Underwriters stake a claim

here can you find a good claims director? According to Groupama, in your underwriting department. The insurer recently transferred underwriting director Phil Bird to the post of director of claims in a move that raised a number of eyebrows. There could be more to come.

The claims sector has traditionally been the Cinderella of the insurance world, with isolated staff sectioned far away from their more glamourous underwriting colleagues – whose profits they spend. As insurers come to realise that clients’ experiences with claims are fundamental to their public image, it has become clear that they need their best people in those unsexy claims departments which, for the historic reasons cited above, have suffered from a skills shortage.

A report published by the CII in January says that recruiting or retaining good quality claims professionals is the second-biggest challenge facing the sector – just behind fraud detection. The results, based on feedback from 528 claims professionals, also revealed that 14% of respondents believed there had been a decline in quality claims staff in the past five years.

One obvious answer to this problem is to transfer skilled staff from other parts of the business to the claims department. Groupama’s Bird admits it is an unusual move but thinks in his case, it will work.

“Claims handling tends to be a career choice that can be rather insular and, historically, there has been little movement of people either in or out,” he says. “This can have the effect of restricting thinking. My underwriting background can only help to broaden the viewpoint of our claims teams.”

Another industry stalwart who in a positive, if rare, move for the industry switched from from underwriting to a head of claims role, is AXA’s former casualty insurance manager, David Williams.

“It does tend to be a rare move but helps achieve a joined-up organisation,” he says. “With a background in underwriting, you can appreciate in a real manner when someone has a claim, which is useful.”

And it’s not just a one-way street. Nick Kidd recently became head of household underwriting at AXA after previously operating as the insurer’s head of lifestyle claims. But this is still fairly unusual, with only a handful of similar appointments in the last 20 to 30 years, says Williams.

While changing disciplines can take time, it needn’t be a tough process. “I found the transition easier than I had expected,” says Williams. “The concerns and technical aspects are largely the same. While with claims there are negotiations on some of the complex large losses, there is always a degree of negotiation on underwriting too. However, much depends on your team – I was lucky to have a very good team around me.”

Not only does an internal appointment from underwriting to claims ensure that knowledge from one half of the business is efficiently transferred to another, it also reduces recruitment costs which, for a senior post, can be significant.

“However good they are, if claims people have to work with poor underwriting they’re handcuffed.

John Sims, Lorega

Also, and perhaps more importantly, moving people around the business means that senior staff have a range of transferable skills and broad experience.

“At a macro level, the management of average claims costs is absolutely critical to the success of any insurance business model and closer liaison between claims and underwriting can only drive better understanding of the needs in this area,” says Bird.

Stephen French, chief underwriting officer at Ace Bermuda International, spoke about the importance of integrating claims and underwriting, at a keynote address to the IEA and Marketforce’s Claims Forum 2008 in June.

French highlights the need to develop a rapport between the two teams that are sometimes based in different locations. This can be achieved through weekly meetings and the exchange of quality market feedback, he says.

“Underwriters are able to make informed decisions on pricing and other aspects of a particular account by regular dialogue with their claims division, especially if that company handles its claims in-house.

“The roles are still very much pigeonholed by the market as distinctly separate, each with specific previous experience requirements. It could be argued, however, that the negotiation and the customer-facing aspects of the roles are very similar and a senior underwriter or senior claims adjuster will have this in common immediately.”

Ultimately, it seems that the two disciplines are inextricably linked. A poorly underwritten policy will provide difficulties regardless of how proficient the claims team may be.

“The bottom line is that it doesn’t matter how good the claims people are – if they’ve had to work with poor underwriting, they’re hand cuffed,” says John Sims, chief executive of Lorega.

Clearly, there are transferable skills with an overlap between the two disciplines – good news given the gloomy outlook painted by the CII. If a shortage of quality claims staff persists then Phil Bird’s parallel leap could become the rule rather than the exception.