Speculation that the insurance industry is suffering from a skills shortage has led to accusations of too little in training investment over recent years. However, Ralph Savage says the claims sector is starting to address the issue with several new training initiatives
The handling of insurance claims, particularly home and contents, and motor - the bread and butter of the personal lines insurance industry - has become the subject of much public and industry criticism. The commoditisation of many personal lines has led to allegations that insurers are giving handlers the bare minimum of training in order to cut costs and there are now concerns of a genuine skills shortage in claims across the industry.
Nicholas Burrell, group director at recruitment consultant IPS, believes a skills shortage exists and that the situation is likely to worsen. "The 1990s obsession with mergers and takeovers had a significant impact on graduate trainee schemes that supplied claims handlers of graduate calibre.
After their initial training of two years spent going round the various departments, a large proportion became claims inspectors or outside investigators; however, young claims inspectors are now an endangered species."
Mr Burrell adds that law firms have also been affected by the malaise. "We miss the flow of well-trained claims talent that regularly emerged from the likes of Guardian Royal Exchange (now Axa), Commercial Union (now Norwich Union) and Provincial Insurance (now Axa) in particular. We also said goodbye to London & Edinburgh (now part of NU), which produced law graduates well trained in professional indemnity claims.
"Eagle Star (now Zurich), General Accident (now NU) and Iron Trades (now QBE) seemed to pay more attention to training mass ranks of good A-level entrants in property, liability and domestic claims. Independent Insurance also offered numerous claims-training opportunities for second-jobbers."
Claire McKinney, president of the Forum of Insurance Lawyers, explains how the impact of high-volume claims and the introduction of fixed fees has 'dumbed down' the claims process. "Because we've become so price driven, we've had to change our business models and in some cases this has meant warehouses full of paralegals.
"Lawyers are only being used in cases where they can add value such as complex, multi-party cases but because of the poor recruitment situation, there isn't much quality around."
Jonathan Clark, senior vice-president for business solutions at loss adjuster Crawford & Company, is less critical of the situation. "If you had asked me five years ago I might have agreed. Some of the 'machines' that trained the industry have died out, but if you look at Allianz Cornhill's underwriting academy and Royal & Sun Alliance's university, training from the large companies is beginning to get back up to speed.
"There are many different perspectives on this, but I think we have a lot of very able people," continues Mr Clark. "We used to be mentored but this happens less nowadays. There are more tailored training regimes than ever before - the training and qualifications available now didn't exist when I started in the industry."
So if there is a problem is it simply down to the insurance industry, claims specifically, being unattractive to jobseekers?
Keith Hough, divisional claims manager, operations at Allianz Cornhill, says keeping hold of people can be a drain on resources, particularly for the insurer's direct operation. "In that part of the business, we have a recruitment and training process that is almost constant. Generally, we look for staff with experience but there's lots of competition in Bristol. All direct operations suffer from high turnover but we try very hard to give people variation in the types of claims they handle."
Outsource service supplier Xchanging Claims Services, carries out third-party administration for the majority of Lloyd's syndicates. However, even in this comparatively high-profile environment Stephen Beard, chief operating officer of Xchanging claims services, says recruitment can be tricky. "We've had problems recruiting the right people in the past. Claims is often regarded as a back-office function and, much as someone working in a bank wants to move to the front office, we often lose people to underwriting."
Mr Beard explains this has hit Xchanging's bottom line in that salaries have often been the best incentive for staff retention. He adds the company has tried to progress: "We've developed more of a structure to train our staff, such as fast-tracking them through the Chartered Insurance Institute training programme, and, more recently, we've begun to introduce performance measurement. We want to align their work with those of people in a profit-centred environment, so we measure claims leakage and compare theirs with a best-case scenario to gain a benchmark. If the staff member is in the higher qualified teams, they will be on a structured-bonus scheme."
As Mr Clark and Mr Burrell said, the structure of training regimes across the industry has gone through a period of change. But Mr Burrell's suggestion that the major insurers have failed to provide the infrastructure necessary to succeed in training could be refuted with the news that Allianz Cornhill is in the process of setting up a claims academy to partner its established underwriting academy.
The insurer's training college in Guildford will see the new department opening at the end of this month, although Mr Hough is reluctant to divulge further details.
NU has also developed its own claims academy over the past two years and trains its staff up to the level of a university-accredited diploma if they reach the top.
Simon Machel, customer services director at NU, explains: "Most of our claims staff need good interpersonal skills and not too much technical knowledge - most claims are simple and straightforward. The other skill they need is to understand when a claim is beyond their expertise. I don't see any problem with this, the real issue is to have a slick referrals process."
According to Mr Machel, 90% of NU's personal lines claims will pass through the front office claims-handlers' systems without needing any referrals.
"Our UK front office claims-handlers have six weeks' training and the offshore staff have double that to accommodate for cultural training."
The difference between NU's approach to training claims staff and Allianz Cornhill's is NU's university-accredited diploma, which takes the place of a CII qualification. Mr Hough is an advocate of the CII's accredited regime and explains that the underwriting academy already awards Continuous Professional Development points accredited by the CII. "We're working very closely with it to see how we should make the links with our claims academy. I've not really considered affiliating with a university - the CII is the industry body and it is the most appropriate partner."
One of the latest developments in the claims-training field is the recently created Faculty of Claims - a joint venture between the Chartered Institute of Loss Adjusters and the CII. The Faculty is being developed in order to standardise training and has appointed Mr Clark as its chairman.
Alexander Forbes recently put its 25-strong claims team through CILA's Society of Claims Technicians exams (now incorporated into the new Faculty of Claims).
Barry Jones, managing director of Alexander Forbes' claims broking unit, took the qualifications alongside his team. He believes some brokers have historically focused more on the sales and technical aspects of insurance than the skills required to deal with claims handling. "Some are very focused on placing business alone, but others recognise it's a serious service issue. For example, when we are up for business against other brokers, very few of them bring a claims expert but, funnily enough, the client wants this cover in case they have to make a claim."
Despite the Faculty of Claims' wish to become an industry standard, it seems for the UK's biggest insurer the programme may be too little, too late. "We might have considered it," says Mr Machel, "had it been around when we began developing our own range of qualifications, but it would be difficult to go back to square one and reinvent the wheel."
The Faculty of Claims' aim is to become the industry standard training provider, tying it to regulatory practice as tightly as the existing CII qualifications. However, Mr Machel argues: "As long as you can demonstrate to the regulator that you have an accredited training structure, an industry-wide scheme would not be essential."
Mr Jones gives a stark warning that companies may even be at risk from a claim made against them if staff are not adequately trained. "In a world where errors and omissions insurance premiums are rising all the time, shouldn't the whole industry be looking at areas where it can reduce its E&O risk? If you want to be a serious player, you have to understand what you are doing."
To date, the Financial Services Authority has offered limited guidance to the industry on how it trains staff to deal with claims handling. The regulator's focus has been squarely on the subject of selling, or mis-selling, with brokers feeling the most victimised of all. However, consumer mistrust for insurance companies is as much to do with low expectations at the point of a claim as it is with anything else, so a joined-up approach could be necessary.
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