JLT Specialty’s unique research into insurers’ claims performance has helped improve standards across markets over the last seven years. This article looks at how this has resulted in better value and service for clients.
With insurers finding it increasingly difficult to differentiate on price and cover, claims performance has become a greater source of competitive advantage.
Michael Costonis, a Senior Managing Director at Accenture, has been studying insurance claims performance since the 1990s. He believes that the claims service tests an insurance company’s ability to delight – or disappoint – its customers.
“Customers think of insurance as a costly product with limited utility – until a time of crisis – and they have intense service expectations,” says Costonis. “So the efficiency and consideration demonstrated by claims professionals has a significant effect on customer satisfaction.”
Formalising claims performance feedback
Richard Gurney, Head of Claims at JLT Specialty, realised that customers would benefit if the company could provide structured feedback on the performance of the claims market.
“Back in 2009, our intention was to circulate our analysis internally, so that insurers could be selected on the basis of claims capability,” he says.
“Prior to that, feedback on claims performance was anecdotal and ad hoc. So if a broker had a negative experience of an insurer, that perception might stick, even if the insurer later improved its claims performance.”
JLT’s claims benchmarking exercise is conducted among almost 100 claims handlers. We ask each handler to rate the insurers they deal with based on five key criteria:
- Responsiveness – typical turnaround times, including speed of payment and response to enquiries and submissions
- Service delivery – how the insurer runs and resources its claims service (internally and outsourced, if applicable) and how this translates into the level of service received
- Ability – the technical competence of the insurer’s claims handlers
- Relationships with the insurer’s claims handlers – how easy/difficult it is to interact with the right people at the right level within each insurer
- Behaviour – the claims handlers’ approach, profile with the client, appointment of third party experts, etc.
Each of the five elements is rated on a sliding scale, from ‘very positive’ to ‘uncommercial’ to produce a scorecard for each market. We then use the scorecard to create a league table of performance.
“Our analysis is sometimes shared with clients, as well as being circulated internally, and we’re increasingly sharing key results with strategic partners,” explains Gurney. “We can show insurers how they compare to their peers in an area where they’re looking to differentiate themselves.”
Other brokers carry out similar exercises, but JLT believes its analysis stands out for several reasons:
- it mixes qualitative and quantitative indices
- answers are not moderated
- the company doesn’t publish the report publically
- the data is not sold
How benchmarking helps improve claims performance
The report is shared with the executive committees of each division within JLT. This means our market-facing brokers are fully informed on the relative claims performance of the underwriters they are seeing.
“This prompts a conversation on factors other than price and breadth of cover, and highlights any disparity between a frequently used market and the quality of its claims service,” says Keith Root, Operations Manager at JLT Specialty.
He explains that insurers view the quality of their claims service as a means of standing out from their competitors.
“The individual insurer reports show each carrier, anonymised against its competitors, at class level,” he says. “Insurers are keen to make sure that if they’re not near the top, they understand why, and can try to improve in the future.”
JLT Specialty Claims Executive Jon Haysom notes that some insurers respond well to major claims, but can be less efficient at handling small losses.
He’s confident that the benchmarking has focused insurers’ minds on general claims, which can be a source of considerable irritation for clients when not handled efficiently.
“One of the most valuable aspects of our study is that it reflects how insurers respond to clients’ demands for a rapid response,” says Haysom. “They’re looking for a quick decision on whether the policy is going to engage."
The JLT scorecard also considers the performance of third party experts – such as loss adjusters and lawyers – that all carriers tend to employ. As they are often ‘the face’ of the claims response, they will directly impact the overall quality of the insurer’s service.
Why claims performance gives insurers a competitive edge
Specialty insurance generates complex risks and claims, so JLT assesses insurer commerciality in terms of how they highlight and deal with potential issues.
Haysom says that the results of the benchmarking exercise are taken very seriously.
“My CEO demands an explanation for why we’re using insurers that receive low ratings,” he says. “We removed one insurer from renewal this year due to its unsatisfactory claims behaviour. We’ve also used the results to identify insurers who are more suitable for use in the excess layer, rather than for primary cover.”
Ultimately, the benchmarking exercise assesses insurers’ willingness to pay. It’s unique among brokers in the way it connects the front and back end of the transaction, says Hamish Roberts, Business Development Director at JLT Specialty.
“When we place business with an insurer, the individual we use to negotiate the transaction is not the person who settles the claims,” says Roberts. “This avoids any conflict of interest between underwriting and claims management. The subjective aspect of our research adds value – it is not just about numbers, it is about attitudes to claims.”
Roberts notes that JLT Specialty is scaling back its business with insurers who are poor at paying claims, even if they’re competitive when quoting for risk.
“Insurers are keen to see how they compare to their peers, and we bring the findings into conversations with carriers whose performance needs to improve,” he continues.
“Sales teams realise that poor claims performance affects their ability to win business, so we see increased interaction between sales teams and underwriters.”
How to improve claims performance
It’s often said that claims handling is the shop window of the insurance world. In JLT Specialty’s experience, clients and markets both realise how important claims performance is to them as buyers and sellers within the industry.
Nicola Parton, Head of Claims at Swiss Re Corporate Solutions, stresses that feedback from the benchmarking signals whether her company is on the right course, and whether its clients and their brokers feel it is meeting its claims commitment.
“And more importantly, it inspires our claims team to keep raising the bar,” she affirms.
Parton explains that Swiss Re Corporate Solutions launched its claims commitment three years ago, in the belief that claims service excellence is a key differentiator.
“We emphasise the fact that how a claim is handled is as important as its outcome,” she explains. “For us, it’s been a return to focusing on relationships and personal connections, which had been overlooked in recent years.
“That could be as simple as never sending a general reservation of rights, or picking up the phone and arranging a meeting to work through issues directly. It’s been gratifying to hear that JLT has noticed this, and has credited us with making this turnaround.”
JLT’s Gurney is confident that the company’s benchmarking strikes a balance between quantitative, analytics-based measurement and qualitative service analysis.
He says: “Some clients will always be transactional buyers, but those with significant claims experience are increasingly interested in claims performance when selecting markets.
“The most enlightened insurers recognise that it’s not just their own teams who must behave in the right way, it’s the service providers they use too.”
The prospect of reinventing the claims function may seem daunting to insurers, given its role in determining profitability and the constantly evolving demands placed on it. But the rewards can far exceed the time and resources invested in transformation.
A claims operation with world-class people, processes and technology will be much better equipped to deliver excellent customer service, and retain business over the long term.
Above all, we do not want to expose our clients to insurers who don’t pay claims.
For further information, please contact Richard Gurney, Head of Claims on +44 20 7558 3880 or email email@example.com
YOU MAY ALSO BE INTERESTED IN