Flooding Question Time - Setting the benchmark

See also: Flooding Question Time: 2008

The issue of benchmarking service for insurance companies during a crisis like the summer’s floods was a contested theme in the Insurance Times flooding debate at the City Presentation Centre in London last month. A selected panel of experts exchanged views with specialists from the floor.

Nigel Parker, director of Harris Claims, said it was an ideal time to see how insurers progressed with clients on a benchmarking basis.

He said: “It would appear the industry is patting itself on the back in terms of its response on the claims side.

“But in view of some of the comments being made by the Association of Insurers and Risk Management (AIRMIC), in terms of more transparency in claims handling, what is the chance of the ABI and individual companies publishing the figures on their response to the flood situation?”

Before Swenja Surminski, policy adviser on climate change from the ABI, could answer, she wanted clarification on the issue. Parker was happy to oblige.

He said: “The industry feels that they have handled the situation pretty well. But I guess there will be variations between companies in terms of how well they have responded.

“I believe there has been quite a bit of pressure suggesting that, to allow policyholders to decide between insurers in terms other than premium cost – maybe response to claims – it would be a good idea to publish some statistics in terms of how well each company has responded to this?”

But Surminski asked how would a response be adequately measured? Parker replied: “It might be speed of response, claims repudiated or adjustments because of underinsurance.

“There is insufficient information given to the public, to policyholders in general so that they can differentiate between companies in terms of service rather than purely premium. I know this is an issue with AIRMIC. It has come up quite a bit recently and they want more transparency in terms of claims handling.”

Surminski said she understood the background to this question, before replying: “I would say you are looking for benchmarks according to response levels and I just cannot envisage how the ABI would do this. The data that we have provided so far is a summary of the total cost based on the feedback we get from member companies.

“In terms of giving you rankings, I just do not see how the ABI would be able to provide them. In the competitive market I guess we consider this is down to our members.”

Parker responded: “You cannot or will not? I would argue that the basis for benchmarking could be produced and there is now pressure to produce it.”

Alan Gairns, development manager of property underwriting at Royal & SunAlliance, put forward an individual insurer perspective. His view was that it would be difficult to create a proper benchmarking process.

“I am not convinced about the value of the information in some respects. I suppose the response times could vary on the event. You might not be able to get there as quickly as you would in normal circumstances, purely because of the volume of claims that are there.

“At the other end, I guess, from my own company’s point of view, we would not really have any misgivings about publishing the information if that was the way the industry went. Claims service is the basis on which we sell our products.

“I do believe we respond exceptionally well to not only getting to customers, but also delivering service and treating them fairly within the policy cover. I do not think we have anything to hide in that respect, but, at the end of the day, I am not sure that would actually help a consumer make a better judgement on whether they want to go with one company or another.”

However, Jonathan Samuelson, also a director at the Harris Claims Group, argued that it would help. “I believe that Royal and Sun Alliance, certainly in these floods, have been exemplary in how they have behaved, but that is not the case for all insurers.

“I would have thought there is almost an incentive for you to let everyone know that you have a very robust claims systems and it works, even when put under extreme pressure. I know there are several other insurers who would not measure up on that basis.

“From a policy holder’s perspective, how the claim is dealt with is the acid test of their cover; how well is the promise kept. I do not think all insurers would wish that to be exposed.”

James Every from Hydro-Dynamics said that benchmarking was a good idea. “I represent part of the restoration community. I totally agree with this. We do need benchmarking. We offer key performance indicators (KPIs). We are often asked for KPIs and we deliver them every time.

“We have total measurement of what we do. We know when we arrive and how long it is since we have been called. We give the information back to the insurance company about when the claim happened, when the insurer was advised of the claim, when we turned up, how long the drying takes and all of the features to do with that information. Our actual invoices are fully worked through.

“We have itemisation for every line that we deliver. I cannot see how it is that difficult for the insurers not to use that information to impose KPIs that they then can give back to their policyholders as a block figure.”

But David Fitzgerald from Navigators, Syndicate 1221, was less sure. “I think that question is really difficult. Benchmarking could be done and it would not be difficult for insurers to state what kind of percentage of claims they settle in 30 days or a benchmarked period, but when it comes to catastrophe it is so much more difficult to fit within a benchmark.

“Obviously everyone gets stretched and you cannot expect repairers to keep a warehouse full of drying equipment to be used. You know that is not going to happen. Someone is not going to make that investment.”

But Harris disagreed. “I would have thought a disaster was the ideal time for benchmarking, because you are all on the same playing field. You are dealing with high volumes of claims and I am sure that is the ideal situation to compare service,” he said.

Stuart Lamb from Norwich Union welcomed the idea of having benchmarks. “I think from a consumer perspective it is an ideal way for an insurer to be able to differentiate their product offering, especially given that insurers are often looking for ways to deflect the impact of aggregators, making consumers compare on price.

“I have a lot of sympathy for it. It may not be my decision, but as a consumer, it certainly has a lot of merit and I will take back the idea and discuss it.”

Join David Blunkett and Insurance Times for this year's flooding question time. For more details, click here: Flooding Question Time: 2008