Being cruel to be kind

We’ve just ended another of the wettest years on record and, if you’re an insurer, one of the most expensive. Aside from the recent floods, injury inflation is soaring, we’re being clobbered by claims farming and credit hire, and we’re struggling with a boom in fraudulent claims as the recession maintains its stranglehold. The car insurance market alone has burned over £1bn of capital.

So you’ll forgive me for thinking that it must be 1 April when I read some headlines about insurers trying to pay out less in a recession or possibly looking to avoid their obligations to honest policyholders. Not only is this untrue, it is perhaps rather discourteous to insurers, who were heavily under the cosh for most of 2009.

I can see little real evidence to back up the suggestion that we’re looking to wriggle out of claims. Indeed, for all the reasons I have mentioned, everything that I encounter seems to illustrate the complete opposite.

An industry commitment to high levels of customer service remains, the numbers of complaints are still low and those that are found against insurers still account for a tiny proportion of the policies we sell. Now, I’m not naïve enough to suggest that insurers don’t create their own problems from time to time, but it’s surely a bit of an urban myth that insurers are poor at paying out?

Take private car claims for example: the motor market has probably made money in just two of the past 20-odd years, while independent market surveys suggest that levels of customer satisfaction regularly approach 90%. Is this evidence of insurers looking to avoid paying claims, because I really can’t see it.

It is true that the industry is cracking down on fraud. But this is not side-stepping our obligations; rather, it is ensuring we live up to our customer promise. Why should honest policyholders pay £40 more in annual premiums just to meet the cost of fraudulent claims? Part of our job is to keep these costs down and this helps keep premiums low too. Surely this is good news for customers.

We are fast becoming one of the most regulated insurance industries in the world. The FSA’s treating customers fairly initiative is by no means a toothless tiger. If there was even the faintest whiff of our making things more difficult for customers, we would all be hearing about it.

I’m pretty sure that partner brokers would be letting us know too if there is any suggestion that we are reducing claims for no good reason. The process of negotiation is part and parcel of ensuring that a reasonable and proper settlement is agreed. This is entirely different to intentionally offering less to reduce claims payments, however.

Brokers have a key role to play at the claims stage and it always surprises me that many do not get more involved. Where they do, they perform a great job in ensuring a fair deal, quickly and efficiently. Brokers are skilled at trimming premiums, so why not help with managing claims costs too? Clients will ultimately feel the benefit with cheaper premiums.

One final, important point. The insurance business continues to be a convenient punch bag for media commentators who love to give our reputation a real bashing. There are already plenty of outsiders happy to take such pot shots, so please let’s avoid providing the ammunition. IT