The Intelligent Quarterly from the publishers of The Insurance Insider

Summer 2018

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Reflecting on claims

Sarah Newman

Sometimes we can get so wrapped up in the internal workings of the spectacular machine that is the Lloyd's insurance market that we forget how we appear to those outside this specialist global hub - or even to those on its periphery.

Simple market-led mechanisms such as premium price hardening in the wake of catastrophic events can easily be interpreted by the wider world as unfair, even underhand, machinations - just another insurance complot designed cynically to kick those that are down, and price the uninsured out of the market.

The industry also suffers from the perception in the public consciousness that complex wordings and exclusions are designed to impede claims payments.

The suspicion is that insurers will either point to the small print and refuse to pay a claim, or drag their feet and pay valid claims only belatedly and reluctantly.

This perception is not improved by the fact that, earlier this year, a new law came into force in the UK, under the Enterprise Act granting insureds the right to claim damages if undisputed claims are paid late. The law, which applies to all (re)insurance contracts, stipulates payment within a "reasonable time" - the first time that the issue of late claims payments had been tackled with penalties in this way.

The fact that this law was deemed necessary says a lot about the industry's track record.

A claim is a promise
Swift payment of all valid claims should be the central role of any insurance business - lose focus on this and you risk damaging not only your own business's reputation, but that of the whole industry. It's an issue of trust, which isn't helped when claims disputes (such as Kanye West's ongoing tussle with Lloyd's over a tour cancellation) hit mainstream headlines around the world.

Rightly or wrongly, news that a claim is being disputed will inevitably feed public perceptions about the industry.

It's time to hold a mirror up to this market. We all need to work harder to make sure valid claims are paid swiftly and efficiently.

Take the coverholder model, for instance. Coverholders are a proven and successful way of placing business with Lloyd's, offering benefits to each of the parties involved and increasing the volume of business, from the US and Canada in particular, flowing into Lloyd's.

But in the past Lloyd's coverholders have complained of cumbersome and onerous processes for extracting claims from the market. These include inefficiencies and delays connected with duplication, regulatory compliance, use of multiple platforms, and an overall lack of transparency and accountability.

Mirror on the market
Delays in paying claims can obviously have a reputational impact on a coverholder in its domestic market.

A Canadian coverholder we work with voiced the views and experiences of many, telling us that Lloyd's generally responds slower than subscribing domestic markets, regularly leading to a situation where they have funds from every other market to settle a loss, except Lloyd's.

This is not aided by some of the existing systems and processes that we continue to persevere with, which ultimately create something of a bottleneck for business.

Our clients are calling on the London market to empower coverholders and provide them with resources to propel the Lloyd's brand into a position of high esteem; rather than the current situation of coverholders having to explain delays due to an old-fashioned business model or process.

Challenges also persist relating to ever-increasing compliance and regulations, which require Lloyd's coverholders to spend an inordinate amount of work and time implementing procedures necessary to satisfy Lloyd's requirements and pass audits.

Of course, there are clear benefits to being a Lloyd's coverholder, not least the fact that it provides access to a flexible business model that allows them to secure business within the broker channel, which other non-coverholder domestic rivals may not have access to.

However, the current issue of Brexit should bring challenges like slow claims payments to international coverholders into even sharper relief.

Now, more than ever, the London market must protect and increase its competitive edge in the international market or risk coverholders simply getting fed up and refocusing elsewhere.

New technology
Work to streamline London market claims payments is progressing of course, and it has been for years. For instance, the London Market Association says it is undertaking some "exploratory work looking into the feasibility" of introducing automated learning/robotics technology.

These are carefully chosen words, but clearly there is promise here: such technology has the potential to support and enhance the roles of claims handlers and managers.

However, delegated authority claims must be handled more efficiently right now in order to prevent loss of business. Systems are needed today, yesterday even, that empower coverholders to more effectively exercise the authority given to them.

It is essential that new systems enhance the notification and communication of claims during the life cycle, improving the message and notification to brokers and customers.

We also firmly believe brokers have a role to play, but it's not the one they've been playing in bygone years. With increasing costs, compliance restrictions and actuaries scrutinising business plans, it is inevitable that the basis for remuneration and how that is apportioned will be reviewed. There is pressure on brokers, in particular, to demonstrate that the role they are undertaking adds value to the process.

For this reason, the model that we have embraced provides a single, unified platform that allows coverholders, brokers and the market to keep sight of claims with complete transparency.

All information is stored in one central location, whilst providing the capability to interface with market systems such as Lineage and ECF, and other parties' internal systems. Crucially, Endeavour clients can use the system free of charge.

There are other models out there too, of course, and ultimately the entire market needs to work together to cut out inefficiencies in claims processing.

This in turn would allow valuable resources to be refocused and redistributed to client-facing work, improving both the client experience and the experience of the claims handler, whose job would become more dynamic since they would no longer need to laboriously re-enter data for claim after claim while slowly slumping their head against their keyboard.

Retaining claims talent
Making the claims process more efficient - and the job more absorbing - could even improve staff retention. There is a large pool of talent in the claims community, but we risk seeing more and more claims professionals leave the market unless we modernise, and this means supporting them with the tools and technology that allow them to swiftly deliver what insureds were promised.

Lloyd's success has been built on its reputation for paying all valid claims. The aftermath of the 1906 San Francisco earthquake is testament to this.

In fact, to many clients, the claims service is one of the most influential factors when choosing a product from a (re)insurer.

We simply don't have time to wait for more months and years of testing - delays in paying valid coverholder claims are reflecting poorly on the market today.

Sarah Newman is support services director at Endeavour Insurance Services.

This article was published as part of issue Winter 2017

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