Claims handling, with care

As with all business relationships, it is a mutual understanding of the needs of each business and perspectives that form the basis of all dealings. In this regard, the pre-appointment - usually by way of agreed nomination with the carrier concerned - of a loss adjuster can be hugely beneficial.

For this relationship to work, it is important that the adjusters get to know the broker and gain their confidence in their ability to deliver a quality service. Once that confidence has been gained, access to their valued client and subsequent formal nomination with an insurer are more easily achieved.

Client nomination

The principle of nominations is relatively straightforward and it is important that adjusters work with the broker and their client to establish what action needs to be taken to ensure that, should a claim occur, all parties are prepared and everyone has an understanding of each other's perspective. This relationship building at nomination stage is extremely important as it enables the parties to leapfrog some of the initial 'posturing' that inevitably arises whenever a claim occurs and that first meeting takes place.

Until relatively recently, brokers did not wish to become involved in claims but, as claims have become larger, more complex and, often, associated with profit share issues with the carrier, brokers have been more keen to be active in the claims process. Fundamentally, the broker has sold his customer the ability to deal with claims promptly, efficiently and professionally and he needs to work with all parties concerned to ensure that this happens.

This is the true test of the product they sell as an intermediary. Certainly, in the commercial lines sector, adjusters are now perceived as offering added value at no cost and many brokers see the benefit of seeking closer relations with specific adjusters. Nevertheless, there are still some brokers who have no wish to be involved in the claims process and still perceive adjusters as unnecessarily confrontational.

Gradually, we have seen that this perception is changing and this can only be good for the whole of the claims industry.

With insurer/adjuster panels being reassessed on a regular basis, the issue of client nominations via brokers continues to cause some concerns.

However, almost without exception, the carriers now accept the benefits of these nominations and will now agree them on a regular basis.

To understand the mechanics of a nomination, a simple example is the best illustration. The broker receives a call on a Saturday morning advising of a serious fire at one of his client's factories. The broker has direct access to the appropriate account manager at an adjuster and, after making contact with the account manager, possibly via a 24-hour emergency telephone number, the account manager can mobilise a team of people within hours to deal with the impact of the loss. The lead adjuster that arrives on site will hold the insured's hand and ensure that all matters are dealt with promptly.

The adjuster will - again, through the account manager - be aware of the insured's business, their key personnel and the need to involve the insured's brokers. The adjuster appointed as team leader will also have access to in-house accountants, building and engineering specialists, lawyers and suppliers and any of these can be utilised at short notice.

Ultimately, adjusters are there to see that the insured is put back into a full trading position as soon as possible, enjoying the maximum benefit of the policy cover available in the process.

The new 'virtual insurers' - those who front underwriting houses for syndicates - are very keen on the concept of broker-led nominations. The nature of their very close relationships with their 'selected' brokers extends to the claims functions and they have very clearly identified that a nominated adjuster really does bring benefit to all.

The client is comforted in that the adjuster understands their business.

The broker is comforted in that the adjuster will not be unduly confrontational with their client and the virtual insurer accepts that the adjuster will report to them in good faith and work with them to help achieve a wholly appropriate end-result. All together, this must - in the long term at the very least - mean business retention for the insurer and the broker.

GAB Robins continues to seek brokers' influence with insurers on adjusting nominations and looks to build partnerships with brokers and their clients.

This is in the full knowledge that good service delivery will - by word of mouth - be likely to not only result in the sponsorship of the firm's services, but also the maintenance and growth of the broker's own business.

Third-party claims handling

Third-party administration provides back-office claims handling facilities to the insurance market and is utilised by corporates, insurance companies and brokers. Contracts with corporate clients are often within their own very large retentions or, where those retentions are more modest, via nominations to the insurer carriers themselves.

Contracts with insurers are very much on a complete outsource basis where insurers do not have their own volume in-house function and seek to outsource this volume work to third-party administration operations. Services supplied are very often on a branded basis so that the claims handling experienced by the policyholder is seamless.

The third source of business is from the broker market. This itself falls into two very distinct categories. Firstly, nominations on bulk claims for broker clients and, secondly, through complete outsource of brokers' own claims operations.

While many corporate clients place their business via the large broking houses, their risk managers or insurance divisions are sufficiently large, experienced and qualified, that they are more than comfortable in managing their own claims function.

Other corporate clients that lack those abilities seek guidance from their brokers about claims management companies and many clients are gained through these broker channels. The contracts placed are extremely rigid and are tied to strict service standards and key performance indicators.

In recent months there has been a growth in the number of approaches from broking houses to provide a complete outsourced version of their own existing claims departments. Although not exclusively so, many of the brokers' claims departments provide little more than a 'postbox' service for their clients. Others, possibly with delegated authorities on claims have a greater technical expertise but are, nevertheless, still conscious of the burden of costs of such an in-sourced department. Consequently, many brokers are reviewing these operations in isolation and are looking at alternative solutions via outsourcing and third-party administration companies.

There are real opportunities around pure claims administration and technical claims handling for brokers. The real drawback relates to systems access, given the plethora of computer systems used by brokers. The range and ability of systems covers the spectrum but, to a greater or lesser degree, they all have a single common function - the ability to access and read client information. It is the third-party administration company's ability to interrogate these systems remotely that is often the most significant stumbling block when considering outsourcing.

Schemes management

With a dramatic increase in housing stock being transferred from local authorities to housing associations and right-to-buy schemes, coupled with no suitable tailored claims service, it was realised that the market needed low-cost claims handling.

Many adjusters provide small-scale ad-hoc services for this sector but research reveals that there was a growing niche market to be explored.

Brokers are looking for a large-scale service, combing desk handling and field adjusting. Services also needed to provide a focus on data processing, administration, technical support, pre-agreed audits and annual audits.

Conclusion

While brokers are presently caught up in the maelstrom of Financial Services Authority compliance, there will come a time - whether driven by compliance or cost - that they will have to review their claims operations. Whatever the brokers own or, indeed, whatever the needs of their client are, there are now a huge range of services available. With the ability to tailor these services at relatively modest expense, certainly compared to the 'in-source' option, there will inevitably be a greater move towards claims management and outsourcing.