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Issue 25 May 2017 ISSN 2051-6495
David Hanson MP I believe there are too many claims management companies. They’re taking too high a stake, and I’d want to see a reduction in that, but not in the way the government have approached the problem
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MODERN CLAIMS
Editorial Contributors Alex Jones Senior Media Relations Manager Zurich UK
Lesley Graves Managing Director Citadel Law
Amanda Stevens Group Head of Legal Practice Hudgell Solicitors
Matthew Thomas Strategy and Planning Director Ageas
Andrew Gibbons ACII Managing Director Mason Owen Financial Services Ltd and BIBA
Nigel Teasdale President Forum of Insurance Lawyers (FOIL) Partner DWF LLP
Ben Howarth Senior Policy Advisor Motor & Liability, Association of British Insurers (ABI)
Sarah Roberts Marketing Executive Eclipse Legal Systems
David Williams Technical Director AXA Insurance
Scott Whyte Managing Director Watermans
Donna Scully Director Carpenters
Simon Stanfield Chair Motor Accident Solicitors Society (MASS) Partner Simpson Millar
Jason Moseley Executive Director NBRA
Stephen Ward Managing Director Clerksroom
Jason Tripp Operations Director CoPlus
Zoe Holland Managing Director ZebraLC
Keith Tracey Managing Director Aon Risk Solutions
WELCOME ello and welcome to the latest issue of Modern Claims Magazine, following yet another turbulent month in the world of claims. Just when it looked like there was some direction and certainty on the reforms to personal injury that have been in the pipeline for so long, the announcement of a snap General Election threw everything into doubt. The reforms were shelved until Britain decides on the government that will carry it through Brexit, but many in the claims sector only see this as a breather following the first leg of a long and gruelling marathon. Time will tell if the reforms are introduced, and in what capacity, so in the meantime there’s a great opportunity to address other challenges in the sector.
H
Modern Claims sought to examine one of these challenges in this issue’s Legal Consumer supplement, sponsored by Lyons Davidson. In the supplement, we looked at the way contemporary consumers are changing, and how this affects their attitudes and expectations of legal services. “Distress purchase” is a phrase commonly applied to legal services, and similarly “grudge purchase” is often used to describe insurance. The size and scale of some insurers can make it difficult for them to address this and improve perceptions, so in parallel to the Legal Consumer supplement, this issue of Modern Claims Magazine features a number of articles from new and innovative companies that are looking into how services can be modernised and improved for the insurance customer. And speaking of innovation, this issue is also being released with the innovation in Practice supplement, sponsored by S&G Response. This supplement features a selection of companies that are changing the claims game, either through their product offerings, style and delivery of service, or relationships with their partners and customers. The emphasis of customer feedback in this edition of Modern Claims has inspired us to ask our readers what they would like to see in the future. We’ve devised a short survey, which you can answer by visiting tinyurl.com/ModernClaims. It takes less than five minutes to complete, and all participants will be entered into a prize draw. The survey will really help give us an idea of the issues you want to see addressed, and how you would like to read about them, so please do spare the time to take part.
Issue 25 May 2017 ISSN 2051-6495 Editor Brendan Gurrie
Editorial Assistant Poppy Green
Project Manager Rachael Pearson
Events Sales Kate McKittrick
Brendan Gurrie, Editor, Modern Claims Magazine. 01765 600909 @ModernBrendan brendan@charltongrant.co.uk
Modern Claims Magazine is published by Charlton Grant Ltd ©2017
All material is copyrighted both written and illustrated. Reproduction in part or whole is strictly forbidden without the written permission of the publisher. All images and information is collated from extensive research and along with advertisements is published in good faith. Although the author and publisher have made every effort to ensure that the information in this publication was correct at press time, the author and publisher do not assume and hereby disclaim any liability to any party for any loss, damage, or disruption caused by errors or omissions, whether such errors or omissions result from negligence, accident, or any other cause.
May 2017
Modern Claims 03
MODERN CLAIMS
CONTENTS NEWS
INTERVIEWS
07
EdiTorial Board
12
07 Ant Gould talks News
The Chartered Insurance Institute’s Claims Faculty New Generation Group have focused their spotlight on the issue of fracking in the UK and what its potential wide scale adoption could mean for insurance, writes Ant Gould.
29
12 David Hanson MP
David Hanson MP is among the members of the Commons Justice Select Committee who heard evidence on the Ministry of Justice’s whiplash reforms earlier this year, and following the session he spoke to Modern Claims about his views on the claims sector and the future of access to justice for his constituents.
17 Matthew Avery
23 The evolution of the drone
23 Curbing claims management companies Donna Scully, Carpenters
25 An interesting decade
David Williams, AXA Insurance
25 Decreasing the discount rate
Following the announcement of the Vehicle Technology & Aviation Bill, which will pave the way for autonomous vehicles on British roads, Matthew Avery, Thatcham Research, spoke to Modern Claims about the current status of autonomy, how this will change in the next few years and the importance of educating drivers in the lead up to total autonomy.
Alex Jones, Zurich UK
Amanda Stevens, Hudgell Solicitors
27 The Future of Professional Indemnity Insurance Keith Tracey, Aon Risk Solutions
27 Personal Injury Law Firm Agenda 2017
Lesley Graves, Citadel Law
29 The insurance implications of autonomy
Matthew Thomas, Ageas
29 One voice for Bodyshops
Jason Moseley, NBRA
contributors
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04 Modern Claims
May 2017
MODERN CLAIMS Issue 25 May 2017 ISSN 2051-6495
EdiTorial Board
FEATURES
32
31 Are you making the most of the Bar?
Stephen Ward, Clerksroom
36
36 The millennial insurance consumer
32 Representation for Rob? Scott Whyte, Watermans
32 The need for MLEI
Jason Tripp, Coplus
33 What role does MI data have in selling personal injury at value?
Zoe Holland, ZebraLC
33 Weighing up whiplash reforms Sarah Roberts, Eclipse Legal Systems
FEATURES
While this issue’s Legal Consumer supplement will attempt to explain how consumers of legal services have changed, Daisy Gleeson, Digital Fineprint, explains how insurance customers can also evolved, and how insurers can utilise social media to help provide the bespoke service they expect.
46
42 Sector Soapbox
44 Interview with Peter Oakes
38 Know your customer
Ian Hughes, Consumer Intelligence, examines the claims industry from the point of view of the customer, and asks how the industry can change in order to offer a better service.
40 Disruption and drones: making innovation meaningful in the insurance sector
Mark Evans, Direct Line Group, explains why the insurance sector needs to demonstrate its willingness to adopt and utilise emerging technologies to meet consumer expectations and to move to a preventative model of insurance, something Direct Line Group is currently doing through their innovative Fleetlights campaign.
Modern Claim’s panel of resident associations outlines the burning issues facing the claims sector.
Fraud is a constantly growing problem in the insurance industry, explains Peter Oakes, Hill Dickinson, who talked with Modern Claims about the evolution of fraud and the subsequent evolution in counter fraud this necessitates.
46 Making a claim on transformation
Bill Safran, Vizolution, explains how breaking down the claims process and focusing on each step can allow insurers to provide the best possible customer journey to perhaps give them a competitive edge.
49 Case Study: Eclipse
Eclipse’s Proclaim Case Management Software enables Total Legal Solutions to operate as an entirely paperless office.
10 MINUTES WITH 50 10 minutes with…
Richard Beaven, Swinton Insurance
Future of Mobility Focus 02 Interview with Gary Smith
Gary Smith spoke to Modern Claims about the way customer expectations of the vehicle rental sector have grown over time, and how technology could both disrupt and improve the process.
05 Case Study - Delivering a positive customer experience
James Roberts, Business Development Director - Insurance at Europcar UK talks about the company’s focus on addressing the big challenges facing insurance companies.
06 Interview with Sue Stansfield
Mobility is changing, and insurers need to adapt at the same pace in order to provide the optimum claims experience, as Sue Stansfield, LV=, explained to Modern Claims.
May 2017
Modern Claims 05
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NEWS
Ant Gould TALKS NEWS The Chartered Insurance Institute’s Claims Faculty New Generation Group have focused their spotlight on the issue of fracking in the UK and what its potential wide scale adoption could mean for insurance, writes Ant Gould. he insurance profession, the energy industry and the government need to prepare for the impact that increased levels of onshore fracking could have on UK households and businesses, according to a thought leadership report from the Chartered Insurance Institute’s Claims Faculty New Generation Group.
T
The report, ‘Insurance Implications of Fracking’, is the culmination of 18 months of research by a group of 12 insurance professionals from across 12 companies, all working on a voluntary basis in their spare time as part of the professional body’s annual talent development programme. The group carried out their research with insurers, lawyers, loss adjusters, energy companies and environmental groups to provide an overview of the main issues around fracking and in order to make key recommendations for the profession based on their “what if” scenario. The group are not pro or anti-fracking, and the report underlines this by featuring a welcome from both sides of that divide, namely Ken Cronin of UK Onshore Oil and Gas and Tony Bosworth from Friends of the Earth. However, the basic premise of their report is what if fracking does take off in a big way in the UK and what could that mean for insurance. Hydraulic fracturing has been used in the UK for years, but the scale and the techniques used are changing now that the Government has said it will support it at policy level. The UK Government supports a roll-out of fracking to reduce Britain’s reliance on imported gas. In October last year, for example, it gave a major fillip to the UK’s fledgling fracking industry when it overturned a veto imposed by Lancashire County Council on drilling by energy explorer Cuadrilla. At the heart of the report is a recognition that whilst there are no policies that specifically exclude fracking, consumers and businesses may be wary that there are also not any policies that specifically cover it either. This raises the spectre of potential confusion should a fracking related event actually occur on a major scale. For example, poses the report, if fracking related activities were to result in any property damage, it would in all probability be expected to be covered under the earthquake, subsidence, heave or possibly even landslip covers of a property policy; though the group suggest that subsidence or heave are extremely unlikely.
