on incomplete information, a core competence, will be essential to avoid internal referral blockages and delays. Perfecting information will be a costly business.
Mapping out new and more effective relationships with business partners, upskilling people and streamlining process are all going to be on the agenda for claims managers, ahead of expected implementation of the proposals in early 2008.
So is your business up to scratch? Time to reassess what you do, how you do it and stress test your model against the future. The opportunity for change is here but hurry, as the claims process reform bandwagon is about to leave the station. IT
Mike Noonan is head of strategic claims management at QBE Insurance (Europe)