Settling in for a change

The servicing of household property claims has never been straightforward and its complexity has been compounded by the numerous options available to resolve a claim. Among the key questions insurers are currently asking themselves is whether cash settlements are, in fact, preferable to more traditional routes such as asking the insured to provide several quotes, or whether the repairer network route - outsourced or managed in-house - is better.

The challenge is to achieve both cost-effectiveness and customer satisfaction but is this an unobtainable ideal? These were the major issues debated by a group of industry professionals during a roundtable event hosted by Post Magazine in conjunction with Multiassisatance.

James Grant, managing director of Multiassistance, kicked off the debate by emphasising some of the particular challenges inherent in the market today: "The differences between cost control and customer service have to be balanced and they are often at different ends of the scale. Depending on how large an insurer is and their current position - whether they are trying to gain customers or make money - the pendulum swings in several different directions. Couple that with consolidation and movements in the repair and insurance industries, and it's quite an interesting market."

Mr Grant then injected a note of pessimism about insurers' search for a definitive answer to the household claims settlement question. "What has also come out of my own discussions with market figures is that the absolute perfect solution hasn't been found - and there is some scepticism about whether it ever will."

In the search for the ideal solution, some insurers have been taking a renewed look at the prospect of cash settlements. David Williams, Axa's claims director, observed: "Many insurers have avoided this option in the past because they have been concerned about issues such as fraud." He added that Axa has been carrying out an exercise to compare different routes to settlement.

One of the findings so far is that where the insurer only offered a repair solution if customers specifically requested it, only 2% opted for the repair route. "So in terms of message from the customer, 98% seem happy with cash," explained Mr Williams, adding that this research was on smaller value claims of less than £1000.

Fraud filters

Adrian Spencer, property claims director for Zurich, identified some of the problems surrounding cash settlement: "The challenge is being able to ensure the fraud filters are in place and that customer satisfaction is obtained even though you are settling for cash." There was considerable agreement around the table that these long-standing issues must be considered.

Mr Williams emphasised the importance of responding to customer requirements. "As well as wanting to control costs and fraud, we have a duty to provide a fulfilment option to our customers but if only 2% of them want it - and one exercise doesn't prove that conclusively - then maybe we have to consider the cash route more."

Making cash settlements work relies to some extent on being carefully selective about which types of claim are appropriate for this route, according to Amanda Hancock, claims services manager for household at Groupama.

She stressed that it is important not to lose sight of the distinction between relatively low-value, straightforward contents claims and the more complex buildings claims - not least because of the risk that customers may end up with sub-standard building repair work if they are left to organise this themselves.

"There are different dynamics for a contents claim than there are for a buildings claim," said Julian Millar, technical claims services manager at the Royal Bank of Scotland Insurance.

Mr Spencer added that there is a risk that those customers who opt for cash settlement may regret their choice further down the line if they find the repair has not been adequate or the damage has not been resolved. The question is, where cash settlements have been given, should insurers leave the door open for customers to come back with requests for help in sourcing suppliers?

According to Mr Williams, the ideal cash-settlement scenario is that everybody is aware of the finality of the route. He added: "That said, if a customer needed assistance, I would hope we would try and assist but certainly in terms of the processing we need to make them aware of the finality when they accept the cheque."

In addition to some of the more recognised risks in offering cash settlements for household building claims, Mr Williams pointed to the potential problems this can cause for the supply chain in the long term. "The other concern is that if you are trying to set up a network or a facility of any description, you've got to put some volume through it," he said.

"Everybody talks about the Olympics and how every tradesman is going to be tied up building for the Games and, therefore, we need to be establishing relationships - we need to be booking time and volume. Some insurers are looking for cash but if it goes so far down that particular route, we won't have those relationships in place for when we really need them."

Whether or not insurers choose to promote cash settlements, one of the messages from around the table was that provision of customer choice is vital. As Mr Grant emphasised: "Customers need to be able to have their own choice and any number of customers might have their own builder and their own preferred way of doing things. In this scenario, you need to be talking to the customer and asking what they want."

For his part, Rob Smale, claims director for Fortis, commented: "Choice is key, as is having time to elicit from customers what their choice is and being prepared to give them advice along the way. Then you need to have a process, a system and a culture that is capable of absorbing variation. We have to absorb variation - not drive it out."

In addition to choice, Shelley Frost, claims development manager for NFU Mutual, highlighted the importance of keeping customers informed: "It's important to manage customer expectations and be proactive in the way you communicate what's happening because bad communication is what tends to cause a lot of dissatisfaction. It's not that customers are unhappy with what is happening, the problem is that they don't know what's happening." Mr Smale agreed: "Often the attrition and dissatisfaction comes from lack of communication."

