The most successful businesses are those that can interpret the effect of external market changes and adapt the quickest. However the very nature of insurance is backward looking, considering probabilities based on what has happened before. So how do we as the insurance community keep continuously evolving, attempting to balance customer needs whilst managing costs and risk?
In the claims space I can see evolution coming in the form of increased collaboration between brokers and insurers. There are several significant drivers or threats on the insurer/broker horizon; the discount rate review and new legal measures for ‘whiplash’ reforms, reduced capacity through market exits and a hardening of the market in general.
In motor claims the broker FNOL model is well known. The broker benefits from branding the claims service as well as potential income from non-fault claims. It’s an approach which is common for brokers but can also be a cause of friction with their insurance providers.
For brokers, probably the biggest benefit they see from being involved in claims handling is the ability to provide a consistent, branded customer journey. Brokers work hard to ‘win’ the customer and at the point of claim it’s the broker’s brand that they want to be front and centre, the brand that is delivering for the customer.
Working with an outsourced provider can be the answer as the broker has access to the providers economies of scale to deliver advantages such as 24/7 operation however this can’t be a trade off with achieving a customised service which supports the objectives of the broker, and also the insurer sitting behind them.
An unquantified FNOL provider engaging in the claims process could be regarded as a threat for the insurer, especially where there is a lack of transparency. Poor claims management for the insurer drives up costs. Where notification of a claim is delayed or missing reserving will be inaccurate, allowing the claim to move outside of the insurer’s network can drive up costs where work is done outside of agreed terms. These factors, without control, pose significant financial risks, which ultimately materialise in rate to the broker.
From the brokers perspective, a lack of claims control is definitely to be avoided, for a number of reasons, including of course the ability to secure lower premiums from the insurer, as well as increasing renewal prospects from a positive customer experience. Another risk for brokers which the squeeze on capacity has brought in to focus is the ability to find and retain access to niche underwriters. If the underwriter has concerns about the claims control this could easily lead to a withdrawal of the agency.
So what does this mean for collaboration?
I see significant benefit in outsourced providers working harder to align the interests of both insurers and brokers. At best, this can be a triparty relationship where a claims management company holds a pivotal role, working on behalf of the broker to meet their requirements whilst also engaging with that brokers insurers and their own claims process needs.
This probably seems obvious but it’s surprising not really common practise. Yes of course any broker relationship will mean associated insurer contact but that doesn’t mean it’s collaboration and that all three parties are working together to solve problems, drive efficiencies and a better outcome for the policyholder.
There is a big picture vision needed to see all of the benefits of a more aligned broker/insurer claims model. Relationships, trust and understanding take time to build and maybe take months or years to come to fruition. This strategy may not drive the maximum income in the short term for the broker/claims provider but a bigger advantage at a future time. These future benefits may be harder to measure but it’s absolutely the right way to operate.
Balance is an important word in this vision. A non fault claim presents the opportunity for an outsourced provider to generate income for their broker partner, however too strong a focus on achieving just this revenue alone can misallocate claims causing a range of problems, the claim is delayed, the cost for the insurer rises and the customer journey is poor. Those final few non fault claims squeezed from setting the bar too high are usually not worth the damage caused in the broker/insurer relationship.
The individual businesses and people within each relationship create different dynamics and that can be another barrier to this more holistic triparty claims approach. The business structure and background, how it makes decisions, where it is heading – all drive different behaviours, and that’s the same for claim management providers, brokers and insurers, so it’s quite complex. I have spoken to Claims Directors at MGAs where managing the capacity provider, and their loss ratio, is absolutely top of the tree. They won’t work with brokers who are slow to report claims, it’s just too big a risk for them.
Big picture benefits from collaboration:
I’m sure all claims providers would agree that long term relationships are essential in order to build great services for our partners and their customers. I don’t think this is possible if real, three way, broker, claims partner and insurer collaboration isn’t taking place as business as usual. I see this as a central aspect of the role we perform for brokers – to protect their insurer relationship, or perhaps boldly to say, to enhance it!
Just a small improvement in the loss ratio can make a difference for the insurer behind the broker. That small improvement is driven out of lots of factors – from accurate assessment of liability, understanding the information capture requirements of the insurer and getting the claim information out immediately, giving accurate information to customers and working proactively to resolve their claim, all drive this bigger picture, holistic claims performance.