In or out: how to manage claims

“Claims are the frontline of a broker’s business because for customers they are the proof of the insurance policy they bought, so it is vital to get them right.”

So says chief executive of broker Bluefin Stuart Reid.

Yet few brokers give their claims management process the attention it deserves, according to Hansen Young Consulting managing director Andrew Linnell, whose company advises brokers on how to increase profit. He says: “When I ask brokers how they sell products they give me chapter and verse on their strategy but when it comes to claims management a large number of them have not really thought it through.”

A considered approach

Different brokers handle this essential part of their business in different ways. Some manage claims in-house while others outsource or simply hand the customer directly to the insurer. So what is the best approach?

Jobson James, a £1m-revenue Birmingham-based corporate insurance broker, has managed all claims in-house over its near 20-year history. Director Keven Parker is a strong advocate of working this way. He says: “We see this as an essential part of both customer retention and risk management, because when it comes to renewal our brokers know exactly which claims have occurred and what the customers have done to prevent them reoccurring.”

He adds that it is also about customer service: “We want to take the frustrations of claims off the customer’s hands.” Taking the example of a fleet company’s motor claims, he says: “If you have a fleet of vehicles and several have been in accidents and are off the road, then it may be critical to your business that they are repaired and operational as soon as possible. Many brokers now ask their clients to deal direct with the insurers on claims thinking that they cannot add any value but an insurer claims service can be hugely variable.”

Plus, the insurer may be using a loss adjuster or another company to outsource their claims handling service, which he says can also cause headaches: “Clients often find it confusing having to handle claims themselves because of the number of parties involved in the claim; the uninsured loss recovery provider may be trying to recoup the excess, the insurers authorise the claim and manage payments and the specialist accident repair company will be managing the motor body repair workshop.”

The right foundations

The catch is that if you do manage claims in-house, you need the expertise. At Jobson James about 20% of the 21-strong staff manage claims and they have legal qualifications. Parker adds that they have the right aptitude too: “Our people are extremely determined. They are tough cookies and they have claims management in their DNA.”

Reid warns that without this – and without spending the money to pay the right people, who can be on salaries of around £50,000 a year – handling claims in-house could slow the process down. “Some brokers – both small and large – say they have a claims department but really they are just acting as a post office.”

Linnell warns that the insurer will have “a professional loss adjuster on the case, so if you send in someone who is not an expert they will struggle to negotiate with these guys". He adds: “Loss adjusters are independent but as they are paid by the insurer my view is that their settlements will lean slightly in favour of the insurer, whereas a good client representative can push the decision more towards the client.”

So you may feel that claims management outsourcing provided by firms like Topmark – or using claims support services provided by loss adjusters such as, again, Topmark or Lorega – is a better approach. Bluefin manages claims in-house mostly but has outsourced motor. Reid says: “This works because we have a very high volume of motor claims and clients tend to want their vehicle back very quickly. Other claims can be less straightforward.”

Another plus is that outsourcing can earn you commission. Reid says: “This means any broker should consider it, especially in the current market conditions.”

Keeping control

The downside of outsourcing – and also of passing the customer over to the insurer – is the loss of control over customer service. Parker says: “For us, control is key. We want hand-picked and trained staff helping customers.”

You also lose control over the relationship with the insurer. 1 Answer Network managing director Paul Muir warns: “Make sure you go with a company that is respected by insurers and not just an ambulance chaser.”

He adds: “Don’t just go with the firm that will bring you in the most money.”

Linnell argues these issues can be tackled to some extent by monitoring the way insurers and claims managers handle claims. “You should look at the time taken to handle claims and ask for three or four references.” Also, Topmark does give brokers the chance to oversee claims it is managing.

Ultimately the approach you choose will depend on your business but as Linnell says: “Whatever you opt for, think it through.”