Relaying assistance

Insurers may be in the business of selling promises but, when the claims come in, how involved are they in actually fulfilling them? Many have taken the view that their core skill is in calculating and underwriting the risks involved, and when it all goes wrong the clean-up operation is passed on to various specialist third parties to deal with. Industry loss ratios give a clear marker of the varying success that providers have in this area, while the success of the end-service is often down to assistance providers - be they in the home, roadside or travel market.

In picking up the pieces, assistance companies sit at the right hand of their insurer cousins, and have an essential role to play in delivering service, protecting and developing brand, controlling claims costs, and delivering a logistics network often required to span the globe. Like insurers, assistance providers have had to evolve quickly during the past decade to meet the demands placed upon them, with the biggest changes revolving around advancements in IT, the development of brand, and the implications that scale and volume bring to an operation.

Practical improvements

Simply put, better communication has improved the efficiency with which the whole insurance market works. Partner firms are better informed, documentation is more consistent and more effectively recorded, while administration costs are reduced. The paperless nirvana may remain some way off but it is now a possibility rather than a pipe dream.

Looking at the practical improvements that better IT has brought to the assistance sector, Allison Walters, spokeswoman for travel assistance specialist Cega, comments: "Even 10 years ago losing baggage would see the client speaking to their broker and having to put it in writing. There would be two or three weeks while the broker sent it to the insurer and the insurer would either deal with it themselves or send it to an outsourcer. It would all be done in a long-winded and mechanical way." Now, she claims, such processes happen almost instantaneously. "We are informed directly and if it is a simple delay, for example, the conditions on the average policy are very straightforward - the policyholder receives a certain amount of money for every 24 hours the flight is delayed. We also have our own travel desk that we can check straight away online, confirm that the claim is legitimate and then send out the cheque. From the consumer's point of view they are winning, while the insurers benefit from better service and reduced administration costs."

By improving the speed at which information is communicated, IT has allowed intervention - where necessary - to happen more quickly and, consequently, more effectively. Steve Hook, director of corporate and travel at Mondial UK, says he is notified of any losses of more than £5000. As soon as he sees it is a medical case originating in the US, then he looks to repatriate the claimant as quickly as possible without compromising the service given. It is simply too expensive to allow the bills to build up and, by being on top of where and when claims are originating, he says the firm is able to manage them effectively.

"If we are talking about medical bills and there is someone who is sick or ill in Europe then the average amount of the bill is going to be quite small. If they have fallen sick in the US, however, then the insurance company's attitude towards costs will be paramount - not to the detriment of service but the main focus will be how quickly the patient can be brought back into the UK. I get notifications of any large loss and the moment the US is mentioned we look very closely at it."

Demands and expectations

Assistance firms have a balancing role to play between the insurer, the policy holder and the third-party medic in such situations. Mr Hook adds: "If someone has insurance and the bill is going to hit £100,000 or £200,000 then what do they care and why should they even bother - that is my problem. So, when we deal with the customer we deal on a service basis, and when we deal with the hospital we deal on a cost basis." In dealing with the insurer a balance has to be struck between the two.

The demands and expectations that consumers have shown in relation to brand have also led to a large step change in the way assistance companies operate. In working with insurers there has always been the need to assimilate towards a partner's culture but this, in some cases, has resulted in a complete metamorphosis. Mr Hook says this has led to certain vehicle manufacturers paying for assistance firms to run dedicated patrols for their customers, making sure repairs are carried out where necessary, and that the service and customer care levels meet and mirror those of the particular brand.

There are two main considerations in deciding to go down such an expensive path, Mr Hook explains: "The question is, by spending that much money does the manufacturer believe they make a return on what they spend? It is about critical mass as well as brand."

Where such dedicated service is not provided, insurers in the motor market also have big decisions to make relating to the breakdown services available to clients. Norwich Union has recently bought the RAC, believing the brand will provide welcome comfort to its clients, deliver the national service it needs and help cut costs across the board. Green Flag also believes in the importance that its brand can deliver in the middle market. Spokesman Nigel Charlesworth says: "Our clients often find that they need a recognised brand that provides a level of comfort and reassurance."

Irresistable market

In other areas of the assistance market, brand has not been paramount and firms have sought to merely provide the services needed by the insurer on a white-label basis. What has been increasingly important, however, is the ability to provide a consistent and large-scale operation to insurers who now have millions of policyholders on their books.

While many assistance firms have gone down the route of creating networks of subcontractors to meet the high volume of claims they have to handle, some believe this does not demonstrate the long-term commitment to the market that insurers are looking for.

