We’re living in a post-Insurance Act world where the FCA has a spotlight on everybody’s conduct, says Dan Cooper, claims manager, Manchester Underwriting Management
We’ve all heard the well-used expression that claims is the true product of insurance. It’s not until a client has experienced a claim that they understand the value of the product that they have bought. As an MGA, providing customers and brokers with a first class claims service as has its challenges.
Insurance is a strange product. Our customers spend a lot of money buying it but they rarely look at what they are buying until disaster strikes, by which time they may well have breached policy terms. They’d never do that when buying a car or a house but they will when insuring them. It’s why we have a new Insurance Act. Just when the customer expects total support, the opposite can happen. It’s in customers’, brokers’, insurers and MGAs’ interests for claims to be handled quickly, fairly and for customers to get the support that they rightly expect wherever possible.
Many MGAs just don’t get involved in handling claims, leaving everything to the insurer. This model is great when the insurer handles claims well, as is often the case. Often, an independent Third Party Administrator (TPA) is appointed to handle claims. And some MGAs handle claims themselves. Whatever the model, there can be a disconnect between the approach expected by the various stakeholders and the longer the value chain the more attention needs to be paid to prevent that happening. Any claims process throws up challenges such as awkward coverage issues, difficult claimants or high maintenance clients (and who can blame them for wanting maintenance?!). Where third party claimants are concerned, it can often make sense to be very proactive, which involves a special set of skills. For the MGA that doesn’t handle claims, their reputation is in the hands of the insurer or TPA. And so is the broker’s and insurer’s.
The cynics amongst us might suspect that it’s in an insurer’s or an MGA’s interests to pay as little as possible. That is technically true in the sense that premium income that isn’t spent on claims (or commissions) can be profit for the insurer. And a profitable MGA contract might last longer and generate more income. But it’s getting increasingly difficult for insurers or MGAs to think like that even if they want to – after all, we’re living in a post-Insurance Act world where the FCA has a spotlight on everybody’s conduct. And brokers soon work out which markets will cause them grief with their clients.
At Manchester Underwriting Management, our biggest concern is that the customer’s journey through the claims process should enhance our, our broker partners’ and our supporting insurers’ reputations, not harm them. We therefore adapt our claims model according to our customers’ needs and our skillset. We handle many claims ourselves and sometimes we use TPAs where the customer can get a better service. The key here is having supporting insurers completely aligned with our service ethic. These relationships are important and need work to keep everybody aligned. Where claims are handled in-house, experienced, dedicated staff need to be recruited. This isn’t cheap. And claims staff should not underwrite, nor should underwriters settle claims. This way, conflicts are avoided.
There are some really good TPAs but they need to be managed properly to ensure consistency in the claims approach and service delivery and to ensure that the optimal result is achieved for all concerned.
The over-arching imperative is fairness and professionalism. That takes investment and it takes effort. It takes supportive insurers and a certain kind of culture. So, when those difficult coverage issues arise, there are the right people there to deal with them sensitively, involving the broker rather leaving them to find out.
All too often, insurance is bought on price. The focus on price is even encouraged by our regulators in the way renewal invitations must now be worded for certain types of cover. But there’s so much more to consider. Whether using an MGA or not, brokers should understand and ask how their customers’ claims will be handled, who will handle them and how they, as the broker, will or won’t be involved. Any decent insurer or MGA should have a ready answer on that.