Lorega boss warns insurers not to cut costs

The insurance industry needs to focus on changing the way it handles claims and providing customers with a decent level of service in order to begin changing the poor public perception of the sector, according to Lorega chief executive John Sims.

Speaking at last Friday’s CII InsurEd conference in Nottingham, Sims told delegates at a claims service session: “Unfortunately the large-scale insurer job losses seen in the past 12 months are not, in the main, being implemented to produce a leaner and more effective service; they are about the desperate need to improve the bottom line.”

“In these dire financial times with claims being the largest outlay for the majority of insurers in this is an obvious area to target to quickly reduce costs. However we as an industry must recognise the negative consequences of these actions could be severe and long term.”

From the consumer’s point of view, when it comes to making a claim currently most UK policyholders approach the moment of truth with trepidation. In addition, as highlighted recently in a report published by The Centre for Crime and Justice, an alarming number of people now regard inflating a claim as completely acceptable. It found the British middle classes demonstrated an unprecedented level of contempt for the law in that regard and that the inflation of insurance claims to be widespread. Those surveyed justifying their behavior as revenge for the injustices of exclusion clauses or spurious warranties in the small print of insurance policies.

Sims continued: “If we look back 10 or 15 years ago the role of the insurers’ loss adjuster was quite different. They were well paid and, despite the perception that some customers might have had then, we knew them to be by and large impartial and both willing and able to give pretty high levels of service to the insurer, client and the broker. Today is a very different story thanks to some of the bigger insurers having systematically driven down their fees to a point where there is little or no service or hand holding for the client.

“In mainland Europe however things are very different. In many parts of the continent, insurers provide their customers with help to make a claim. In the UK customers get a much rougher ride because the process here has the insurer and loss adjuster on one side, with only the broker on the other to represent their client– hardly a level playing field.”

“As a result there is a vibrant loss adjusting industry in those countries and the system works extremely well. It may seem an obvious and fair thing to do by European insurers, but UK insurers have, largely, yet to recognise this gap in the claims process.”