Technical Insight – what is fracking? Hydraulic Fracturing, commonly known as ‘fracking’, is part of what is known as a completion technique used for extracting oil or natural gas from shale rocks. Fracking is a technique that has been used commercially for 65 years, although the techniques that are being proposed in the UK involving high pressure and horizontal drilling have only been around for around 15 years. The types of onshore practices that are expected in the UK involve a well passing through topsoil, ground water and bedrock to a depth of 1 to 2 miles (1.6 to 3.2 kilometres). When the well has reached the required depth to reach the deep layer of shale rock, where natural gas exists, the well curves about 90 degrees and drilling begins horizontally along that rock layer. Horizontal drilling can extend more than 1 mile (1.6km) from the vertical well bore. The first 300-400m of casing is triple layered to protect the aquifer layer and the well is pressure tested to ensure no leakage. After the initial vertical bore and subsequent wells have been secured, liquid is pumped into the well at high pressure. This causes the shale rock to fracture and the sand to flow into fractures to prop them open. The liquid that is pumped down into the well is called ‘fracking fluid’ or ‘slickwater’. It is composed of approximately 98.5% water, 1% sand (used as a proppant to keep fractures open) and 0.5% chemical additives. Once the shale rock is fractured and propped open, the trapped reservoirs of shale gas are released and pumped back up to the surface along with 5-10 million gallons of ‘flowback liquid’. The recovered shale gas is likely to be provided straight to the national grid or contained ready for transportation. However, the ‘flowback liquid’ contains water and possibly a number of contaminants released from deep underground, which include naturally occurring radioactive material, heavy metals, hydrocarbons and other toxins. As a result, the returned waters from the hydraulic fracturing process are sent for treatment at a wastewater treatment facility as they may be highly saline and contaminated by naturally occurring toxins and radioactive material. Under strict permission, the environment agency will allow temporary storage in twin skinned tanks inside a secondary bund over an impermeable membrane.
So picking up on the ‘what if?’ premise, the authors look closely at earthquakes, as this is one key area where there is still much debate on whether earthquakes can actually be caused by fracking activities. If, the report asks, clear geological evidence did emerge that fracking can cause earthquakes, and the earthquakes that arose in the UK were of a size and scale that damages buildings, insurers would then clearly want to limit their liability to potential losses.
May 2017
Modern Claims 07
NEWS
If, the report asks, clear geological evidence did emerge that fracking can cause earthquakes, and the earthquakes that arose in the UK were of a size and scale that damages buildings, insurers would then clearly want to limit their liability to potential losses Using this scenario, the potential complications quickly become apparent. One way a property insurer could react to this change in understanding would be to add a specific exclusion for manmade earthquakes; and the burden of proof on determining whether or not an earthquake was man-made would be down to the insurer. Where there are a lot of properties in an area affected by an earthquake, then insurers and their agents would be keen to obtain evidence on what was the proximate cause of the earthquake and would try and find a link between local fracking activities. Proving that an earthquake was as a result of fracking could in practice prove to be difficult, so it may not be easy for insurers to always rely on that exclusion. Taking this scenario a step further, if the insurer was able to exclude the claim, this would leave the consumer in a situation where they have no cover for the damage to their property, and they would have to pursue a claim directly against the well operator. If the well operator did not admit liability, this could be a costly exercise if legal action was required, which could be beyond the means of a small homeowner with few assets or savings. Furthermore, any civil action against a well operator is far from certain, with the property owner having to rely on case law set out in Rylands v Fletcher, which was a case relating to the escape of hazardous materials following the construction of a reservoir.
Fracking: Key recommendations for insurers
• The insurance profession needs to remain open and transparent about the risks of fracking by working together to monitor and discuss the issues as one profession • The insurance profession, energy industry and government need to work closely together to reduce the likelihood of potential risks occurring • Insurers need to be prepared for claims in the event of a fracking-related loss and consider policy wordings with increased fracking in mind In the final analysis, the ‘what if?’ scenario adopted by the group makes a strong case for fracking not to be ignored. While current insurance policies appear to provide some cover, the very fact that there are no insurance policies that specifically cover it either has to ring alarm bells, albeit theoretical ones.
Claims Faculty New Generation Group members Phil Beattie ACII, Direct Line Group Graham Black ACII, Zurich Insurance Hollie Dearman ACII, Caytons Law Sarah Dunkley Dip CII, Covéa Insurance Timothy Foulger Dip CII, JLT Nicola Friar ACII, QBE Jennifer Hill ACII, Aegon John Humphries Dip CII, Crawford & Co Ben King ACII, Subsidence Management Services Rebecca Winterhalder ACII Ageas Mark Pollatos ACII, Catlin Lucy Simpson ACII, GAB Robins UK
I hope the report will act as a catalyst for the profession, industry and the government to act in the public interest and think ahead around the issues that more extensive fracking could raise so that we don’t have another ash-cloud scenario; this latter event took the airline industry, the government and the insurance profession by surprise with the unprecedented event affecting policyholders, and non policyholders, let alone the damage caused to the insurance profession’s reputation, as some insurers paid out on claims immediately and others did not. The report is an unbiased and forward-looking document that examines the risks extensive fracking might pose to UK households and businesses. It examines the issues that insurers need to consider should we begin to see a greater level of fracking in the UK and the impact this could have on insurers and policyholders. It is useful reading for everyone working in property insurance today. Ant Gould is Director of Faculties at the Chartered Insurance Institute (CII), www.cii.co.uk
At the heart of the report is a recognition that whilst there are no policies that specifically exclude fracking, consumers and businesses may be wary that there are also not any policies that specifically cover it either
08 Modern Claims
May 2017
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INTERVIEW
There are arguments in the sector that there are a plethora of providers and that it is a confused sector as a whole 12 Modern Claims
May 2017
INTERVIEW
David Hanson MP David Hanson MP is among the members of the Commons Justice Select Committee who heard evidence on the Ministry of Justice’s whiplash reforms earlier this year, and following the session he spoke to Modern Claims about his views on the claims sector and the future of access to justice for his constituents.
Q A
Do you believe there is a compensation culture in the UK, and if so, what is the reason for this?
Q A
How do you feel the public perceives the personal injury sector and, more broadly, the legal and insurance sectors?
I don’t think there is a compensation culture. People have a right to make a claim, under law, if there have been damages done to them that are potentially claimable. Obviously, they’ll need help and support from the professional solicitors and the legal system in order to do that. But on occasions, they will use other methods as well, and I feel it’s reasonable to ensure that people aren’t being pushed into making fake claims.
I don’t believe the public thinks about it until something happens to them and they need to make a claim. For many of my constituents, and indeed for myself, it wouldn’t be something that’s on anybody’s personal agenda until they have been a victim of a personal injury that is potentially claimable. And then they would have to see the sector, I hope, as a system that gives them justice for any injuries that they have suffered. There are arguments in the sector that there are a plethora of providers and that it is a confused sector as a whole, but ultimately my constituents know that if they feel they have a grievance to pursue because of a personal injury, then they can pursue that, with help and support from the people who have dealt with the system before.
Q
Should improving road safety receive more emphasis in government and the insurance industry, thereby reducing the frequency of accidents and the resulting claims?
A
It’s important that we do all we can to reduce road accidents, and that’s being done already. You’ve got very strong drink driving laws, very strong speeding laws and very strong enforcement laws. You’ve got more rigorous driving tests too, which have improved since I passed my test many years ago! There’s always potentially more the government can do, but ultimately there are going to be incidents, and when incidents occur there will occasionally be people who are responsible. There are potential legal ramifications that result from the accident, and that’s when my constituents fully expect to have the support and access to be able to get redress.
Q
What may have been the reasons for the suggested small claims limit increase to £5,000, when factoring in inflation would only result in a rise to £1,600?
A
You’re speaking to a Labour MP, and as far as I’m concerned it’s because the government don’t wish to meet the costs the increase to £5,000 will mitigate. So for them it’s two-fold; it’s reducing the costs centrally, but also reducing the potential costs
May 2017
There will potentially be a reduction in the number of personal injury legal professionals, and that is a concern for the sector, but my main concern, with respect to them, is the access to their services for insurance companies. Cynics amongst us might think there’s a link between that and the contact the government have had with insurance companies about the potential ‘burdens’ they’re facing.
Q A
What are the potential implications on employment in the PI sector as a result of the Ministry of Justice’s reforms?
Employment issues are important, but it’s not my central concern; at the end of the day, my central concern is access to justice for people. There will potentially be a reduction in the number of personal injury legal professionals, and that is a concern for the sector, but my main concern, with respect to them, is the access to their services for people who are facing the potential of not being able to pursue damages for injuries in an effective way because of the changes that have been proposed.
Q
Do you think claims management companies contribute to the current problems in the personal injury sector, and how can their effects be mitigated?
A
Claims management companies are there, and they perhaps take an additional resource from individuals. They serve some purpose, but ultimately I’m not keen on the idea of pro-active work by claims management companies. In my view, people should get proper legal advice and proper legal representation first and foremost. I believe there are too many claims management companies. They’re taking too high a stake, and I’d want to see a reduction in that, but not in the way the government have approached the problem.
