Better education, communication and wider use of claims protocols could help risk managers to shorten the claims process and reduce delays in payment.
Insurance only has value if the insured company can make a valid claim and receive payment in full, and in good time. But there is a perception among many risk managers that the claims process takes too long, and payments are often delayed, particularly with business interruption claims.
Part of this perception may be due a lack of understanding of the complexities of the claims process, says Jonathan Haysom, Claims Executive at JLT Specialty.
“Some risk managers, even at large organisations, may not have had a big claim before, so it can be an unknown entity for them.”
There isn’t enough knowledge or awareness, agrees Candy Holland, Managing Director at Echelon Claims Consultants. As a result, risk managers may have unrealistic expectations of the claims process, says Holland.
“Every claim goes through the same process – it will be investigated, quantified and validated by insurers before being paid. And you can get holdups at any point in that process. We help our clients understand what to expect as well as providing them with hands on support throughout the claim.”
There are a handful of slow payers in the market, however. And the experience of a slow payment can affect how risk managers then feel generally about the insurance market.
“Where risk managers state there is a problem with the market paying claims, it tends to be the odd example of where they have had a painful coverage situation,” says Patrick Harrington, Head of Construction Claims at JLT Specialty.
“They may not understand the claims process so it feels long, especially if there are major issues, or an investigation.”
The bigger the claim, the more closely the insurer is going to look at it, notes Carey Lynn, Partner at JLT Specialty.
“The claim will need to be escalated to more senior people within the insurer, the insurer will be under more pressure to go through the wording and make sure that they should be covering it, and sometimes this can take time and frustrate risk managers,” Lynn says.
“And with risks becoming more global, with different jurisdictions involved and documents in different languages, the process can take longer.”
And sometimes insured individuals within the company who have the benefit of the cover may not properly understand exactly what the policy is designed to do as they would not have been involved in the purchasing or negotiation, adds Lynn.
“For directors’ and officers’ liability insurance, for example, there are many individuals in a business that could come forward and claim on that policy, so we might not be dealing with a risk manager but with someone who may never have seen the policy previously and may not understand the intention of the cover,” says Lynn.
When risk managers consider insurers for their programmes, a lot want to know what the different insurers’ claims service is like.
Insurers are trying to differentiate themselves on claims, says Leo Dixon, Chief Operating Officer, Integra Technical Services. “They compete, in the first instance on price and when price has gone, insurers differentiate themselves via their claims proposition.
“In the last two years, in particular, a number of insurers have been either publishing their own claims commitments or signing up to Brokers’ claims promises, looking to ‘raise the bar’ in terms of their claims service, which must be good news for the Insureds.”
Insurers appear to be increasingly aware of the positive opportunity paying claims can present, says Jonathan Blackstaffe, Oil Rig Technical Lead at AIG.
“From a reputation point of view, it is much better for us to pay claims, and pay quickly. If there is a problem with a claim, it is my job as an insurer to explain that properly to a client and try to work with them to resolve the situation.
“It is important when dealing with a complicated issue that the insurer sits with the client to explain the procedure, enable both parties to outline the pressures they face and better understand each other, and try to resolve any issues.”
Role of the broker
The broker’s role is vital in the whole claims process. Above all, it is about trust and communication, and involves a continual education process, says Harrington.
“As we go through the life of the claim, we should use the opportunity wherever we can to talk to clients about the process, and lessons that can be learned from a bad claims experience.
“They may have their CFO putting pressure on them, and asking ‘Why isn’t this covered?’ We should helping the client to understand exactly what it is they should be saying internally, standing alongside them, with the CFO, explaining the issues, with the account executive,” says Harrington.
Part of the broker’s role is to ensure that clients get to know the carriers’ claims people as well as the underwriters, adds Harrington.
One of risk managers’ big challenges concerns the large amount of information necessary to verify their claim. Risk managers that are making a claim are generally in a difficult position in their business.
Following a loss, they will be desperately trying to focus on getting their business back up and running. While trying to restore their business’s operational capabilities, they are asked to provide an enormous amount of documentation to evidence their claim – which they can find overwhelming, says Holland.
“They do not have the manpower, they don’t understand what they are expected to do, so a large claim can easily create a log jam. The insurer and adjuster might want to move things along and progress the claim, but they may find it difficult because they don’t get the information from the policyholder that they need.
“That is where we come in and help the policyholder, by providing them with the resources and expertise to manage that process,” says Holland.
The broker should establish with the insurer from the outset specifically what coverage issues (if any) they may be looking at. And when it comes to information requests, says Lynn, the role of the broker “is to push back on irrelevant requests, and to only allow requests for information that are key to the coverage issues and the claims”.
Some industry figures consider the greater use of claims protocols to be one solution to avoid potential delays and holdups. Indeed, the chair of Airmic’s Claims Focus Group has said they would like them to be normal practice, rather than the exception.
Claims protocols can certainly help to smooth the claims process, but they are not particularly common, though some sectors are better than others at having them in place.
Because claims protocols are not that common, there isn’t a recognised template for what claims protocols should contain, says Felix Ukaegbu Partner at JLT Specialty. “They are done on an ad hoc basis and vary greatly. Clearly, they need to be tailored to an extent, but there are certain things that could be standardised for different classes of business, or size of client.
“More attention should be paid to how claims protocols are configured with policy wordings. We sometimes see an incongruity between what is set out in the framework of the protocol and what is expressly prescribed for in the policy wording, so more work needs to be done to make claims protocols fit for purpose,” Ukaegbu says.
This is another reason why claims teams and policy wording teams need to work together to ensure that the various insurance documents are aligned with one another and leave no room for ambiguity, Ukaegbu says.
When it comes to claims, the overall message is that there needs to be: better communication, better co-ordination, and a greater understanding from all sides of the issues and pressures involved.
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