SMEs can easily fail if claims are not dealt with efficiently So what are insurers doing to preserve their customers?
"My business premises are flooded. My livelihood is ruined," says one small business. "My insurer failed to deal with my claim quickly and efficiently and now my customers have gone elsewhere."
Insurers are aware that time delays in the claims handling process can have a disastrous effect on a small business. And they recognise that efficiency and better claims management are critical if they are to retain customers and remain competitive in the marketplace.
"Unfortunately, it's not a question of one size fits all," says Pat Brady, AXA head of property and lifestyle claims. "We don't have our own supplier list for personal lines or commercial lines and we are not sure if we want to develop one."
AXA is hoping its current household and commercial property project - building repair and value evaluation strategy (Braves) - will give it some answers. Two surveyors, Imperial and CPI, are expected to track what customers want. Results are expected in the spring.
Brady's target is to manage customer expectations. "If a builder or loss adjuster says he is going to turn up then he should. Judging by the volume of complaints from customers they don't turn up," she says.
AXA says it has dealt with this by changing key performance indicators to measure from when contractors do the work and not from when they log the call.
Cycle times are also under attack. AXA wants 90% of household, excluding long tail claims, to be dealt with within 30 days. Commercial property claims, except long tail, should be reduced to 90 days.
Brady says: "The bottom line is choice. Brokers are telling us that if you force a contractor on a customer then the customer will find fault and it will end up costing the insurer more."
AXA is looking at an online system that will allow it to validate estimates to ensure cost control is maintained for those customers who still want cash settlements. AXA is deliberately shying away from the trend towards big contractor networks that claim to have the ability to be anywhere any time.
For personal lines, some insurers say that using a preferred list of tried and tested contractors has given them "significant financial gain".
Norwich Union (NU) says it has saved £200m a year by going down this route.
It is not surprising that insurers tackled the simpler personal lines supply chain network first. The cost of claims in 2003 remained the major cost centre for general insurers accounting for up to 85% of their total operating costs. They are now asking if the concept could work in the commercial arena.
"It's a hard nut to crack," says NU senior purchasing consultant Iain Sinclair. "Every business has different needs and suppliers have to understand that."
He says the commercial claims process is time-consuming, consisting of a lengthy process of correspondence, form-filling, telephone calls and inspections.
"Automating and tracking claims processes more effectively is clearly going to reduce costs and make the process more efficient," says Sinclair.
Royal & SunAlliance (R&SA) claims to have solved the problem by launching its nine-strong preferred supplier network late last year. This was designed to tackle 80% of its commercial property claims worth up to £100,000,.
R&SA says the move gives it control over the entire claims process. It guarantees the quality of its contractors by tying them into tough service agreements. The supplier networks consists of experts in handling a range of businesses that include shops, offices, block of flats or leisure complexes.
The insurer is in the process of executing the second part of its strategy dealing with property claims above £100,000.
Leading insurers are likely to follow suit. NU and Allianz Cornhill are currently "researching" what the market wants. They are in talks with brokers - who are responsible for placing around 95 % of all commercial policies - customers and suppliers to find the best way forward. Results are expected later this year.
At the same time, insurers are looking at developing technology systems that will enable them to link their claims handling departments to suppliers.
It is unclear whether brokers will be kept in the loop via this system.
Datamonitor's Claims Automation in Europe 2003 report strongly favours the technology solution: "Automated and paperless flow of information from the customer interface through to the claims operations has clear business benefits," it says.
Mark Henderson, Cunningham Lindsey director of claims management services, warns: "Problems occur when insurers are unwilling to be flexible. Some clients want cash settlements or to use their own suppliers and insurers don't always want that."
Biba technical service manager Graham Trudgill says that brokers are concerned they will lose control of offering a personalised service if supply chains are introduced in the commercial sector: "We will be keeping an eye on this and bang on insurers' doors if problems arise."
One broker who wishes to remain anonymous highlights concerns with current service level agreements.
"Loss adjusters are the worst. They always call in the final hour. Yes they are within their service level agreements, but what if it is an emergency. Shouldn't they put it to the top of the pile?"
The Broker Network chief executive Grant Ellis says insurers should consider the basics to ensure efficiency. "Do all insurers have 24-hour help lines to deal with commercial claims? It is no good to a business if they can only make a claim 9am to 5pm Monday to Friday."
Insurers say they are listening. They admit the commercial claims system is archaic and some are looking to overhaul the whole process.