Q A
Do you agree with suggestions that a total ban on cold calling would help reduce the number of fraudulent claims?
I’m fairly neutral on this; in my view, there should be a ban on cold calling, but ultimately I’m not sure if that’s linked to the number of fraudulent claims. I’m not saying that cold calling and fraudulent claims are always the same, but I also don’t believe it’s
Modern Claims 13
INTERVIEW
They serve some purpose, but ultimately I’m not keen on the idea of pro-active work by claims management companies right that people are phoned and encouraged to claim, only for a large percentage of their compensation to be taken by claims management companies.
Q
How can insurers affirm that savings made through the Ministry of Justice’s reforms will be passed on to customers in the form of lower premiums?
A
I’m not sure they can. We tested this very strongly at the Justice Committee, and it was clear that the figures that are being suggested of a £30-40 reduction in premiums have not yet had any substance to them. What I want to see, and I’m not sure how they can do this, is for insurance companies to give firm commitments on that fee. But to date, they haven’t been able to bring forward companies that have agreed to pass on that figure in detail following the Justice Committee session. Even when they were talking in the Justice Committee about those lower premiums, they were caveating so much around the reasons for not offering a lower premium; that it was to do with markets, inflation etc. So I think this is effectively a straightforward transfer of savings to the insurance companies that wouldn’t necessarily be passed on.
Q
Rt. Hon. David Hanson MP
A
David George Hanson (born 5 July 1957) is a Labour Party politician who has been a Member of Parliament for Delyn since 1992.
Would reforms to personal injury result in a higher number of litigants in person, and what would be the effect of this on access to justice? I think it would. The idea that individuals cannot claim back a proportion of the legal costs that they might need to means they might often take on their representation in court themselves. With due respect to litigants in person, very often they would not be versed in the ways of the court, they wouldn’t be versed in the ways of the legal system, and they wouldn’t be experts in trying to win their claims because insurance companies would still be defended by legal representation of a professional quality. My prediction is that we would have greater confusion in court, greater need for people presiding over court to give guidance, and through all of that we would have a lower number of claims won; it doesn’t always mean that justice hasn’t been met, it just means that those claims haven’t been won.
Following this interview, it was announced that as a result of the June 8th General Election the measures proposed in the Prison and Courts Bill have been postponed until a review under the new government.
Litigants in person […] wouldn’t be experts in trying to win their claims because insurance companies would still be defended by legal representation of a professional quality 14 Modern Claims
After being elected to Delyn in 1992, David joined the Welsh Affairs Committee, moving on to the Public Services Select Committee. Upon Labour’s landslide victory in 1997, David became the Parliamentary Private Secretary (PPS) to the Treasury and then a Junior Government Whip. This was the start of David’s long career on the Frontbenches. In 1999 David was appointed to the position of Parliamentary Under-Secretary of State for Wales, whereupon in 2001 he was promoted to PPS to the Prime Minister. After four years in the position of PPS to the Prime Minister, David moved to the Northern Ireland Office as a Minister of State between 2005-07. 2007 saw David appointed to the Privy Council and Minister of State for the newly created Ministry of Justice. In 2009, he moved to the Home Office and fulfilled the role of Policing and Security Minister. David continued his Frontbench duties in Opposition as Shadow Minister at the Home Office, Ministry of Justice and The Treasury. 2010 saw David appointed as Shadow Exchequer Secretary and then Policing Minister. In 2013, David moved to the Shadow Immigration brief which he continued until 2015. In October 2015, David stood down from the Frontbench after over 17 years’ service after being appointed to the Speaker’s Panel of Chairs. David has also recently been selected as a member of the Commons Justice Select Committee.
May 2017
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INTERVIEW
Matthew Avery Following the announcement of the Vehicle Technology & Aviation Bill, which will pave the way for autonomous vehicles on British roads, Matthew Avery spoke to Modern Claims about the current status of autonomy, how this will change in the next few years and the importance of educating drivers in the lead up to total autonomy.
Q
How will a person’s relationship with the vehicle they own change in the lead up to autonomy, and in the years following its introduction?
A
There are many voices out there predicting the demise of the private car, and that demise is overegged to some degree. The core issue is that vehicle manufacturers are looking for a niche market and seeing whether it will explode. There is definitely a push within cities that the idea of shared and pooling vehicles will happen. The autonomous vehicle will give mobility to a lot of people who don’t currently drive. For example, if you are partially sighted, it could be possible to have a vehicle that’s like a personal taxi. The government is pushing the investment from the Centre for Connected and Autonomous Vehicles, and their innovative funding has been centred on mobility pods. In reality, there will be a new niche that is created. There will be people in cities that will decide they don’t need to own a car because there is a regular means of getting the latest vehicle. Maybe this has autonomy, maybe it doesn’t, but there will be a new niche of vehicle that grows in the 2020s, especially with autonomy. However, in order for the vehicle manufacturers to make the big bucks, they will want to sell an image to the consumer; you buy a BMW or a Mercedes because it says something about you. Although a lot of manufacturers are looking at automated vehicles, they won’t want to relinquish that, and, ultimately, it is a niche that’s immature.
Q
2021 has been suggested as the year the first fully autonomous vehicles will be introduced. Do you see this as a feasible date, and what would delay autonomous vehicles?
A
It depends on what you mean by fully autonomous; currently we use a six level system to describe autonomous vehicles. It goes from zero to five. Zero is no autonomy at all, and five is fully automated, door-to-door. Level zero means that you have to drive it and control everything. Level five means that you get in the car and say “take me home”, and off it goes. We are currently in a level two to three world; that means the vehicle is assisting you to some or greater degree. We are seeing manufacturers like Tesla, Volvo and Mercedes implementing what we might define as pilot assist systems. Those systems require the driver to take back control if there is an action that the system can’t handle, so the driver is always in control of those systems.
There are many voices out there predicting the demise of the private car, and that demise is overegged to some degree
The step to full autonomy, which we would describe as level four, is when you can get in a vehicle and you can press a button and the car drives completely competently for at least some of the journey. When the car says it is your turn to take back control, and
May 2017
Modern Claims 17
INTERVIEW
There is a role for the government and a role for the insurer, but the big responsibility is from the manufacturer not to over sell the capability of the car you don’t respond because you’re fast asleep, it can safely pilot you. That is called level four automation, and from our perspective is full automation. Level four is on a 2021 timeframe, but that is still not fully autonomous. In reality, full autonomy will arrive a good few years after that. The delay: regulation. We can decide our regulations, not Europe, so Brexit is irrelevant. There’s a regulation called Regulation 79, which deals with steering control, and currently there’s an amendment for 2018, which is a partial step, and another one is due for 2020, which is the next step. The other factor that will come into play is the Road Traffic Act. Until there is full autonomy, these are driver assistance systems. You are still the driver, so insurance and the Road Traffic Act won’t need to change. If the police see you driving and your hands aren’t on the wheel, even if the car appears to be driving correctly, they can pull you over. Come 2021, when the car enables you do to something other than driving because it is safe, there will be changes to the Act to stop you being pulled over. The basic question is, if you’re not driving your Volvo and the Volvo is driving itself, who pays when your Volvo has a crash? At the moment, the insurance is focused around the driver, and it has got to change to accommodate the car being the driver; that isn’t the way insurance works at the moment.
Q A
What are the difficulties in classifying autonomous vehicles, and the dangers of confusing this definition?
There is likely to be a new classification of a vehicle capable of this fully autonomous control that is linked to the vehicle registration mark; that may be one way of validating and verifying whether your vehicle is autonomous. Perhaps that then links to the software on that vehicle, because software changes regularly. We have to consider how we determine if you’re using the latest software. If a manufacturer says they can do better by converting to newer software, how do you make sure that everyone has it? Insurers need to know that and the authorities will need to use that.
Let’s say that there is a recall issue and a manufacturer realises they need to patch something quickly. The great opportunity is that they can fix it overnight, like Apple does on your iPhone. There is an opportunity to do this for vehicles, but the authorities and the insurers need to know whether you have version two. Cars can potentially be updated very quickly, but there are a number of risks around knowing what car does what.
Q A
Where does responsibility lie for educating the public about the definitions and use of autonomous vehicles?
The onus is on vehicle manufacturers, and I don’t think they’ve covered themselves in glory yet; manufacturers that are using terms like ‘autopilot’ or ‘self-drive pilot’ suggest to the consumer that the car drives itself. A couple of manufacturers have been pushing that their vehicles are autonomous when they’re not. The manufacturers need to take a step back and understand the marketing advantages while also understanding that there are some fairly big risks in the customer being confused. There is a role for the government and a role for the insurer, but the big responsibility is from the manufacturer not to over sell the
18 Modern Claims
capability of the car. This is not automation, yet, and you cannot buy an autonomous car, yet.
Q
How do you predict the public will perceive autonomous vehicles when they become available? Will they be welcomed or met with scepticism?
A
It will be met with scepticism until they experience it. It will remove the pressure from mundane driving in day-to-day life, and that’s when I think people will get it, as long as when you want to drive your BMW, you can drive it yourself. That is the new proposition for the vehicle manufacturers; people are going to want autonomy as an option, but maybe they don’t always want to use it. They want the choice.
Q
Is there the potential for misuses of autonomous technology, for example distracted or drink driving, and what is being done to prevent this behaviour?
