Hoping to break through

Back in March, claims resolution specialist Inter Resolve announced it would be partnering with broker Aon to provide its clients with a fixed-costs resolution service for employers' liability, public liability and fleet motor claims.

The deal means that Aon's clients have access to Inter Resolve's Bodily Injury Claims Scheme. Launched in 2006, the scheme claims to save at least 30% on third-party transaction costs by offering fixed prices for legal, medical and mediation services.

The scheme provides claimants with independent legal advice without retaining law firms in simple claims, with agreed price legal representation through Law Alliance in more complex claims. As well as reduced costs, Inter Resolve says it can cut settlement times by as much as 18 months.

This month, the firm announced another strategic partnership, this time with Elision, which specialises in building claims-handling technology. Resolusion is aimed at employers' liability, public liability and road traffic accident claims and this improved service promises savings of over 50%.

The Resolusion system also boasts an advanced medical assessment process, which is already being used by the government for its Pathways to Work programme, which was designed by Professor Mansel Aylward, the former chief medical officer at the Department for Work and Pensions.

These developments could not have been timelier. With the Department for Constitutional Affairs publishing its long-awaited consultation on personal injury claims, the market is looking for ways to meet the proposals that set out the need to lower costs and provide speedier, more efficient settlements.

Peter Ashdown-Barr, chief executive officer of Inter Resolve, says the latest alliance with Elision boosts its offering and means it will now be able to set the "gold standard" for the market.

"The DCA consultation paper is like a blueprint of our scheme. It highlights hugely disproportionate costs and the bad deal many claimants are getting. Our scheme reverses this, providing early notification, early rehabilitation and fixed costs," he claims.

So, is this system setting a new benchmark in claims management? Tim Roberts, a senior partner at the Parabis Group, is wary and says it will require a huge culture change for the market: "This model is fine for those claimants without legal representation, but what about the thousands with solicitors? Referral fees will have been paid, so there will be a desire to drive claims down a different model."

The market may also be reluctant to buy into new systems until the DCA's final report is published. "The challenge for Inter Resolve will be waiting for clarification from the DCA around what 'fixed costs' means - it's only then that we will be able to truly judge products," adds Mr Roberts.

Unnecessary costs

But Kevin Nicol, development director for claims at Marsh, says anything that helps reduce fees is a good thing: "Having to pay high amounts out to solicitors really sticks in the throats of clients. Solicitors are usually in no hurry to settle either - it seems the more to-ing and fro-ing they do, the easier it is for them to justify their costs."

However, he adds that some insurers, including Norwich Union and Royal and Sun Alliance, are already taking proactive steps to shorten the lifecycle of claims by forging partnerships with legal firms to get a more efficient service. And he predicts that it will be increasingly common to form partnerships in the market to help cap costs.

According to Mr Roberts, another way to make the claims process more efficient would be for insurers to expand their remits so they can offer a fuller claims management service to clients. Having recently launched Parabis Ltd, which aims to provide practical advice to the insurance industry and their major insureds on all aspects of the claims process, Mr Roberts says it is assisting insurers do just this.

"We are helping them to be more proactive in the capture of claimants and broadening the products they can offer policyholders after an accident," he says.

More solicitors could, Mr Roberts adds, also be looking to provide a wider product offering: "They are realising that they need to do more than simply deliver compensation - solicitors need to embrace rehabilitation and become multi-disciplinary businesses. This is where the market is going."

While everyone is waiting for this to happen, products like Inter Resolve's offerings do have a place, as long as their distribution channels are improved, he continues. "Claimants are either directed to law firms via unions for employment claims, or to large before the event insurers for motor claims. Inter Resolve now needs to get innovative about getting claimants on board."

Positive step forward

Inter Resolve's partnership with Aon could be viewed as a positive step for improving distribution, but Mr Roberts questions how much clout brokers currently have. "Focusing on brokers is all well and good, but they are still not the main ones directing where claimants go," he says.

But Jeremy Ure, business director at Aon, says it views the partnership as highly beneficial. "Anything that holds the potential to reduce settlement times and cost for clients is positive. Inter Resolve's data seems to back up that they can do this in a significant way."

Having said that, the broker is still taking a cautious approach. "We're doing careful pilots at the moment rather than taking a 'big bang' approach, so we can measure the benefits being seen by clients," he explains. "We won't advocate any service without thorough testing. The new partnership with Elision is a positive move and it will give more capability, so we will be looking at whether pilots deliver the right benefits."

