Strategic Risk

Insurers and brokers are falling out of touch with the needs of businesses. That’s not my view, but rather the main conclusion reached by Strategic Risk’s recent survey of corporate risk managers and insurance buyers from the FTSE top 250 companies. ‘Failure to keep pace with the complexities of large multinational organisations’; ‘lack of innovation’; ‘less choice’; ‘emphasis on product rather than bespoke solutions’: these are just a few of the challenges levelled at the insurance industry.

Claims management in particular comes in for some harsh criticism in the survey. Risk buyers view claims as an area calling for more expertise and more personalised solutions… one respondent said insurance partners were judged by his company on ‘claims settlement, attention to detail and flexibility’. Top of the shopping list for many is the issue of cost certainty allied to consistent quality of performance. They want to participate in a value chain of risk and reward supported by transparent and technically robust claims management. But when it comes down to specifics there are differing agendas: some businesses want to control claims processing throughout; others may look to outsource entirely and stay in control through first-class MI. There is also a growing demand for additional services such as TUPE facilities, captive arrangements and, of course, MOJ portal management.

Over the years I have come across plenty of instances where an innovative approach to claims management, tailored to corporate goals & objectives, can deliver more value. The brief example in the panel below provides one illustration.

Case history

A FTSE 250 business, faced with an 18% premium hike on its insurance renewal, reflecting its poor claims history, was looking to reform its structure. The high claims spend seemed in part to be caused by a disjointed claims management system, which was heavily dependent on lawyers.

Davies helped them turn things around with a bespoke claims management programme. It was effectively an action plan to reduce claims and re-evaluate risks. At its heart was a claims-handling strategy designed to deliver a consistent approach to claims with processes to minimise leakage and delay. Lawyers were brought in only where they added value, reducing legal spend by 90%. A redesigned MOJ portal improved retention rates by more than 50%. Above all their finance director can now view all claims as they are handled and exercise greater control over both settlement process and indemnity spend. Over four years the company’s claims spend fell by over £2 million & premiums reduced considerably.

Flexibility is the key to claims management responses. Standardised solutions don’t work. Instead processes must be tailored to suit insurance arrangements, nature of activities and achievement of corporate goals. In designing cost-effective risk management and claims handling programmes brokers and insurers have to learn to listen to the requirements of their corporate clients. Only then, working in partnership, can all parties develop the appropriate cost control and transparency needed. Several clients are already well down this path. They know that the success of these programmes is based on a combination of, committed account management and expertise, advanced technology and a creative approach to claims.

Davies’s experience of working with corporate clients shows that brokers and MGAs can hold the key to building effective and flexible claims solutions. It’s essential for the insurance industry to put their corporate clients in the driving seat by helping them to create effective operating models and branded, simplified claims processes. Management information should lie at the heart of these programmes with 24/7 access to claims files and bespoke detail to analyse risk and spend activity and trends. But, above all, data must be delivered in a format and style that works for the company itself. Once that principle is established it’s a much easier process to develop other essential programmes such as systems to reduce fraud and MOJ portal management to improve retention rates. It goes without saying that all these processes need to be co-ordinated. At Davies, we are strong advocates, for instance, of a single point of contact to handle co-ordinated incident management and loss adjusting.

If the insurance industry is going to respond to the shifting demands and technical requirements of globalised commercial organisations, it will take strong partnerships with clients and account-management programmes delivered by professionals who understand the business. Finance directors and risk managers urgently require bespoke solutions with tools for innovating and better understand changing risks. They need to believe that their insurance advisers are on-side, sharing risk and reward and driving down the frequency and cost of claims. To keep pace with their commercial requirements brokers, insurers and claims advisers must deliver value aligned to those needs.