Blog: The claims lessons to learn from Covid-19

When it comes to claims, timing and expertise is everything; from the first notification of loss and getting a loss adjuster on site who can assist with getting your client up and running as speedily as possible, to receiving the settlement that will compensate them for their losses.

Clients expect and should receive the right expert help, at the right time - when they need it most. That’s what good customer service and claims experience should be built on.

A couple of years ago, I wrote a blog for Insurance Age with the title ‘Demand a better claims experience for clients’. The spur for this piece came after we conducted a survey of UK SMEs asking about both their expectations of a claims service from insurers versus the actual experience. 

The survey ran two years after the FCA published its thematic review on the handling of SME claims and the overall poor perception of businesses’ experience of claims it found. Our survey revealed that little had changed and there remained a gap between SMEs’ expectations and the claims service they received.

Pressure
In the piece, I called on brokers to apply pressure to insurers to improve the claims experience for SME clients. Today that still feels like an appropriate call to action for the sake of the industry and the future relationship with clients.

Of course, we must be realistic here. If insurers haven’t already invested heavily in claims up to now, the current pressure on their balance sheets and the potential costs of covering Covid-19 losses does make it feel like it might not be on the cards anytime soon either. Here’s hoping that the pandemic and High Court business interruption judgment can drive a change that client criticism and regulatory scrutiny failed to do. But there’s still some way to go.

The criticism of certain insurers’ actions is something we should all be concerned about. In the end if clients who are facing economic shocks from coronavirus, believe the industry won’t support them, even if they have bought cover, the the insurance sector is in a dangerous position.

It should be no surprise then that in the minds of customers some products are just not worth the paper they are written on. They see insurers breaking their promises and then trying to wriggle out of paying . Fast and decisive action on the part of those insurers involved will be important for us all.

Business interruption – the lessons so far
The recent High Court judgement on BI coverage brings certainty for some but many others will still be seeking clarity about their policy coverage and claim validity and an appeals process is underway in some cases.

 While it is still too early to have definitive answers for clients across the whole BI coverage issue, we have identified some specific pointers for brokers to consider as they help their client navigate through the most effective way to transfer their business interruption risks.

Firstly, and at the heart of what will happen in response to the High Court judgment, ensure that there is an appropriate policy cover with relevant non-damage BI extensions in place with a reputable insurer who has a track record for meeting claims.  How insurers will respond will be a real marker in this regard, who wants to lose their reputation and then have a hard time rebuilding it?

Calculation
A second point would be to ensure that the sum insured has been correctly calculated for either gross revenue or gross profit. If gross profit, ensure that the sum insured is for insurable gross profit, not accountancy gross profit.

It is also important to ensure that the policy has an appropriate indemnity period of at least 24 months, 12 months is never adequate should a major loss occur.

Ensure that the policyholder business has up to date accounts and easily accessible financial information.

Finally, does the client have an appropriate disaster/business recovery plan in place which is regularly tested? Research conducted by Crises Control and the Continuity Forum has found that while a majority of SMEs had some form of business continuity planning in place, half of those have never tested them exposing them to a real risk of failure if they faced a real business disruption event.

A product fit for purpose
Throughout the pandemic, Lorega Solutions, our Chartered loss adjusting business, has been supporting many SMEs who have had their BI claims declined as well as many others trying to deal with the impact of losses from fires, theft and floods. Each has its own challenges; loss adjusting in lockdown has required a distinct set of solutions. In our own experience, the role of loss recovery insurance combined with access to Chartered loss adjusters working with the client and broker to prepare the claim, providing expert insight and guidance on coverage issues and preparation support, has, I believe, enabled brokers to demonstrate the importance of their role, and be on the side of their clients in the most challenging of times. But as importantly, at a time of uncertainty having an expert on your side can help bring some clarity.

With clients likely to raise questions over some policies in the future, we must not lose sight of the need to continue to respond to the evolving needs of clients with more relevant products.  While some clients may look to self-insurance, parametric or captive solutions for certainty, there will be many whose appetite and risk profile will be best served by more traditional methods of risk transfer.

By listening to brokers and their clients, we can ensure that products are fit for purpose and meet their needs. In our own experience, the evolution of loss recovery insurance into a portfolio of products and services that deliver expert help and support in claims and cyber security, points to why it has never been more important than now to listen to our brokers and clients.

Neill Johnstone is MD of Lorega

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