Roundtable - Claims: The claims game

Insurers have recently had a torrid time in the personal lines arena. With many making losses on both their motor and household books, prices have increased steadily in a bid to claw back the deficit.

The AA's British Insurance Premium Index, published in April, found the typical shoparound premium for a comprehensive car insurance policy rose by 5.9% to £892 for the first three months of 2011 and increased 40.1% for the year. In addition, the average home contents policy rose 5.5% to £76.39 for the first quarter and 11.9% over the previous 12 months.

However, as well as pushing up prices, insurers must also review their claims processes to improve financial performance. At a recent roundtable on claims process efficiency, in association with SAS, a panel of experts discussed the efficiency of existing claims functions and what could be done to drive improvements.

According to Peter Horton, operations director of general insurance at LV, a continued investment in the claims process is crucial to maintaining its efficiency — even in the face of the recession.

"From my perspective it comes down to a simple cost benefit analysis," he said. "You have to invest for the future. Companies will get to a point with their current legacy systems where they have to invest to compete.

"I would not worry about the extra percentage of spend in improving the process but rather the amount we would have to pay out for additional claims."

Steve Cross, head of claims at Markerstudy, agreed that the cost-benefit is more important than the overall claims spend figure. "It is not just how much you spend on running a claims function. It is about being efficient and running a claims function well with the right processes," he explained.

"Sometimes investing money in claims processes during a recession can deliver huge savings on the bottom line. If you can control fraud, the amount you are saving can pay for a claims department many times over."

Targeted and focused
However, it is important that investment in claims spend is targeted and focused. Darren Wills, head of claims development at Groupama, suggested that investing in staff is as important as spending on new technology.

"In the last few years, some insurers have tended to turn their focus away from the multi-million pound system developments and are making sure they are getting more for the money they are spending," he explained. "Technology is one way forward but we can still get an enormous amount out of developing our people.

"As an industry we focus on technology and the people side of things often gets left behind. But there is so much we can do with our people without paying millions of pounds."

Derek McCann, UK motor technical claims manager at Zurich, agreed that staff are integral to the process. He added: "At the end of the day the technology should be an enabler. We need good technicians that can get stuck into a claim."

As well as investing in the claims process, Mr McCann also stressed how important it is for insurers, especially in the motor arena, to get to the claimants first.

"First notification of loss is a big part of the claims process," he continued. "We used to do it on an outsourced basis but a while ago we took it back in-house. We realised just how key this was both for the intervention process and controlling our own policyholders and costs."

His views were shared by Mr Horton, who suggested a significant saving on claims can be made if effective FNOL is part of the existing process.

Mr Horton added: "In all cases, getting out to innocent third parties and trying to get them into your network while speeding up that process is vital. If you can get hold of a third party within the hour of an accident, you can persuade them to let you handle the claim. Especially if you let them keep their no claims bonus, do not charge an excess and return their vehicle quickly.

"The cost of that repair would probably be less than allowing the third party to go to an accident management company. There is also less of a chance that they will put in a personal injury claim — especially if you have spoken to them at that point and they confirm that they are not injured."

According to Mr McCann, staff training in the importance of FNOL must also be part of a move to ensure claims professionals are adequately trained. "Years ago, insurers didn't have an end-to-end claims concept," he said. "When you came into an insurance company you initially worked your way up to the front end and that is clearly not the right way now. There has to be a great technical resource at the tail end of a claim."

Train to gain
Mr Wills agreed: "With some of the more traditional technical areas, like personal injury handling, things have become more process orientated over recent years. Getting that first contact right is key. You are investing in those people so you can retain them and also to prevent them automatically wanting to move on in 12 to 18 months away from dealing with customers. It is about training and retaining in that area."

While the attendees recognised that retaining an effective claims process — both in terms of staff training and technology — is vital, concerns were expressed about the effect of fraud on overall performance.

Martyn Kyle, head of insurance at SAS, suggested that insurers could improve their claims processes if they had assistance in both tackling and educating consumers on fraud.

"We have a heightened awareness of it because of our position in the market," Mr Kyle said. "Insurers really have to do a lot to tackle this problem. There is a perception that gaining an advantage against insurers is acceptable because it is David v Goliath."

Mr Wills agreed that more has to be done to educate the public, especially regarding the way fraud could negatively affect the claims process. "We need to increase the public awareness to make sure consumers have a better understanding of the cost of settling a claim be it household or motor. In some areas, where an item is being repaired or replaced, the policyholder is completely detached from the costs."

He added: "That tends to be a common problem with the public making claims. We also need to try and drive a change among social attitudes so customers know what a claim could mean to the cost of their policy. We also need our customers to come forward when they get repair quotes and they don't think they represent value for money."

However, Mr Horton urged the Association of British Insurers to do more to help tackle the issue. He said: "It is up to the ABI to engage with the government to tackle this on a joint basis, involving the Insurance Fraud Bureau. A few adverts on television would make a huge difference."

Mr Cross agreed and argued the DVLA data sharing scheme — which will allow insurers access to information on the driving history of potential policyholders — would be a useful addition at the point of underwriting.

He said: "An advertising campaign has to be high profile and people have to see it. It has to be in the papers and it has to be on TV. If the fraud issue could feature on a few programmes and is brought into mainstream TV it would help.

"The DVLA scheme can't come soon enough. Most insurers are like us, where we screen at the underwriting stage and screen at the claims stage. We have our toolkits and insurers have had to build in so many fraud screenings to be able to identify and investigate fraud. What we are trying to do is find the fraudsters and take them out of the system so the honest policyholders' claims can be pushed through as quickly as possible."

However, according to Mr Cross, attempts to screen fraud at the claims end of the process must not be negatively affected by concerns of resolving claims quickly.

"There is a limit on how fast you can push any claim through the system but it is important as an industry we don't go down the route of looking at settling claims in minutes," he continued. "It is very much about making sure that you have robust fraud screening. With that you can't process a claim as quickly but an honest policyholder will get their claim dealt with effectively and their payment will be made without any further questions."

Tapping into telematics
Looking to the future of the claims process and how it could be improved, an increased use of telematics was seen as an integral part of its ongoing development.

Mr Wills explained that an increased use of the technology could result in serious inroads against fraud, easing the claims process for genuine policyholders.

"It will be interesting the first time an insurer runs a case on the back of black box technology," he said. "They could be trying to defend an injury that is so minor it couldn't have happened or disputing the alleged fraud involved in proving a vehicle wasn't in a certain location or moving as suggested. A judge making a decision based on this data will be a turning point."

He continued: "It is also a question of economics. There is a considerable cost in trying to defend cases of that nature to what could be an attractive easy way out for a relatively modest sum of money."

Mr Cross added: "Someone is going to test this and once they get the court accepting the evidence being produced it opens up the next stage of claims costs. All of sudden you will have people finding it very hard to bring claims against the data being produced. At the moment, however, this remains an unknown as it has not been tested."

While the panel believed that the impact of telematics on the claims process would not be felt immediately, it was agreed that a big difference would be made in the future.

Mr McCann said: "I recently spoke to an engineer who explained that this will become standard — regardless of what car you have. He is talking just a few years rather than 15 to 20 years."

Mr Wills agreed and added that the real benefit would be felt within the next decade. He concluded: "There is enormous potential in the future for a whole raft of new processes. It will be at least five to 10 years before we have a reasonable number of cars with this technology in place. It has some use in the market now — but it is in fairly small numbers."