Richard Harpin, chief executive of Homeserve, claims: "The biggest single change is that we believe in direct employment and, compared to every other assistance firm, nobody else has directly employed operatives. While we will never be 100% directly employed, it does make a difference and shows that we are really committed to the market. It is not just about using a subcontractor on an ad hoc basis to deal with a claim.

"We have 37 depots around the country, we have made a £40m investment in the directly employed during the past three years, and we think that shows we are the only serious player in the home assistance market."

He adds: "It is risky, requires a major investment and you have got to be very committed and have the volumes there to make it work."

Unlike many firms in the assistance market that now underwrite some of the lines they serve, Mr Harpin says Homeserve will not look to compete with its insurance partners by underwriting insurance itself. "I can categorically say that we will never become an insurer, as that would be competing with our own customers."

For the insurers themselves, however, the assistance market has often proved irresistible. The Mondial Assistance Group is part of Allianz, while both Axa and Mapfre have assistance and insurance operations. Explaining the decision to do so, Barbara Montenegro, business development manager at Mapfre Asistencia, says: "Mapfre Asistencia has been operating in the assistance sector as an insurance and reinsurance company since 1986, and started as a roadside assistance provider for Mapfre Mutualidad, and specialised in motor insurance.

"The idea was to offer additional services to customers purchasing insurance with Mapfre. Later we diversified into other products and services such us travel assistance, home assistance and value added services offered to corporates."

Since then, she says, the company has created a network of around 100,000 service providers, "who work for us with great dedication and loyalty". Ms Montenegro described the network as an essential part of Mapfre Asistencia: "They are an integral part of the assistance services provided as well as a team of collaborators. The network is continuously monitored, renewed and trained, which guarantees a better service to the customer."

In order to serve its customers wherever they are, Mapfre has set up subsidiaries in the relevant geographical areas or by establishing agreements with local assistance providers.

Clearly Mapfre does not rely on the directly employed route to create this scale, and for smaller players in the market the same network model has to be developed if they want to compete. Under the Financial Services Authority's rules, consistency of service has to be guaranteed. For smaller firms collaborating together, under a single brand and working to a single set of standards, networks offer one way to do this while delivering the necessary volume.

Rob Withers, managing director of Withersnet, says: "Where does this leave small-to-medium-sized enterprises? They are the backbone of service providers. SMEs employ and provide a labour force, rather than contracts with others. Therefore, collaboration between SMEs, to be able to fulfil current procurement criteria, is now more commonplace.

"Eventually the circle will be completed as companies realise the full potential of SMEs and reposition themselves in the market to accommodate the needs of today's sophisticated procurement models in the insurance industry. Indeed FSA compliance is a major driver in this process."

Niche areas

To date, most of the assistance firms have tended to remain in their own specialist markets, and the likes of Homeserve and Cega have expressed their intention to do so in the future. With such large operations in place for their particular fields, the set up costs of establishing the same size and expertise in another market would be gargantuan. Where the real expansion has been is in the provision of international services for clients who travel abroad or have foreign property.

As Mr Harpin comments: "Around four million people have a second home, and the biggest area is Spain. Halifax in Spain has just introduced an assistance service targeted at some of its UK customers with a second home, and our objective would be to see that as a major opportunity as we develop our international business."

As firms get larger, expansion invariably means looking at other parts of the insurance process and seeing whether they can provide this through further acquisition or organic growth. This, in turn, creates problems for the smaller firms trying to compete but leaves them with niche areas to move into.

The assistance market is prey to the same market forces that insurers have faced, and consolidation and decreasing margins have been at the forefront of the drive to get bigger and more efficient. This will continue so long as the insurers need partners to meet the promises they sell. As competition stiffens, the winners should be the policyholders cashing those promises in.

A ROUNDUP OF SOME OF THE DEALS IN THE ASSISTANCE MARKET THIS YEAR

April: First Assist wins contract with Lloyds TSB Group to help deliver its 76,000 employees sickness absence management products and services.

May: Norwich Union acquires RAC.

June: Allianz Cornhill signs a three-year contract with Mondial UK for roadside assistance and recovery, and rebrands its motor assistance service as Cornhill Direct Rescue.

June: Mondial UK wins a contract to provide Liverpool Victoria Travel Insurance. Under the new agreement, Mondial is providing every aspect for a fully branded travel insurance and medical assistance service to Liverpool Victoria customers.

June: RAC, the roadside assistance company owned by NU's parent Aviva, wins a 15-year contract worth £600m to supply plant and mechanical equipment to the UK Ministry of Defence.

July: Cega opens joint venture facility at Funtington, Chichester, in conjunction with NU; Cega is now handling all NU travel business - broker, NU direct and branded schemes.

October: Swinton Colonnade announces that it has committed to a further three-year partnership with Axa Assistance.