One insurer that is impressed with Inter Resolve's solution is Fortis Insurance. Nick Gunter, head of technical claims, says it is currently in discussions to have its own pilot to test-drive the system. "We don't have a start date but things are moving," he says.

Although insurers have to pay an upfront fee, he says cost savings can definitely be made. "The upfront fee still works out lower than the overall bill using the traditional model. Fixed costs also eliminate the fear that when you instruct a lawyer, you will be expected to meet endless bills. As a concept, it seems to have everything going for it," he says.

Despite these benefits, Simon Collings, head of the employers' liability practice at Marsh, is not convinced that the market is ready to fully embrace mediation solutions. "There is a lot of talk at the moment about mediation products, but no one has seen much evidence of how well they work yet. It's like the early stages of the rehabilitation market - until there is concrete evidence to back it up, people will be reluctant to get involved," he says.

Axa has already road-tested the system and, after a successful pilot last September, the insurer agreed to increase claims volumes through Inter Resolve and use its Bodily Injury Claims Scheme in more complex injury claims. David Fisher, liability claims technical manager, says he is looking forward to seeing what the new partnership with Elision will now offer. "While we were piloting Inter Resolve's scheme, we were also piloting Claimsense, which was powered by Elision, so we've effectively been working with both parties already. We've been impressed with Elision, so this partnership should be a positive move."

And it is not just low value claims that Axa plans to use the system for. The insurer has high hopes that the system will be able to deal with more complex claims.

"I don't see why we shouldn't put more complex claims through. Although some legal brain power is needed, the process should be capable of handling more complex cases," says Mr Fisher.

However, he acknowledges that there are some barriers in making this a market-wide initiative. "The whole PI market is so geared around referral fees that there will be some resistance to going down this route. It has been said that 80% of legal work is capable of being automated. This may be a scary statistic for lawyers, but what Inter Resolve has here is a system that goes a long way to delivering that."

But does the system really deliver the cost savings it promises? "From piloting the Bodily Injury Claims Scheme model, the results have been very pleasing," says Mr Fisher, who says the "modest admin fee" is soon reaped back.

"If you look at the total costs of claims including admin and legal fees, and the savings made by settling claims more quickly, it works out much cheaper. It means that claims are settled within a few months rather than an average of 18 months, which is what we were seeing under the old system," he explains.

As for other systems emerging, Mr Fisher says the insurer will be keeping an open mind. "We'll look at anything that can influence and help change the market. I believe referral fees have inhibited reform of the civil justice system and only serve to drive commercially vested interests. These fees hurt the insurance industry and don't benefit the consumer. Any system that can remove referral fees from the process should be embraced."

Aon, like the rest of the market, will also be keeping an eye on competitor propositions should they emerge. "A whole host of services are likely to emerge focusing on reducing insurers' overheads and late payments to claimants," says Mr Ure.

Tim Rankin, managing director at WNS Assistance, a motor insurance claims management firm that acts on behalf of insurers, brokers and commercial fleets, believes that the market will indeed see more services launch using similar models to Inter Resolve's solution.

"There is demand for open disclosure and fixed-costs services, so this has to be the way that third-party administration is going. Customers want services to be transparent and to know upfront costs before entering into an agreement. Unlike services that are charged at a percentage of costs, there are no incentives for expensive add-ons and this helps insurers to plan more effectively," he says.

Outsourcing

But is outsourcing in this way the right move for all insurers? "The first thing insurers need to ask themselves is how well they are doing this internally. They may need to up their game so they are on a par with services such as Inter Resolve, which have invested heavily in technology. When you take this into account, outsourcing claims handling will probably be cheaper and better than doing it internally," says Mr Rankin.

Mr Ashdown-Barr acknowledges that more services modelled on its scheme are likely to emerge and increase competition: "However, I truly believe that any competitor has an uphill struggle because they will also have to be neutral. If a service emerges out of the lawyers' camp insurers won't want to work with them, and if it comes from the insurance side, lawyers will be cautious."

So far Axa and Tesco are the only two firms to have been officially announced as actively working with the Inter Resolve, but Mr Ashdown-Barr says that it is also working with six major liability insurers and a number of self-insured corporates. "With the liability insurers we have on board, we already have access to a significant proportion of the market," he says.

With the DCA's proposals at the forefront of everyone's minds, there is no doubt that the timing of Inter Resolve's system is spot on. Whether it is set to become an industry-wide solution to claims management remains to be seen.

Until the DCA publishes its final report, the market is likely to remain cautious. But for those that believe that change has to come from insurers and solicitors themselves, rather than waiting for legislation on the problem, then this could prompt some interesting moves.