A
There is a risk, as we’ve seen already in a fairly high profile crash in the US involving a Tesla. The driver was perceived as misusing the system as he was apparently watching a film and allowing the car to drive itself when it wasn’t 100% autonomous. A truck crossed the car’s path and the system couldn’t cope with the situation. You are going to get people that are abusing the system, so it is very important that the manufacturer is clear about what you can and must not do. However, there is also technology out there, driver monitoring systems for instance, that could introduce cameras that are watching you to make sure you’re watching. If you’re not, it might disconnect the autonomous system. There is this grey zone, where you have automation that isn’t robust. We need to make it clear that when a manufacturer says a vehicle has full automation, they mean level four automation and not a level before that. Most manufacturers should not be branding their vehicles otherwise, until robust level four automation has been reached. Drink driving could be an issue, because people will see this as an opportunity to get drunk and the car can still take them home. There is technology out there that vehicle manufacturers have demonstrated, like alco-locks, where you have to blow into a key before your car will start. Perhaps we have to look at adopting that technology in order to make sure people don’t abuse autonomy. There needs to be a lot of public information, to ensure people don’t make any mistakes, because there will be people who think it’s safe to do that.
Q
The Vehicle Technology & Aviation Bill proposed a single insurance product for autonomous vehicles. Do you believe this is the best approach to insuring autonomous vehicles, and what are the benefits or pitfalls of this suggestion?
A
We supported the ABI on the formation of the Automated Drivers Insurance Group, a group looking at these issues. This group fed into what was the Modern Transport Bill, now the Vehicle Technology and Aviation Bill, proposing the idea of the insurance product for autonomous vehicles. The big question is, who pays if there’s a claim? There needs to be a new way of writing insurance for these vehicles. We need to understand that if the driver is not driving then the
May 2017
INTERVIEW
You are going to get people that are abusing the system, so it is very important that the manufacturer is clear about what you can and must not do manufacturer may need to provide cover for that vehicle when it’s being driven, as it’s their liability. That is part of the purchase of that vehicle, so if you are leasing the vehicle then you are leasing the insurance cost within. Some manufacturers will insure the car and take on the liability of automated driving, and other manufacturers, like Tesla, have said they won’t. There will definitely be a new model for insurance when we reach level four autonomy.
Q
Is there room for improvement in the relationships between OEMs and insurers to help understand how autonomous vehicles need to be insured?
A
It is a good relationship, and we are trying to work with the SMMT and the European Vehicle Manufacturer Association, for example. They have produced the plans around data availability. If there is a crash, we need to know who was driving at the time, but there could be a temptation for the driver to say it was the car driving and there may also be a temptation for the vehicle manufacturer to say it was the driver driving. We need to know so we can understand and identify who was responsible. There has got to be an understanding between the vehicle manufacturer and the insurer, and the ADIG is going a long way to opening up the manufacturer to the challenges in insurance.
Q
What will Thatcham Research be doing in the next few years to educate the public and the insurance industry to ease the introduction of autonomous vehicles?
A
Our key focus is supporting the ABI group, which is very important, and from the insurer’s perspective we are providing that technical knowledge from the vehicle manufacturer, helping to set policies. There is a way for us to educate, as we produce a lot of media material to explain the difference between an automated and assisted driving car. We need to continue to deliver that education and that message because it is going to become more and more important. The technology we have on vehicles today is really good; it’s going to help to save lives, reduce causalities and reduce court and insurance costs, so it’s all positive, but ultimately you are still the driver.
May 2017
Matthew Avery Matthew Avery is Director of Research at Thatcham Research – the independent voice of automotive safety & repair, advising motorists, insurers and vehicle manufacturers to help reduce accident frequency, severity and costs and to realise the vision of ‘Safer cars, fewer crashes’. As well as its world leading crash and track research, Thatcham Research tests and accredits crash repair parts, vehicle repair technicians, and a number of other products and services within the collision repair industry for insurers, motor manufacturers, equipment manufacturers and suppliers. A founder member of the international Research Council for Automobile Repairs (RCAR), Thatcham Research has also been a member of the European New Car Assessment Programme (Euro NCAP) since 2004.
Modern Claims 19
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20/12/2016 09:44
EDITORIAL BOARD
The evolution of the drone
Curbing claims management companies
What role might drones play in the not-too-distant future of insurance?
Do claims management companies have a role to play in the claims sector, and how can their negative influence be countered?
sing drones may seem either a little futuristic, something for hobbyists, or an extreme way to get a selfie, but the fact is that they have already become a part of how we deal with claims, particularly larger and more wide-reaching ones. They also pose a question around the risks that they present themselves, and how insurance policies can adapt or how new ones can be created to take them into account.
ew subjects unite insurers and lawyers in the way that CMCs do. The Brady review of CMCs may have concluded that under the right regulatory regime they do have a role to play, but their pernicious influence is still felt by all. Their growth has undoubtedly fuelled the public perception that there is easy money to be made, and they have directly led to the position we are in today.
We have used drones across the world to ‘see’ damaged properties in dangerous locations where there may be claims, and this helps us inform customers about potential damage and process their claims more quickly.
Within the confines of its legal powers and resources, the Claims Management Regulator has worked hard to limit the damage done by regulated CMCs, but there are worrying times ahead. Having a lower cost base and significantly fewer regulatory burdens, CMCs, and increasingly McKenzie friends, will be able to exploit the damage about to be wreaked by the Government’s whiplash reforms. Better able to make the numbers work, they are likely to flourish in the new claims market after October 2018.
U
Drones used in this way are essentially an extension of other types of visual assessments we’re already able to do. For example, we regularly use a wealth of information about sites where there may be claims to do remote assessments, long before we ever visit a customer’s factory or home, and one way of doing this, even before the drones have been sent in, is to look at imagery from satellites and aircraft. In 2016, we used this approach to assess property in the path of huge wildfires in Alberta, Canada, which burned through the town of McMurray. We were able to review customers’ claims for McMurray just two days after fires forced the town’s evacuation, and long before anyone could enter the site. It was possible to link the pictures of the damage and cross reference this with our risk modelling and underwriting information. We also looked at the status of evacuations, and how quickly the fires were spreading by monitoring social media. As I write this, sat outside our global head office in Zurich, a drone is buzzing overhead, probably taking pictures of the lake in the evening sunshine. Their easy availability does however also pose a question for insurers about mitigating any risks they may present. And again, in Canada we have extended property and liability insurance for “Unmanned Aircraft Vehicles (UAV) under 25 kilograms.” Although aimed at commercial customers who may use drones to complement their main operations, insurers are looking at the evolution of drone usage across all its forms – including for leisure, like the one over my head. The coverage we’ve applied includes physical damage, theft and bodily injury and we expect it to be relevant to operations such as power generation, mining or construction. But it won’t be long before this sort of cover appears across other markets as well, including the UK.
F
The inherent problems associated with the off-shore or unregulated market will remain, but more can be done for the regulated market too. It is worrying that we have yet to see the primary legislation necessary to authorise the transfer of responsibilities for the regulator from the MoJ to the Financial Conduct Authority. The chances of it happening in time to correspond with the 2018 date for the other reforms are dwindling rapidly. A key recommendation of the Brady review, holding directors personally responsible for the actions of their company, needs to be fast-tracked, without further prevarication. With penalised firms being liquidated before fines can be paid, so-called phoenixing can only be tackled at the individual level. Many smaller CMCs have found that accident management activities, including recovery, storage, repair and vehicle hire, have become more profitable than injury claims, yet these areas are not addressed in the legislation before Parliament. Whatever action results from Part 2 of the reforms covering some of these areas needs to be implemented speedily. There is also the vexed issue of cold-calling. The restrictions may have been tightened, but too many are still blighted by nuisance calls and texts. The CMR and the Information Commissioner’s Office urgently need the legal powers to make the regime more robust, and the penalties more of a deterrent. I fear that the agenda being pursued by the Government against legitimate small claims will only exacerbate the negative impact of CMCs, and significantly more needs to be done to counter them. Donna Scully, Director, Carpenters.
Alex Jones, Senior Media Relations Manager, Zurich UK.
May 2017
Modern Claims 23
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EDITORIAL BOARD
An interesting decade
Decreasing the discount rate
How will the driver’s relationship with their vehicle change in the next decade, and what effect will this have on insurance?
What effect will a decrease in the discount rate for personal injury claims have on claimants and the wider claims and insurance sectors?
e are now entering what I think will be the most transformational and disruptive period we have ever seen in the automobile space, and this will clearly have a massive impact on insurers as well as motor manufacturers. Driver assistance systems currently available are moving towards being able to provide fully autonomous driving, with options in the future to buy vehicles that allow you to interact whenever you feel the need to take control, or more ‘Pod’ like vehicles that allow no real interaction at any time.
017 was a historic moment as the discount rate was reduced from 2.5% to -0.75%. The aim is for injured people, once again, to achieve damages that put them in as close a financial position as possible post-accident as their uninjured life would have produced, in accordance with the principle of the House of Lords in 1999 in Wells vs Wells. Considered controversial by compensators, who question the affordability for society, the Lord Chancellor described it as the “only legally acceptable rate” after a very thorough review.
In addition to this amazing new functionality, people’s attitudes are changing, the ‘Sharing Society’ and ‘Millennials’ being the buzzwords that represent a world where we are less hung up on actually owning things, and much more willing to share. People have been talking about the ‘Uberisation’ of insurance, looking for clever technology in the claims handling space perhaps. But maybe the biggest disruption will come from Uber themselves. A recent Deloitte report suggested that in some population segments, over 60% were regularly using ‘Ride Hailing’ services, and as a result questioning whether they actually needed a vehicle of their own. These trends are more pronounced in the big cities, but then another trend is that an increasing proportion of global population will be living in ‘Mega Cities’ in the future.
