Following the Business Interruption claims debacle the latest buzzword in the industry is ‘Transparency’. There is belated recognition that policy wording, pricing practices, and underwriting criteria are all in need of an overhaul if we are to have any hope of regaining some of the customer trust we have lost in recent months.
But what of the claims department?
How will we respond to these new demands and what will the consequences be for our core values, operations, and customer management? It seems to me that there are 3 key pillars of thought and action that will need to be adopted in the claims department of the future.
There is much mistaken talk in our industry about claims being the ‘Moment of Truth.’ This is supposedly the point at which the policyholder can finally see and feel what they have bought. The service interactions delivered by claims handlers, suppliers, and a host of associated characters will speak volumes about the business and how it works.
But consider this.
Would you rather have a dreadful service and receive a settlement from your policy, or a great service and be denied coverage? We can be quite sure from the BI shenanigans that what the customer wants and expects is ‘value’.
It is not the Moment of Truth that the claims department delivers (of which there are many, and most of them occurring outside of the claims function) but the Moment of Value. The point at which the policyholder receives what they really want and need – or is disappointed and frustrated. The claims department may well contribute to the ‘Truth’ of the matter, but their real job is to provide the policyholder with ‘Value’ – or not.
Of course, ‘Value’ is not merely the paying out of vast sums of money at the behest of policyholders.
There are other factors that affect the perception of value. Service provision and the impact of claims on renewal pricing to name just two. However, let us be clear in our own minds that if we are truly committed to a new concept of transparency then the first guiding principle on how we should position the claims function must be to understand our customers real needs. To my mind, their primary concern when making a claim is to test the financial value being offered for the premiums paid.
Our obligation is not to provide a largely operational ‘Moment of Truth’ but a core and underlying ‘Moment of Value’.
As we develop and sell policies, design TV adverts to persuade the masses, make promises to allcomers and (supposedly) price our goods fairly and transparently, we are constantly faced with choices. Sometimes difficult choices.
Every marketer worth their salt knows how to hide the real truth about what we do and what we are selling. As we speak, I’m sure pricing gurus are busy working out how to get around the new strictures demanded by the FCA. Comparison websites that were supposedly heralding a new era of consumer power are fined millions of pounds by regulators for practices that achieved the exact opposite of what they promised.
In the often cutthroat and competitive world of insurance there is much to lament about what we do and how we do it. But all is not lost.
The C-Suite Claims Directors and their supporting teams have a duty, it seems to me, to act as the inner conscience of the insurance industry. Many of the problems that arise from poor policy wording, underhand exemptions, and confusing sales practices will eventually land at our door when a claim is made. It’s not in the sales, underwriting, or actuarial departments where the frustration and disappointment of policyholders will be felt – it is in claims. If we take the hit, then it is surely it is our role to be the Jiminy Cricket of the insurance world.
In other words, we will counsel caution where others may seek to cross the invisible line of integrity. We will demand massive investment in claims technology as we seek to forcefully represent customer desires for progress and development in service delivery. We will make sure that true consumer power lies with us – the claims department. We will bring the customer into the boardroom.
Claims as the Conscience of Choice will help us to deliver better standards for the industry and, of course, for our customers.
When I last looked the seemingly never-ending world of Insurtech investment had committed just 7% of its money to the claims arena. Rumour has it that the tide may be shifting towards the ‘back end’ of the insurance eco-system but, in truth, there is a long way to go.
Moreover, for so long as claims is seen as a cost centre by the C-Suite of executive decision makers then progress will be slow. And whilst it is certainly true that most of the money that flows out of an insurer goes through the claims function we are simply seeking to fulfil the sometimes grandiose promises made by the slick sales and product design departments.
However, this responsibility for managing these outflows should make us the prime candidate for innovation and investment.
Claims is not a cost centre. It is merely the manager of transfer payments from one group of people (the policyholders) to another group of people (the claimants). Given the sums of money involved, that management process is deserving of a new approach built on best use of technology, behavioural science application, and offering customers real choice. Equally, as we fulfil indemnity spend demands we have a responsibility to drive ever better ways of meeting the legitimate needs of our customers. ‘Saving money’ is not a suitable lifestyle choice for the claims department.
Instead Claims as the Big Innovator should characterise our development in the coming years. Now it’s our turn!
As we battle to control rising indemnity spend across many lines of business, meet the demands of our C-suite masters, and adapt to radically different methods of working, we can lose sight of our core foundations. The claims department lives and breathes the problems – and the opportunities – of being at the coalface of policyholder rights. Our contribution to corporate profitability is matched only by the sales department. Our commitment to workforce development is second to none in the insurance arena.
Claims as the Moment of Value, the Conscience of Choice, and as the Big Innovator are the core foundations on which we can start to rebuild the trust and support of our policyholders. Goodness knows – we need it!