Most agreed customer choice must come hand in hand with validation. "If your validation is correct, the method doesn't necessarily matter," said Ms Hancock, "save for not leaving yourself exposed to any future risk."

Mr Grant added: "Customer preference prevails but if you've got a customer who wants to cash settle, and you're not certain about them, then you send someone else to validate."

Mr Williams went on to identify some of the issues surrounding the fulfilment option: "If you are going down this route rather than cash then scheduling is important. If you've got somebody who wants you to sort out their roof, why shouldn't you be able to tell them when the contractor is going to turn up while you've got them on the telephone? The technology is there - it seems you can do it in every industry other than insurance."

Further discussion highlighted the vital role played by the first notification stage, with Mr Spencer calling it: "The most under-valued function in claims."

Mr Smale added: "You need to take time with customers at first notification of loss. If you're pressured at that point, then people will be driven down the sausage machine and more customers will be dissatisfied."

There was considerable agreement that recruitment issues need to be addressed to drive through improvements in the notification processes. As Mr Spencer observed: "It's important to have the right people doing the job and to give them the right tools."

Ms Hancock agreed: "People that are the front line must be empowered and aware that they are not going to be forced down a process. That's quite difficult - it's a change in culture. They are so used to thinking they must go down a particular route if it ticks a particular box."

Mr Millar added: "Asking the right questions will enable us to triage claims far more effectively. The people at the front end need the power to make some sensible and informed decisions and, once they've sorted claims, use a far more joined-up approach in terms of the supply chain."

With so much agreement on the issues, one of the questions that arose is whether any of the present challenges surrounding household claims resolution should be tackled on a more industry-wide level rather than in individual silos.

Mr Smale identified the immediate problem inherent in any form of collaborative approach, commenting: "I do not want to give the same claims service as other insurers."

Mr Millar agreed but added: "There is the issue of event management. We need to ask how far we can work together without losing our competitive identity and edge. It's crazy if we all turn up at a Carlisle situation, for example, with whoever gets there first to buying up the largest number of hotels."

Mr Spencer also agreed there is a need for more collaboration in such circumstances, pointing out that the press will always pick up on the weakest link. "If we could all progressively up the bar, that would certainly be a good thing," commented Mr Millar.

Returning to the debate on individual approaches to resolution and the desire for differentiation, Mr Smale suggested: "Perhaps there is a message there for our suppliers - we do not all want to be the same."

Responding from the perspective of one such industry supplier, Mr Grant called on insurers to do their bit by communicating the values better: "Let your suppliers know what your brand values are so they can imitate them and reflect that in the service they provide."

He explained: "One of the things I find works really well is where we have engagement with clients where they come in and tell our people, our management and our teams exactly what their brand philosophy is, exactly what they are trying to do in the market."

Mr Spencer agreed: "Brand value is key and part of having a professional supply chain is being able to have that relationship with your suppliers. The challenge is to get your suppliers acting in a similar fashion both from a brand perspective and a Financial Services Authority perspective."

As far as repairer networks are concerned, one of the issues raised was the effectiveness of running a network in-house rather than choosing to outsource. Mr Williams was quick to stress the difficulties inherent in in-house management. "There are particular skills required to manage a network. It's a risky approach to try to manage a network yourself."

Mr Millar agreed this is not easy but said managing a network is a challenging issue, "whether or not you run it yourself". He added: "We are all in the shop window where event issues are concerned so if you have your own field force and your own contractor network, in theory, you should be able to control your claims exposure and your profile a little bit more."

He widened the debate to the issue of claims service in general and how far household customers are being influenced by their experience versus other factors. "One of the issues in claims is that people are more transient in where they go next time round. It used to be true that your claims service affected your retention. It still does for the most part but a proportion of clients will just keep moving round on price."

Ms Hancock, however, was convinced that "if you provide a fantastic service, they'll think twice about moving. You can't underestimate that".

Mr Williams agreed: "What we are selling is a claims service - they're not buying anything else. If we can get that right, it will positively affect retention. This is easier if you are intermediated, making claims a reason to buy. If we can build on that, it will spill over into the direct market."

The world of household property claims seems to be changing, with many insurers re-assessing their position on cash settlement versus other options. While most agree there is no definite answer, there also seems to be a consensus that the provision of customer choice, coupled with the ability to be flexible where claims resolution is concerned, are crucial factors in the continued search for that perfect solution.

GUEST LIST

- Chair: Lynn Rouse, deputy editor, Post Magazine

- Shelley Frost, claims development manager, NFU Mutual

- James Grant, managing director, Multiassistance

- Amanda Hancock, claims services manager, household, Groupama Insurances

- Julian Millar, technical claims services manager, Royal Bank of Scotland Insurance

- Rob Smale, claims director, Fortis

- Adrian Spencer, property claims director, Zurich

- David Williams, claims director, Axa.