Claimants can now invest damages in low risk Index Linked Government Stock and expect yield to fairly match the projected net loss in their schedules of loss. Identified by experts, those who have been afraid to spend on needs, for fear of funding running out, can now purchase what their award was designed to provide. The stress of future financial planning has been removed.
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Less people will be owning their vehicles, and those that do will drive it less themselves, relying more on autonomous functionality. So what does that do to insurance? Well, roads will be safer, and whilst individual accidents might cost more because of the cost of all that tech, overall claims costs will be down and therefore premiums will fall. That’s the simple theory, but if you choose to retain an option to drive, will those moments become much more dangerous as you are less practiced and therefore less skilful at avoiding collisions? Fortunately, I think that the safety benefits will outweigh any minor deskilling, premiums will fall, and with less cars in private ownership that’s another big hit for the motor insurance market. One consultancy has predicted that conventional motor premiums will drop by 80%; that sounds a bit optimistic to me, but shows the potential for disruption ahead. With regard to timeline, it’s said that we always over estimate what will happen in the next two years, but underestimate what will happen in ten – it’s going to be a very interesting decade! David Williams, Technical Director, AXA Insurance.
2
All claims involving future losses have had to be revalued whether pleaded in schedules, requests for interim payments or settlement offers that pre-dated the change. The extra court and legal fees arising from revaluations must be provided for, through cost budget variation or otherwise. It remains to be seen whether the respective uptake of lump sum settlements versus PPOs shifts in favour of the latter. The vexed calculation of future accommodation claims pursuant to Roberts vs Johnstone is again at the fore. Designed to compensate loss of capital where a claimant purchases a more expensive property to meet their injured needs, the risk of producing a windfall for the claimant is overstated. The new rate will produce negative figures. A suitable case needs to accelerate through the court and produce binding but practical authority. Whether that endorses provision of a life interest in a new property, compensating a notional rental value or perhaps meeting the interest element of a new mortgage remains to be seen. Speculation that the value of claims may double or treble has led to fears of escalating insurance premiums, just after insurers had promised a £40 reduction per household following the announcement of whiplash reforms. Although the effects are far reaching, a new consultation has already opened to determine how the rate should be set in the future (closing date 11.5.2017) so further change is inevitable. Amanda Stevens, Group Head of Legal Practice, Hudgell Solicitors.
May 2017
Modern Claims 25
EDITORIAL BOARD
The Future of Professional Indemnity Insurance Professional Indemnity insurance benefits from high demand, due in part to the number of professional bodies and trade associations whose members buy cover. What is its future and how adaptable is it to changing conditions? hen considering this question, three areas spring to mind: short term changes in conditions for insurers, the risks of new models of service delivery and the responsiveness of the PI product to new and emerging risks.
W
Claims are perceived to be linked to changes in the economy. This fundamental principle may vary by profession and timing effects. Reductions in investment, asset bubbles and sudden changes that expose flaws in operations or financial weakness seem to give rise to increases in claims activity. A reasonable question is, are we about to enter a period of increased economic uncertainty? Even if claims do increase, however, a hard insurance market is unlikely due to the broad conditions prevailing. The current environment of static or falling rates does give the industry the opportunity to offer more responsive cover in a way that addresses new and emerging risks in a coherent manner. Many polices are very broad, but will they need to adapt to the new risks of digitisation and be responsive to new business models? New risks and new risk profiles create uncertainties about insurance response. The risk landscape for all organisations is evolving; data breaches and the Internet of Things are two sources of uncertainty. Technology’s influence on delivery raises questions about who is liable, where, for example, software solutions or artificial intelligence are applied to problems previously addressed by humans. There are new security issues arising from the supply chain. Services may be delivered through or with the help of alliances. Who is liable if something goes wrong, and is the insurance response aligned? These trends are irreversible, as clients demand more efficiency and the competition adopts new models that permit more specialisation and commoditisation in professional services. The evolution of cyber insurance is a good example of how the insurance market is delivering innovative solutions. However, improvements are possible. PI insurance largely picks up client risks, but also other risks exist such as employee privacy, migration costs and regulatory fines and penalties. There is a strong logic to package cyber and PI insurance for the benefit of the buyer. Buyers are concerned about risks that arise from professional services that are not covered by conventional insurances. There is high concern about regulatory and reputation risks. Current conditions create a great opportunity for the insurance industry to be responsive and move away from providing cover in traditional product silos.
Personal Injury Law Firm Agenda 2017 Improving profitability and banking relationships n my last article I considered the questions PI firms should be asking themselves at this critical time of government reform. Banking relationships are crucial to underpin the significant funding requirements of PI firms. With uncertainty ahead, banks are understandably cautious, and whilst they have appetite to lend, they require assurance around a firm’s PI business model and future profitability. When bank funding runs out, some law firms turn to secondary funders. I have witnessed secondary funding in PI claims with poor prospects, which casts a doubt over some funders’ lending criteria. Let’s be clear: funding poor claims with increased debt does nothing to help law firms.
I
The answer?
When asked to look at law firms’ funding requirements, it’s never a one-dimensional exercise. I do not want law firms to become debt ridden with bank or secondary funding, incurring hefty arrangement fees and interest charges, struggling to operate within facilities and requiring constant review. Rather than proceeding straight to increasing debt, I prioritise the unlocking of WIP and disbursements to generate cash and improve profitability.
Complex PI with high value WIP and disbursement
Delivering on billing targets sets the tone for conversations with banks and strengthens banking relationships. Under closest scrutiny are high value, complex PI claims carrying high WIP and disbursement lockup. In every firm I have worked with, I have found claims within this category that are capable of generating cash. Fee earners working on demanding PI caseloads often proffer many reasons as to why settlements are delayed and billing targets cannot be achieved. However, a targeted and strategic approach can support fee earners to bring cases to settlement.
Cash realisation
Deliver “quick wins” on cash realisation by focusing on liability admitted claims that could be capable of settlement. Address what is holding them up from settling as a priority. If a claim is not ready for settlement request an interim payment on account of costs.
Strong relationships
Trading through these difficult times is not going to be easy for PI firms and the banking sector. When a firm demonstrates that it is tackling WIP and disbursement lock up, generating positive results in cash realisation, it instills confidence in its banking relationships. Why not use the forthcoming PI reforms as the catalyst to kick-start your firm towards a stronger, more profitable and commercially savvy future with confident bank relationships to boot?
Keith Tracey, Managing Director, Aon Risk Solutions. Lesley Graves, Managing Director, Citadel Law.
May 2017
Modern Claims 27
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EDITORIAL BOARD
The insurance implications of autonomy What are the implications of the Vehicle Technology and Aviation Bill in regards to ADAS and autonomous vehicles? he development of advanced driver assistance systems (ADAS) and automated vehicles is happening quicker than many thought possible, pushed along by the collective interest (and investment) of car manufacturers and tech companies.
T
It is not hard to understand why they’re so keen. This exciting new technology has tremendous potential to make our roads safer and bring wide-ranging benefits to society and the wider economy. The government is rightly seeking to embrace change, funding research and bringing in new insurance requirements through the Vehicle Technology and Aviation Bill. This will extend compulsory motor insurance to include cover for an automated vehicle whilst it is operating in an automated mode or ‘driving itself’, and will operate on a ‘single insurer’ basis, i.e. the same insurer provides both conventional and extended cover. That decision is welcome as it’s not dissimilar to the strict liability model Ageas previously called for. It means that the users of autonomous vehicles will be properly protected if they are involved in an accident and won’t be left in the middle of a tussle between different insurers, car manufacturers and tech companies over where liability lies. It is a sensible approach that insurers, car manufacturers and tech companies can all get behind, meaning that automated vehicles can be tested and deployed on our roads within the most appropriate legal framework. The Bill will give the Transport Secretary delegated powers to determine what is (and isn’t) an automated vehicle, and no doubt he or she will be guided in this by forthcoming changes to vehicle type approval regulations. However, it is also going to be extremely important that the end customer understands in simple terms what is meant by an automated vehicle, what it will be capable of and what automated modes (e.g. motorway driving, valet parking) the vehicle can support. There are a range of different technologies and capabilities being developed, and a detailed understanding of their capabilities will be essential for insurers to price risk accurately. Access to key data after an accident, to determine what happened and whether there was any issue with the automated systems, will be critical. Insurer and car manufacturer industry bodies are now starting to consider the best way in which this could be delivered.
One voice for Bodyshops or the first time in many years there is now one collision repair trade association in the UK. Instead of the MVRA, the VBRA and the RMI, and then for an interim period the amalgamation of all three called RMI Bodyshops, there is now one single, consistent voice representing body repairers.
F
National Body Repair Association (NBRA) has been created to guide bodyshops, both single sites and groups, through an everchanging industry and provide the support they require now and into the future. This isn’t just a reskinning of the bodyshop trade association. This is an in-depth look at why the NBRA exists and what the brand needs to deliver for the market. The challenges of the market demand more, and the NBRA is going to be more. Among the areas where NBRA will fight the bodyshops’ corner is risk management regarding data, safe guarding repair funds with accident management companies, and the growing technicality within vehicles. The new-look NBRA is also planning to be an enabler for greater cooperation between bodyshops and insurers when it comes to pricing, with the soaring rate of premiums often placed at the feet of the repairer. Insurers claim the rising costs of returning evermore complex vehicles to their original state is a driving force behind the record premiums, but the NBRA will provide a robust rejection of that argument and encourage both sides to find a solution that works for all. The NBRA will inherit a long-established relationship with MPs and have access to a substantial set of lobbying support. With that sort of power, coupled with the leverage that comes with being the only, all-encompassing association for an industry, the NBRA believes it can be an influential voice in the crash repair world with the authority and power to make a real difference. Bodyshops have been through a huge pain cycle in the last ten to fifteen years. There’s been a lot of consolidation that has reduced their number down to about 2,000 who now perform 80-90% of the accident damage repairs. This remaining core will need to address the challenges with a single, consistent voice through the NBRA. Jason Moseley, Executive Director, NBRA.
