Roundtable: how claims servicing has become a key market differentiator

Current hard pricing conditions, coupled with an uptick in natural and man-made loss activity, have seen claims services become a critical retention tool for insurers seeking to differentiate against competitors, as regulatory challenges, the impact of new technology and talent shortages continue to dominate market concerns.

Those were just some of the points raised during a roundtable hosted in partnership with Arch Insurance International which brought together leading claims practitioners to take a deep dive into the current state of claims in the specialty (re)insurance market.

From back office to the forefront

The first point of interaction most policyholders have with their insurer is when they make a claim – and the way insurers and brokers respond can have a major impact on the reputation of their business, explained Barbara Rizzi, head of third-party claims at Arch Insurance International.

“The perception that claims and the claims function should be back office is rapidly changing,” Rizzi said, adding that claims servicing is now “at the forefront” of what underwriters are offering.

“Claims is the point where we as insurers are effectively delivering on the promise that we make to clients. With an increasingly risky world, claims is now a core differentiator and it’s essential that underwriting and claims are joined up as part of the sales proposition in order to deliver a first-class service.”

Rizzi’s comments were backed by Alexandra Anderson, partner at international law firm RPC. Anderson said it had taken the insurance market an “extraordinarily long time” to recognise that the value of its offering was in the claims proposition, and noted that the renewed focus presented a “tremendous opportunity” for the sector to demonstrate its quality.

“We've seen from both clients and our own partners that it's a huge differentiator. Perhaps more importantly, we've also seen that some markets are now able to charge a much higher premium, because they give the service and can articulate how they are adding real value.”

Anderson – an insurance lawyer with considerable expertise in the construction and surveyor sectors – added that claims teams can also provide an “effective risk management tool” when placed at the heart of underwriting decisions.

“We’ve seen the impact that quality claims management can have at all levels, but particularly on the complex and catastrophic losses,” Anderson continued.

The product of insurance has been challenged following successive years of higher than expected and complex losses but claims services have proven resilient, showing return on investment and building trust in the product, said Mehmet Shukri, deputy head of claims and client services at Aon Reinsurance Solutions.

“The London market and specialty claims community has never been more relevant than it is now,” Shukri said. “We've proven our technical abilities through the handling of complex claims through a number of complex and heavy loss years,” he said, highlighting the challenges faced by claims teams in navigating the Covid-19 pandemic, and now through conflicts in Ukraine and the Middle East.

“Underwriters, brokers, risk managers and buyers – they all know that they can rely on us. Claims teams are really driving that value-add for clients and those firms that master it have a sure advantage in what is already a highly competitive market,” Shukri continued. “It’s why I think we’ll continue to see claims pushed to the front of the proposition.”

Client demand and market competition

And with the value proposition firmly in the spotlight, it is clients and policyholders who are driving this change, according to Marsh Specialty managing director and head of Finpro claims UK, Helen Haggie. Haggie said policyholders are becoming increasingly attracted to those firms that place claims personnel at the forefront.

“It's clients that want to understand the claims service and meet the claims team on day one,” Haggie explained. “Clients are attracted by insurers who put their claims offering up front, increasingly clients are surprised by an absence of claims representation on their service team.”

Haggie noted that buyers are increasingly looking for quality of service and speed of response at every stage of the process – from purchase through to the point of claim.

“This is where we see the need for a talented claims professional to be able to provide quality service and communication. We’ve seen at Marsh that these claims can often be significant for the SME or mid-market policyholder but are not high value or particularly complex for the carrier. This is where we really need that service aspect to improve.”

Lisa Payne-Lawrey, VP, casualty technical claims lead for Europe, Eurasia and Africa at Chubb, agreed that client demands are elevating the position of claims, but also flagged that competition across “all levels” of the London market has forced carriers to place claims specialists and underwriters hand in hand to demonstrate value.

“Claims remain the true proof of a product in our market and being able to highlight and demonstrate not only commitment to good outcomes, but also quality of response, is in many ways a commercial necessity,” Payne-Lawrey explained.

Payne-Lawrey highlighted that London typically plays host to more distressed business and more complex claims. She noted that risks in London are typically from “experienced, seasoned buyers” of cover who have had experience with other insurers and are therefore able to compare services.

“London is a very competitive market, increasingly so, and we have found that a clear way to differentiate our brand is to bring claims teams much closer to the underwriting side – we bring claims specialists to the front,” she continued.

This view was shared by Arch’s Rizzi, who said the market’s expertise in claims was not only accretive to firms that display best practices, but to the industry as a whole.

“There's definitely a know-how that's held collectively by the London market,” she said. “It is clear that clients choose to place business in the market for that reason, and we’re seeing growing recognition that our knowledge of claims processing, coupled with the service that we provide, is another differentiator.”

Claims under the microscope and the communication challenge

There was widespread acknowledgment that claims handling has come under increased regulatory scrutiny, particularly in the form of the Financial Conduct Authority’s new consumer duty, which obliges insurers and intermediaries (alongside other financial services) to prove they are acting in customers’ best interests and that the products sold directly meet their needs.

Ben Bolton, managing director at Gracechurch Consulting, described the duty as “the biggest challenge” facing the market from a claims perspective.

“What is quite different about the duty as a piece of regulation is that it challenges the sector and all of its various parts to be responsible for the outcome of the customer,” he said. “This has not been talked about enough.

