The heart of the matter

Consistent improvement or dramatic change is one of the key questions that the Faculty of Claims research project, The Future Positioning of Claims, is tackling.

The potential for making a claim is the fundamental reason an insured buys insurance cover. Intuitively, therefore, many would anticipate claims to be at the heart of the insurance industry agenda; get claims wrong and profitability, reputation and shareholder value suffers, get it right and brand equity and consumer confidence is enhanced.

This lies at the heart of the FoC's mission to raise the game in claims training and skills. With much debate across the industry on the role of claims, it is a good time to take stock on how the market views the future.

As the first phase of the research closes, a clearer picture of what the industry is looking for from its claims people in terms of skills and performance becomes apparent. Companies are often reactive when it comes to dealing with claims but the research suggests it would be more effective to predict what is needed to respond to claims even if the timing of any response is not certain.

The basic reality of insurance products is that 80% of the cost of a premium is spent on claims costs but what drives performance in the general insurance market - underwriting or claims - is less apparent. Both aspects seem to be critical levers of performance and the research confirms that everyone in claims should have a 'line of sight' across the whole business of insurance.

During the past few years, the claims environment has changed considerably but it is less apparent whether the claims process has changed despite many innovations in service. No clear picture emerges as to the position of claims as a differentiator today or whether it is still price that is king. Looking ahead, it is clear that a differentiation in claims service is seen to be a way of creating long-term value in any new customer relationship.

Hot buttons

The 'hot buttons' of customer service - cost of claims and claims expenses - are reaffirmed but there are concerns that the industry is in danger of creating complexity at the risk of not establishing an efficient and effective process across all areas of claims handling.

The need for a well-defined segmentation model is cited as a key success factor, as well as the ability to develop unique models for claims. This helps businesses recognise that claims handling is not a back-office function, which in turn allows claims handlers to get on with looking for better ways to manage the claims process.

The claims agenda has changed, with customer service at the heart of what is delivered - the challenge is to define customer service for individual policyholders. This means soft skills in claims are increasingly important, and that the discipline is no longer the poor relation. However, as customer expectations rise, the issue will be to manage those expectations by enhanced communication skills, which have to be underpinned by strong technical skills so that the right claims decisions can be made in a flexible and responsive way.

Recruitment and retention remain a challenge and the industry needs to encourage people to take on a profession in claims. There is recognition that it is easier to teach technical knowledge than soft skills, and that says something of the recruitment choices the industry is looking for in the next generation of claims professionals. Such skills embrace empathy, an analytical mind, commercial acumen and an understanding and experience outside just the claims discourse.

The claims industry has moved away from the more traditional and technical practices as broader skills are developed and, as a result the role of claims is closer to the heart of insurance.

There is work to be done around understanding the roles that claims can play in the insurance cycle but the cost efficiencies and better business practices, as well as the use of new technology, have contributed to enhance underwriting results. The momentum needs to be maintained if claims operations are to become central to the industry and, in turn, make it easier to attract and retain the right people.

Any changes in the current establishment will be incremental but positive, and they will support the directional shift to the heart of insurance. However, there remains a view that at some point there will be disruptive change and a revolutionised claims process will come through - we need to get this right for the long term.

The objectives of the research were to produce a high-level, strategic leadership report on the positioning of claims in the UK general insurance sector. The views of senior management and claims professionals in general insurance companies and the top 50 brokers were instrumental in determining the claims outlook.

The industry is responding to two questions: what are the key drivers for running an effective claims function for an insurance company; and does claims play an important part in delivering shareholder value?

Phase two is all about getting the quantitative research to evaluate the skills needed to support delivery of the optimum claims operation and, most importantly, ensure training meets the needs for tomorrow's skill set. There is a vital role for the FoC in ensuring the industry has a resource of properly trained individuals to play their part in leading claims forward.

Jonathan Clark is chairman of the Faculty of Claims.