Ageas is excited by the development of automated vehicles and is continually working to understand the effect they’ll have on our customers and their insurance needs. The Vehicle Technology and Aviation Bill is a significant change, which we welcome. We look forward to working with the government to get it right so that we can get automated vehicles onto our roads. Matthew Thomas, Strategy & Planning Director, Ageas.
May 2017
Modern Claims 29
EDITORIAL BOARD
Are you making the most of the Bar? e have been flat out on some very exciting projects that have all started to reach the news sphere recently; one of which is a contract we have been awarded with Ageas Law to provide our barristers to them and deliver greater choice, efficiency and control in instructions. We’re working on similar confidential projects with commercial legal entities, which has all made me wonder; are others making the most of changes to accessing advocacy and advice from the Bar?
W
The unbundling of legal services, artificial intelligence, better automation, enhanced customer journeys and user experience are all examples of how we can create greater customer satisfaction. These lie at the heart of how to improve access to legal services for consumers; but surely that’s what practitioners want too? The last three years have seen overwhelming and exciting innovations to help test the value of joint ventures, improve and measure marketing, aid client communications and speed up case management in the legal sector, but instructing the Bar hasn’t changed. I’m not saying we should ditch the traditional ways entirely, but those who want something different should be offered the choice.
Imagine being able to work with over 1,000 barristers who are qualified to be instructed by both lawyers and non-lawyers. This suits claims handlers in insurance companies and claims management companies who may or may not have in-house solicitors. These professionals, working in highly tuned legal businesses, may not want to spend time relying on a multitude of barristers’ clerks to negotiate a fee or check availability. While some of our clients negotiate contractual fees with us for counsel then choose their barrister and instruct them at the click of a button, others prefer the direct access route, to agree a fee with their barrister immediately. It’s all about preference. Many legal or insurance enterprise owners don’t know you can instruct a barrister directly or work with a national barristers’ chambers in this way. We can also work directly with the public too, so it could be that there are legal services we offer that you don’t, but that your customers need. Brand Bar is bigger than we all think; the public recognise the barrister’s wig and gown and we see the value in that recognition. Stephen Ward, Managing Director, Clerksroom Barristers, Clerksroom Mediation, Clerksroom Direct, Public Access Portal.
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EDITORIAL BOARD
Representation for Rob?
The need for MLEI
What are the potential benefits or pitfalls to fixed tariff system for whiplash compensation?
How can brokers continue to offer legal protection for their customers post whiplash reforms?
W
ell that really depends on what side of the line you are standing on.
From an insurer perspective, you have to be rubbing your hands and pinching yourself in disbelief. Not only do you win a watch with the increase in the small claims limit, you also get the golden goose of decades of well-reasoned jurisprudence cast to one side at the same time. The alleged benefit that will come to the average motor insurance policy will apparently be £40 (albeit there is a resounding lack of binding commitment from the ABI and its membership to actually delivering this figure), and undoubtedly the proposal will also generate significant increases in profit for motor insurers, which will be good for their fat-cat bosses and shareholders. From the point of view of someone injured in an accident that wasn’t their fault, the picture looks considerably darker. Firstly, the increase in the small claims limit means that they either have to represent themselves against an insurance company or alternatively fund the cost of representing themselves due to the removal of costs. Secondly, if they do manage to overcome that hurdle and prove their case, the damages they receive will be a fraction of what insurers, solicitors, judges and the Judicial College have assessed as fair and reasonable. That is because the government, in their wisdom, have simply decided to make up some figures to replace the awards set down by the judiciary. So let’s look at an example of a case. Let’s call our injured person Rob (because he is about to be robbed). Rob is in an accident and suffers an injury lasting six months; an unpleasant experience I’m sure we will all agree. Today, Rob gets proper legal representation and those costs paid by the at-fault party. He gets £2,150 in compensation (the average sum set out in the reform table). Come October 2018 though, in exactly the same scenario, Rob has to either go it alone or fund the case himself, and for the same injury he gets £450. However, it’s not all bad news for Rob. He’s saving £40 on his car insurance each year. Rob likes to keep himself in good shape and eats well. That’s a good job because it will take 42 and a half years of £40 savings for Rob to make back the £1,700 in damages he is losing out on. So, while the champagne corks are popping at the ABI, the future for the population of England and Wales is a rather more sobering experience. There are 60,000,000 potential Robs out there who are all about to suffer the same fate. Scott Whyte, Managing Director, Watermans.
t is clear that the recently announced PI reforms are going to have a significant impact on the motor claims and legal expenses market. More importantly, whilst these changes may seem comfortably distant, the reality is that the impact on motor policy sales is just a few months away, with policies incepted in November this year becoming the first that will need to operate under the new rules when they come into being in October 2018.
I
The clock is ticking for brokers to consider how they will set about meeting customer needs and TCF requirements when recommending a motor legal expenses product. What should brokers be considering in their review? Motor Legal Expenses Insurance (MLEI) will become more important than ever to customers. Whilst the present system sees solicitors offering their services to claimants at no cost, the reforms will see this advantageous position changed, much to the customer’s detriment, as legal costs will no longer be recoverable within the small claims track. As a consequence, it is clear that customers will have a much increased need for quality MLEI cover that will provide the service they need at a cost they expect. In the future, customers who choose not to take out MLEI will, in the event that they suffer a non-fault injury, be left without protection and face the difficult option of either pursuing their own ‘DIY’ claim against the responsible driver’s insurer or taking their chances with a cold calling claims farmer. MLEI is, however, a complex product, and there is no ‘one size fits all’ product in this space. Careful assessment of exactly what MLEI provides is a critical factor. In particular, many existing policies explicitly exclude small claims track cases and this, post-October 2018, will leave customers with virtually no protection, with the majority of injury claims falling under the proposed £5,000 small claims limit. Another significant factor will be an understanding of how MLEI claims will be handled and by whom. Given that future claims handling models may not include claimant solicitors, it will be essential to assess the expertise of the service provider and ensure that the delivered service represents the broker’s brand in the best possible way. Brokers should speak with their Motor Legal Expense providers now, in order to clarify how they will manage the transition into the new world, from November this year, and deliver the requirements for customer protection and commercial viability for the broker. In short, all brokers need to be thinking and planning now for these changes. They need to be reviewing their current MLEI provision, in order to understand how they will be adequately meeting customer demands and needs as we move into the new regime. Jason Tripp, Operations Director, CoPlus.
32 Modern Claims
May 2017
EDITORIAL BOARD
What role does MI data have in selling personal injury at value? M
I data that gives granular visibility of the caseloads is critical in achieving value in selling personal injury cases and firms. The better the data, the better the value achieved.
With very poor MI data, it is unlikely that a firm could realise a cash upfront deal of value, and it is more likely that a full earn deal would be offered in place of any cash up front. Most buyers observe LTV rates offered by lenders (there are few firms out there who have unfettered cash resources), and therefore, would be willing to or able to offer cash upfront if data is poor. A clear picture on paid, but unbilled, disbursements is required, as in most deals this is the most likely point a buyer will offer cash and near to the firm’s value. The Firm must also be able make a clear distinction between on-going cases, settled cases, and those in Costs. Settled cases should attract a much higher percentage of realised fees for the Firm and, as such, must be separated from on-going WIP files. It is best to separate these entirely from the on-going files and create separate statuses for Cost’s files progression. At the point of sale, the Firm must be in a position to understand what has been sold, and at what stage the cases have reached. Without this information, it is not possible to create a cash flow forecast of future anticipated receipts from the Buyer. The Seller is disadvantaged, as it will not be able push the Buyer for receipts as and when they are expected to fall due.
Deal Practicalities
On reviewing the quality of the data, and the effort required to deliver it so far, any Buyer will also have to consider the effort required to transfer the MI to their own systems. Where a potential Buyer has a higher level of MI, the current state of the data may act as a barrier to a deal being made, since some may perceive the effort too much. Relying on the Buyer to cleanse and populate data puts the Seller at a disadvantage in maximising the number of cases carried forward. It is possible that with a low cash outlay, and future payments due on realised cases, the Buyer will adopt a “path of least resistance” and close any case it considers marginal. This will impact on the eventual value realised by the Selling Firm. Zoe Holland, Managing Director, ZebraLC.
Weighing up whiplash reforms What are the potential benefits or pitfalls to a fixed tariff system for whiplash compensation?
T
he MoJ’s whiplash claims reforms, although significantly challenged by many in the industry, are due to take effect towards the end of 2018.
