Household claims are taking too long to complete. Richard Harpin argues that using a surveyor or building estimater from the outset could save insurers money
Household insurance claims total around £2bn a year. The market is highly fragmented, with most insurers using a network of builders either controlled by themselves or outsourced to specialists as an alternative to cash settlement and to reduce insurance fraud. This form of outsourcing is certainly becoming more popular, but the businesses employed are often national networks of small builders, with varying levels of quality, service delivery and pricing.
No household insurer or supplier has yet been bold enough to set up a national network of directly employed operatives covering the general building trades like replastering, painting and decorating and roofing.
For household insurers this would require major investment in an area that does not represent a core competency. Ownership of a network by a single insurer may prohibit other insurers using it and so prevent sufficient volumes of claims to make it a cost-effective solution.
The household claims process is dogged by problems and inefficiencies, and the average household insurance claim is still taking far too long from start to finish.
One of the first issues to consider is that a typical household insurance claim averaging £1200 will involve more than one supplier. Take a water-damage claim as an example. This is likely to first involve fire and flood restoration. Once this part of the job has been completed, the follow-on work will typically be plastering and redecoration.
A significant problem is that the job does not always get passed on to the next supplier promptly enough. It could typically remain with the flood restoration company or in the insurer's call centre in limbo, rather than being swiftly passed on to the building repair network to complete the job. Very often, it takes the domestic policyholders' chase-up call to prompt further action, which is why there are several calls to be handled by the insurer for the majority of household claims.
Skills and trades
Another major issue is that most £800 to £2000 building claims are not inspected at the very beginning. So nobody is quite sure what skills and trades and, therefore, which suppliers need to be used and in what order to be able to get the job completed in 60 days, rather than 120. This is why the customer is all too often left chasing their insurer and the insurer is forced to cope with the cost of these calls.
A common action has been for insurers to reduce the cost of call handling by 50% or more by moving their claims centres to India. This has been a controversial trend and one that could be seen to avoid sorting out the root cause of the problem.
The fact remains that claims are taking too long to complete. One solution is to inspect the job at the very beginning. This does not necessarily need to involve a loss adjuster and could also be carried out by a building estimator or surveyor. Almost all of the building networks send out one of these people when they receive the job. However, by this time it is too late - the job has been delayed, the insurer has borne the cost of needless calls from the customer and customer service has been seen to be compromised.
Advantages to outsourcing
Most household insurers see claims handling as a core skill and competency, like underwriting, and would not therefore consider outsourcing the initial claim notification call. However, there are also advantages to outsourcing at this stage. In particular, many insurers do not have systems that can electronically deploy claims to nominated contractors, so a claims hub that is outsourced would eliminate the need for dual handling of claims.
There is no doubt that household buildings claims remain characterised by inefficiencies and outdated practices and are causing headaches for insurers. A fresh look at handling these claims should be a priority.
Richard Harpin is chief executive of Homeserve.
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