Good faith? Practise what you preach

A number of things I have been reading recently have led me to worry again about our reputation as an industry and how we cause a lot of the damage ourselves.

I was briefly left upbeat and motivated after reading the CII’s excellent paper ‘What we talk about when we talk about trust: the future of trust in insurance and financial services’. But when I started to think about our submission to the Legal Services Consumer Panel Investigation into Referral Fee Arrangements, the gloom returned.

I should point out yet again that while dedicated claims-farming organisations don’t feature too highly on my Christmas card list, we as insurers continue to support the structure – many earning substantial sums from it – and so we must view ourselves as at least partly culpable.

These referral fees are often seen as ‘marketing’ – raising the awareness of the man in the street of their rights to legal redress – but that misdescription just kicks off the list of factors that could be titled “Reasons not to trust the insurance industry”.

The first problem is that the fees are far too high. I imagine that with so many people feeding from the trough, there needs to be a fair bit of money to go round, but wouldn’t it be nice if someone within the frenzy could actually be deserving of the cash? Wasn’t the whole process meant to be about the injured person, not the opportunistic businessman who sees a chance for a quick buck somewhere along the line? It reminds me of that great PR fiasco where six Tyneside lawyers earned £250m from the misfortune of a group of miners, who in turn received an average compensation of less than £5,000, and many nothing at all.

We expect our customers to act with utmost good faith in their interactions with insurers direct, and through brokers, but how do some of us respond? Customers with valid claims are directed to law firms, credit hire companies, even motor repairers, based on what? A genuine belief that they will receive better service? Is that large commission/referral fee/bung – call it what you will – just a coincidence or has it influenced how the claim is directed? I think we all know the answer.

Things seem to have gone a bit quiet on the serious injury front following the previous auctioning of brain- and spinal-damaged customers to the highest bidder, but with basic referral fees so high now, maybe the volume route is a better earner without the inherent PR risks?

Top up a bodily injury fee with a credit hire commission and maybe even an arrangement with a motor repairer and you can earn a tidy penny. The customer won’t realise what they are signing up for on the credit hire agreement, but maybe they won’t mind if their car is off the road for longer than it needs to be and will enjoy an unnecessary day in court. Still, let’s not forget that all these costs are being paid by someone, and sadly that is the the man in the street, through increased premiums.

And in return? We expect the customer to act in good faith, otherwise we act to void their policy or refuse to pay a claim.

The CII paper includes a quote from Socrates: “The way to gain a good reputation is to endeavour to be what you desire to appear.” If we are serious about being viewed as professional and trustworthy, we clearly have a long way to go. Let’s hope Lord Justice Jackson and the Consumer Panel Investigation help us along that way! IT