According to the MoJ, the reforms firstly will crack down on the compensation culture epidemic we are experiencing. Most will be in agreement that those who make fraudulent claims do need to be exposed and prosecuted as such, however, introducing a fixed tariff system may not be a guaranteed method of eliminating these claims entirely. There could still be plenty of potential for exaggeration so as to tip them into a higher level of compensation, in theory meaning insurers will still need to identify fraudulent claims, contrary to the Government’s proposals. Many insurance companies are concerned at the amount of fraudulent claims and state this as the reason for increased premiums. However, claimant solicitors do not believe that this has been sufficiently evidenced by independent figures. Many are arguing that the number of whiplash claims registered by the Government’s Compensation Recovery Unit suggests a decrease in figures. Upon analysis of these statistics, the MoJ believes the differences in the labelling of claims may be responsible, as when soft-tissue injury claims labelled ‘back’ and ‘neck’, are combined with ‘whiplash’ claims, the number increases significantly. Another benefit to the proposal, as per the MoJ, is a means to end the cycle of honest motorists paying out higher premiums to cover false claims. It’s believed that the current ‘substantial financial incentives’ encourage exaggeration of the severity of injuries sustained, and introducing a fixed tariff system will tackle the issue. Agreeably, banning claims without medical evidence is sure to actively discourage many, and it’s expected as a result it will cut car insurance premiums by £40 a year. These savings can then be passed directly onto insurance companies’ customers. However, this has been met with scrutiny from some, as the Government is on record saying they will not force insurance companies to forward the savings, leading to the belief by many that premiums will realistically continue to rise. Ultimately, it remains to be seen how significantly these changes will affect the legal sector as a whole, and more specifically how PI claims will be managed under the new reforms. The next year or so will no doubt provide an interesting insight into the future of RTA claims, and how the legal services market is going to adapt. Sarah Roberts, Marketing Executive, Eclipse Legal Systems.
May 2017
Modern Claims 33
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FEATURES
The millennial insurance consumer While this issue’s Legal Consumer supplement will attempt to explain how consumers of legal services have changed, Daisy Gleeson, Digital FIneprint, explains how insurance customers have also evolved, and how insurers can utilise social media to help provide the bespoke service they expect. he world is constantly changing and trends come and go. One thing that has remained concrete throughout the centuries is insurance. It has stayed stubborn to its roots; the Lutine Bell still resides in the Lloyd’s of London building and has done since the 1890s. But is this a good or a bad thing? There is no denying that since the inception of the Internet in 1991, the way people spend time, shop and live has changed exponentially; have the industries managed to keep up?
T
In just a few years, we have almost completely put our lives online. Before, we might have spent our Saturdays in town, browsing through clothing stores, visiting the local travel agent or queuing at the nearest bank branch to organise our accounts. Many industries have acknowledged this shift in dynamics and have adapted accordingly; nearly every clothing brand has an online store, travel agents are a thing of the past as price comparison websites have all the best deals and packages to book flights, hotels and hire cars all in one go, and online banking has revolutionised the way we save, spend and transfer our money, the reason for this being the evolution of the Internet. Prior to this, companies would rely on telemarketing, word of mouth or printing and broadcasting adverts to entice customers. Now, all a consumer has to do is simply Google “holiday in the Maldives”, and they are bombarded with some 30,000,000 results in 0.56 seconds, all offering competitive package holiday deals. The problem here is that consumers have almost too much choice. Research carried out by Retailing Today showed that 81% of shoppers research online before making a purchase and visit five unique stores, three online and two brick and mortar, before actually going through with the purchase. So how can companies that are offering the same product at the same price stand out above the rest? Good brand values and mission statements that align with the customers could be a deciding factor. For example, coffee brand Kenco runs a Coffee vs Gangs campaign, which trains young people in Honduras to be independent coffee farmers to deter them from joining gangs. This might encourage more people to buy their product, although it might be more expensive, as they know their purchase is going towards something good.
One foot on the ladder
Worth a hefty $7 trillion, there is no doubt that the insurance industry is one of the most prominent in the world and is showing no signs of disappearing anytime soon. However, where do they stand on the ladder of the digital revolution? In all honesty, they’ve got one foot on the first rung and the other foot on the floor. Other industries have been reaping the benefits of moving online, whereas insurance is floundering behind, still relying on disparate broker channels and cold-calls to try and gain new customers. It
36 Modern Claims
Other industries have been reaping the benefits of moving online, whereas insurance is floundering behind, still relying on disparate broker channels and coldcalls to try and gain new customers doesn’t help that insurance is viewed by many as a necessary evil and the corporations behind it as money-grabbing and unfair. Other industries have adapted well to the change as they offer their customers a shorter and simpler customer journey, which is a stark contrast to the lengthy and complicated process a person would have to go through to get an online insurance quote; this is where their major downfall lies. Insurance companies tend to have a long list of decision makers who are involved in making changes, and this means changes rarely happen, if at all. Some companies have tuned into the change and have adapted well; one well-known peerto-peer insurance company’s unique selling point is their annual “giveback” scheme, where unclaimed premiums are donated to a charity of choice. This makes them appealing because they lose their greedy and unfair title, since they aren’t reluctant to pay out for claims as it doesn’t damage their overall profits.
Generation of renters
This all leads on to an interesting question. Does the insurance industry need to modernise? Many would agree that it does. The way we live today has changed dramatically, even in just the past decade. With 16.2 million millennials in the UK alone, they now account for the largest generation in western history and pose as a great market opportunity. However, with Generation Y running things, there has been a complete change in demand and with it, a shift in needs. Probably the most documented change between millennials and their parents is the steady rise in the average age of marriage; in 1993 the median age was 27 and by 2013 it had increased to 29. As well as this, earlier generations had the luxury of being able to buy their own home, which is something that is becoming less and less common today due to the ever-rising cost of housing. According to the Office for National Statistics, a home in London in 1996 cost on average £79,000. Today, that same home costs £488,908. Nicknamed a “generation of renters”, one in three residents in London believe they will never own a home, and this is just one way in which insurance needs have changed.
May 2017
FEATURES
Although there is a strong case for them to adapt and modernise, the truth is that there will always be a need for insurance, regardless of whether it continues to operate in the same way it did 300 years ago Some people have realised that there is a serious need for change and that has led to the birth of InsurTech companies. They understand the problems insurance is plagued with, and they have the passion for wanting to be that change. They can adapt to change quickly and don’t face the hindrance of long decisionmaking processes and slow turnaround times like the insurance giants do. With a lot of the entrepreneurs being millennials themselves, they understand the customer and the need for fuss-free applications, affordable premiums and the knowledge that their insurance provider will pay out in the claims process. A way in which the insurance industry has successfully modernised is the introduction of “on-demand” insurance. Car insurance is a good example of this, with many of them offering a pay-per-mile insurance plan, enabling consumers to only pay when they use their car and not on an annual basis, which is costly to those who are infrequent drivers. Similarly, there has been a rise in on-demand contents insurance, whereby policyholders can simply turn on and off their insurance when necessary via a mobile phone app, reducing costs. This is particularly appealing to millennials, who have on average just £176 left after repaying student debts and spending on basic living costs, per Aviva research. Although there is a strong case for them to adapt and modernise, the truth is that there will always be a need for insurance, regardless of whether it continues to operate in the same way it did 300 years ago.
Social media opportunities
With 2.51bn active social media users worldwide (1.87bn of these being regular Facebook users), there is no denying that social media poses a great opportunity if insurers can understand how to utilise it effectively. First and foremost, it can be used as a marketing channel to reach out and engage with new and old customers. Research carried out by digital marketing specialists Speedie Consultants has found that 50% of people use social media to research an insurance product and one in five of these people use Facebook. Using social media as a marketing platform allows a company to have more control over who is being targeted in their campaign and ensures that money is being spent effectively to reach them. Insurance companies especially can benefit from using different social media channels to advertise their product. as they can specifically target those in certain areas, of specific ages or even different income levels.
journey, as they would not become confused with long, complicated online insurance quote forms, reducing the number of drop-offs and increasing online conversion rates for the insurer.
Fraud and Facebook
An article published by the Association of British Insurers stated that 350 insurance fraud instances worth £3.6 million are uncovered every day. With this in mind, social media could hugely benefit insurers if quotes are generated for customers using their social media data. There is no room for the buyer to falsely represent themselves in the application, as all data is gathered automatically from their profile once the user has granted access. This provides a veil of transparency between the insurer and the buyer and encourages trust between the two parties. Although it can be tempting for an insurer to scour someone’s Facebook, Twitter or Instagram profiles, especially if they have recently made a claim, to try and find evidence of fraudulent activity, this is not only expensive and time-consuming, but it also will not avert those who remain away from social media altogether. In May 2018, the General Data Protection Regulation (GDPR) will come into effect throughout Europe and it will be illegal for insurers to gather information unknowingly from a user’s social media profile without consent, meaning it is likely that the industry will have to shift to ensure full compliance, improved engagement and complete honesty from both sides. There is no denying that both consumers and the way we buy insurance has changed. Baby Boomers and Generation X are being replaced with Millennials and Generation Z, who have different values, motivations and mindsets. They don’t like to be sold to, and if they feel they are then they probably won’t buy just out of principle. 70% of young people say that travel is their main motivation to work and earn money, they view insurance as an expendable, with many having the feeling of “it won’t happen to me”, all paired with living in a consumer-driven market, and insurance companies just can’t compete with full-blown marketing campaigns and catchy adverts. They fail to engage with them, and as a result, they lose them. Millennials are the most under-insured generation alive today, and if insurance giants do not adapt soon, they risk losing an entire generation of customers, and perhaps the next generation too. Daisy Gleeson is Marketing & PR Manager at Digital Fineprint.