“It's absolutely massive and will impact anyone responsible for customer outcomes. Whether it’s an insurer, a broker, MGA or TPA, we will have to show how the products are being delivered. Nothing will be allowed to fall between the cracks.”

Meeting the regulatory objectives places the onus on communication. But Bolton said Gracechurch – which publishes a regular London claims report – has found that communication of products has been a consistent challenge for the market.

“Communication of product, and the level of communication between firms, are also concerns for the regulator, which feels that the market does not challenge itself adequately. This will be one of the biggest challenges, and the consumer duty will push us all towards sorting that out.”

Griffiths & Armour director Mike Stubbs also flagged issues around communication in the handling of claims, noting that a trend for online and virtual claims handling – particularly in the wake of the Covid-19 pandemic – had resulted in a drop-off in face-to-face interaction.

“We’ve seen that effective communication is the cornerstone of successful claims handling. It's not just about processing paperwork; it's about understanding and addressing the unique needs of our clients,” Stubbs said. “But I do have concerns that some of this may be getting lost as a result of portals, and also as we hire an increasingly digital workforce.”

Stubbs said that has placed an onus on firms to hire from a diverse range of backgrounds to ensure they are not only gaining and retaining the important technical skills but also the “soft skills” needed to communicate with clients and partners effectively.

He noted that London-headquartered Griffiths & Armour has already had “great success” in using apprenticeships as a magnet for talent: “We have to attract people from other industries, rather than just juniors that come in to be trained up by us.”

Rizzi shared Stubbs’ enthusiasm. The executive noted that Arch has been actively hiring across “all levels”, highlighting that the war for talent is not confined to the graduate level.

“Talent is always at the forefront, and that is especially true in claims where so many complementary skills are required. We find that there is no ‘one size fits all’. There's clearly a lot of market knowledge and resilience that has been born out of the old ways of communicating, but we’re also finding that graduates and apprentices, those from the younger generations, are bringing a freshness that has been missing. It’s a balance”.

AI, innovation and the data jackpot

Marie Hill, group head of claims at Brit Insurance, noted that the sector has traditionally had a large focus on distribution, and relatively little focus on the “plumbing” – the real processes that kick in when a claim occurs.

“Ultimately, the efficient and proper handling of claims is the only element of the pipeline that matters once you've taken the premium in, and it's certainly the part of the process on which we as carriers are judged most harshly by clients, brokers and often everybody else in the market,” Hill explained. “All the goodwill achieved early on in the buying process will be quickly lost if you don't handle the claims that flow well and meet the promises made appropriately.”

Hill noted that the London market in particular has suffered from a structure that results in multiple touch points for claims, slowing down processes and adding complexity.

“It is probably true to say that London has historically encountered some significant issues with the claims process, more so perhaps than probably any other market because of the subscription model and the fact there are invariably many mouths to feed in the distribution chain, but that's also driven us to really think about how we're meeting client needs and we're beginning to see a dramatic uptick in innovation and service standards, particularly after nat cat events. It's very positive.”

Hill – who joined Brit in 2014 and has experience in both underwriting and claims – praised efforts by Lloyd’s to streamline the process, particularly for more simple claims, and also offered a bullish outlook on the potential impact of AI, machine learning and enhanced intelligence.

“It is clear that such innovations have the potential to radically evolve our part of the business. It often requires a great amount of collaboration between insurers and, perhaps surprisingly, I feel the claims market is inherently often better at moving such innovations forward than the underwriting side, primarily because we don't compete directly with each other at this stage, we just need to get it done,” Hill continued.

This was echoed by Marsh Specialty’s Haggie, who noted that the London market has proven expertise and experience in handling complex and large losses, while the use of technology including AI is already having an impact on the management of more straightforward, high-frequency, low-severity losses typically associated with personal lines.

“In the middle of all that there is a sub-set of claims with which we aren’t dealing as effectively – this is where the balance between people and technology comes in,” Haggie said.

Matt Olorenshaw, partner at DAC Beachcroft, said AI was already having a transformational role in handling claims. While he welcomed the enhanced use of data among claims professionals, Olorenshaw also stressed the need to ensure that quality of service was not being lost in the rush to AI.

“It seems to me that there can sometimes be a tension between the pressure on insurers to provide an excellent claims service by highly trained specialists on the one hand, and on the other, the need to meet demanding targets in terms of claim turnaround times, which are often used as a yardstick for claims team performance.

“My impression is that there is a continual balance which needs to be struck between these two things.”

But while Olorenshaw – who has a particular focus on complex policy coverage issues related to construction and engineering – hailed the “transformative opportunity” of emerging technologies, he flagged that “traditional” property risks continue to dominate thinking.

“Within the construction sphere, an emerging area of interest for insurers has been the Developers' Remediation Contract (DRC). This has arrived on the back of the Building Safety Act, and the ongoing consideration of how the costs of remediating tall buildings with unsafe cladding are going to be funded.”

Olorenshaw said these claims are being driven by recent political decisions to force developers to pay the cost of replacing combustible cladding on high-rise buildings.

“The DRC is creating a number of interesting issues for insurers, and it has the potential to drive claims activity which we may start to see over the next 12 months. RAAC [reinforced autoclaved aerated concrete] is another issue the insurance market is keeping a close eye on. In particular, we're starting to see claims emerging around inspection duties."

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