The big claims shake-up

12 September 2018

The London Market has agreed a historic deal in how it pays claims.

London Market insurers and brokers have agreed a landmark deal to fast-track approval of lower value, straightforward claims, in a move that will help London to better compete with other underwriting centres around the world.

The new deal, known as the Single Claims Agreement Party (SCAP), will simplify the process by giving the lead insurer sole responsibility for handling claims below £250,000.

The change could dramatically reduce the time it takes to resolve these claims. Previously, Lloyd’s and the company market had different approaches to paying claims: while Lloyd’s insurers followed the Lloyd’s leader decision, each company insurer on a policy needed to agree to pay a claim before it could be settled.

“SCAP will make London’s claims process much more efficient and give clients the reassurance of knowing how quickly their claims will get paid,” says Keith Root, Chief Operations Officer, Claims at JLT Specialty.

The scheme will cover most claims in future, as around 80 per cent of London Market claims are expected to fall within the £250,000 threshold, says Tim Lovick, Lloyd’s Senior Project Manager for claims.

The new process is a milestone as it is the first time that Lloyd’s and company market insurers have agreed to abide by the decision of one leader on whether to pay out on a policy. Lovick calls it a “quantum leap for London Market insurers”, which have in the past reserved judgement on paying claims.

Although voluntary, it is hoped that SCAP will become commonplace in every policy.

“Our long-term expectation is that it will be in every policy,” says Root.

“All of the leading insurers we’ve had meetings with have told us they see no reason why it shouldn’t be included as standard,” adds Root.

“The London Market understands it has to remain relevant in a competitive global industry,” says David Miller, Chief Regional Claims Officer – International at XL Catlin. “SCAP will help us do that.”

SCAP to bring cost and time savings

As well as cutting the time it takes to handle simple claims, SCAP could lead to substantial cost savings for the London Market and enable insurers and brokers to focus their attention on more difficult claims.

SCAP’s first objective, says Miller, is for it to be widely adopted within the London Market. “There are lots of insurers here, each of which wants to be seen as being different. But, at the same time, we all recognise how important it is for London to succeed. We are likely to see some tweaks as the process beds in, but I think the market will quickly come to a landing on how best to use it.”

Once SCAP has been taken on, Root hopes it can soon be extended. “It would really benefit clients if it could be added to existing policies with outstanding claims.”

Increasing SCAP’s threshold above £250,000 could also be on the cards.

The Lloyd’s Claims Scheme, which was the template for SCAP, might offer a blueprint for how the new claims agreement could be implemented. It was originally rolled out on new policies before being gradually extended to every class of insurance and then applied to existing policies.

Lovick says: “We wanted to start this gradually, so companies can become familiar with the concept and comfortable with the lead insurers. Once we have that, we could then begin discussions (on whether to broaden it).”

Applying SCAP to existing policies would require further analysis, Lovick says. “The last thing we want to do is to slow down existing claims by applying this new process to them all.”

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Leading insurers

SCAP will make it important to select a lead insurer that has the same level of know-how in handling claims as it does in underwriting risks.

“Those insurers that want to be seen as leaders will have to inspire sufficient trust among other carriers that they will cede to their judgement on whether to pay claims,” says Richard Gurney, Head of Claims at JLT Specialty.

“There is now a more significant risk for some aspiring lead markets that their claims handling ability may mitigate against them taking a lead line on a risk if brokers cannot find supporting follow markets.”

Miller says: “XL Catlin takes its responsibilities as lead very seriously and we’d like to think that SCAP might encourage a flight to quality for which carriers are chosen to lead.”

Selecting the right leader is one of the most important decisions a broker must make on behalf of their clients, and JLT benchmarks London Market insurers according to data gathered on the claims they handle as well as the feedback from JLT’s account handlers, who deal with these companies every day.

“We choose leaders that deal with claims quickly but are also open and honest about their decisions,” says Root.

SCAP is a part of London’s programme of modernisation: “It’s a great example of how we can achieve pretty significant things if we put our minds to it,” says Lovick.

Miller agrees, adding: “It would be good if this were the start of a new collaborative approach to solving some complex issues in this market.”

SCAP, says JLT’s Gurney, is an important step in making London more competitive. “London has always been known for its world- class insurance expertise. SCAP means that that is now coupled with a world-class claims process.”

For more information, please contact ClientFirst@jltcanada.com.

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