Social media is a place where we all willingly divulge personal information about ourselves, posting our life events or when we get a new job as well as information about where we live and our age. This could be a great tool for insurers, if used correctly. They could benefit from learning how to harness a person’s social data and analyse it to provide smarter underwriting, pricing, cross-selling and targeted marketing. This alone would vastly improve the customer
May 2017
Modern Claims 37
FEATURES
Know your customer Ian Hughes, Consumer Intelligence, examines the claims industry from the point of view of the customer, and asks how the industry can change in order to offer a better service.
T
he insurance industry talks a lot about ‘digital’, but the use of the word has been split into two different, somewhat competing camps.
In one corner, incumbent providers are using digital capabilities to improve their customers’ experience through slicker purchasing and quicker claims settlements. In the other are tech start-ups who are turning insurance on its head and coming up with something totally different, like So Sure and Lemonade. At its heart is an acknowledgment that customer expectations and business models are shifting to meet them. Digital isn’t new to insurance, and it hasn’t always made things easy for providers. The advent of price comparison sites ushered in an era of unprecedented transparency that showed how broken some parts of personal lines had become. For the first time, dual pricing was laid bare and industry took a reputational body blow for being more expensive for loyal customers, something it has not yet recovered from. As a recent survey we conducted showed, people trust their hairdresser more than their insurance company. The disruptors are trying to address the real problem with the way insurance is set up; it’s very difficult to trust someone if you think their driving force directly opposes yours. The majority of the industry knows that good insurance companies like paying claims and delivering on their promise. And yet our research showed that the most common perception of insurance companies was that they are a necessary evil. This underlines the consumer understanding that an insurance company exists to make money, and the perception that not paying out in claims helps them to achieve that goal. Where start-ups like So Sure are clever is that they charge via a monthly subscription model, something comfortably familiar to a generation of Netflix and Spotify users, and refund money if its customers don’t make a claim. While a sizeable minority of insurance customers would always prefer to trust an established brand with something so important, most are open to placing their policies with a new company. When we asked 2,000 consumers, only 23% said they wouldn’t consider supporting a start-up insurance company trying to disrupt the sector. This doesn’t threaten insurers in the way that Uber poses an existential threat to traditional taxi firms. Becoming a regulated insurer is incredibly capital intensive, and the tech start-ups have little interest in using their seed funding for banking reserves. In other words, start-ups still need to work with insurance companies to pool risk in the traditional sense.
38 Modern Claims
As a recent survey we conducted showed, people trust their hairdresser more than their insurance company Where digital innovation can majorly disrupt is the relationship that traditional brands have with their customers, relegating underwriters to risk carriers without personality. One way to overcome this is to be transparent with customer reviews. Research shows that people trust recommendations from their friends and neutral third parties over claims from the companies they’re buying from themselves. Good brands have nothing to hide here. Our research with 4,944 motor insurance claimants showed that 81% either strongly agreed or agreed with the statement “Overall I was happy with the way my claim was handled.” Only 5% were dissatisfied. The best companies use sites like Feefo and Reevoo to invite feedback, good and bad, and respond individually to any complaints through the site. That’s another opportunity to tell customers you actively step in if someone isn’t happy, and that it doesn’t happen very often. Thinking about the service you received during the claims process, please could you tell us how much you agree with the following statements? - Overall I was happy with the way my claim was handled
44% Strongly Agree 37% Agree 24% Neutral 3% Disagree 2% Strongly Disagree
May 2017
FEATURES
Retailers like Amazon have raised expectations and there is a danger that customers are changing faster than insurers can respond The only way to achieve the best level of customer satisfaction for claims is to work really hard all day every day in delivering the best customer claims experience, continuously trying to improve it and for your customers to recognise that. In particular, making it easy and regular communication are really important to customers in a crisis. And that’s not easy to do with so many different companies in the claims supply chain. The companies that do it best do it really well. We asked customers about their experiences and they told us that the best are, in alphabetical order:
To understand more about these changes, we asked consumers what they would want from their insurer and claims handling experience. They gave us four key areas for development and focus, which includes a clear message on the importance of service and the customer experience.
“What innovative idea would you suggest to insurance providers to improve their service?”
Top 10 companies in the UK for claims satisfaction
• Use the potential from existing and emerging technologies. • Develop agile, flexible products. • Remember that Price isn’t everything – Experience is. • Interrupt and re-route the consumer journey.
Motor Claims Satisfaction
Know your customers
1. Aviva 2. Churchill 3. Co-op Insurance 4. Direct Line 5. esure 6. LV= 7. More Th>n 8. NFU Mutual 9. Saga 10. Swinton Insurance
Home Claims Satisfaction
While it’s easy to get excited about the new world of digital selling and customer contact, the phone remains a consistently important channel of communication. Although online shopping has become the dominant channel for new quotes, contact centres should also be at the ready as consumers seek quotes and clarification of prices in addition to other service requests. Brands must take into consideration the needs and preferences of their different customer groups. Older customers continue to pick up the phone more than other age groups. Last year 25% of over 50s renewed their policy by phone, compared to 16% of under 50s.
1. Co-op Insurance 2. Hiscox 3. John Lewis 4. Lloyds Bank 5. LV= 6. M&S Bank 7. NatWest 8. NFU Mutual 9. RIAS 10. Saga
The phone becomes even more important when it comes to renewals and mid-term adjustments. In a recent survey, we found that 57% had called a motor insurance company to renew their policy and 39% had picked up the phone to cancel a policy.
Our research into both good and bad claims experiences shows that poor communication, having to chase, speaking to multiple companies who aren’t speaking to each other and delayed claims settlements were the most common reasons for dissatisfaction.
Ian Hughes is CEO of Consumer Intelligence.
This all goes to show that having a great website and a clever route to market will get you far. But as long as insurance remains a trust-based people business, looking after customers consistently at whatever point in the cycle, the fact that they can interact with your brand is fundamental.
Customer expectations on service are changing, and insurers need to keep abreast of this to ensure that they can continually deliver outstanding service. For example, in a recent survey we conducted, 76% of consumers thought it should take 48 hours or less to receive a replacement device if theirs was lost or broken. Retailers like Amazon have raised expectations and there is a danger that customers are changing faster than insurers can respond.
May 2017
Modern Claims 39
FEATURES
Disruption and drones: making innovation meaningful in the insurance sector Mark Evans, Direct Line Group, explains why the insurance sector needs to demonstrate its willingness to adopt and utilise emerging technologies to meet consumer expectations and to move to a preventative model of insurance, something Direct Line Group is currently doing through their innovative Fleetlights campaign. ue to rapid technological advances, the future of insurance looks set to become ever more disruptive. Driverless cars, blockchain, IoT (internet of things) and increasingly connected homes and cities will all play a massive role in changing the shape of the sector. The industry is wise to this; in fact, according to a survey by PwC, over 75 per cent of insurance CEOs believe technology will “completely reshape” the industry in the next five years. But being alert to this threat is not enough. New technologies are already beginning to transform shortcomings and clunky processes within insurance, from claims, to in-house processing and quotations, and there is more to come. With Tesla claiming that it will have mastered driverless car technology by the end of 2017 and will then simply wait for legislation to catch up, insurers cannot afford to rest on their laurels. Indeed, with so much change afoot and the inevitable disruption of traditional models, insurance must become agile and adaptable if it is to keep up.
D
Embracing innovation to keep up with consumers
Consumer expectations of the services insurers provide are increasing exponentially. In an increasingly volatile and uncertain world, insurers need to help consumers to avoid situations rather than just deal with them after the fact. The sector needs to shift from the process of restitution to the service of prevention, underpinned by innovation and proactivity. Blockchain offers all businesses a great opportunity to transform their customer relationships and reduce fraud. In the insurance sector, however, the opportunity is arguably much greater. Decades of claims and driving data could be stored as a blockchain for insurers to evaluate a driver’s risk, eliminating the need for the traditional quotation process as we know it and offering consumers a faster, more efficient service. Another strand of technology that could very easily challenge the status quo within the insurance sector is chatbots, potentially driven by machine learning. Used intelligently, artificial intelligence could rid the need for customers to go through some of the more tedious processes of insurance, making way for more meaningful and bespoke services and experiences. Artificial intelligence might also help to drive efficiency and precision by simplifying complex back-end systems for insurance. For this reason, machine learning is already being used in actuary circles. Bots could also be the answer to customers’ demands for 24/7 availability of providers in an always-on economy. According to PHD head of planning Michael Florence at the ISBA Annual Conference 2015, by 2049, a single neural networked computer could become more intelligent than all the human brains on the planet put together. In this
40 Modern Claims
With Tesla claiming that it will have mastered driverless car technology by the end of 2017 and will then simply wait for legislation to catch up, insurers cannot afford to rest on their laurels context, we need to accept that machines are better than humans in tasks that involve repeatable precision. Of course, with any new technology, particularly those in the artificial intelligence field, there are concerns. Already we are hearing discussions around the need for AI to understand ‘morality’ in the same way that we teach children, and to have unconscious bias training. All of these friction points can and will be addressed, but there remains one crucial caveat in this journey.
Retaining a sense of purpose
It’s crucial to remember that tech should serve a real purpose to both customer and company; it shouldn’t be an afterthought or a nice-to-have, but rather a meaningful addition to the value chain. For example, insurers should be asking themselves: does blockchain/AI/ IoT help deliver the best possible service to the customer? If there is a clear value to the customer, then it is up to the sector to educate consumers and communicate the value that these advances can deliver. This is something we’ve always been passionate about at Direct Line. Our fixer mentality has been the purpose for all of the innovations we’ve invested in; if it helps us fix a problem for customers then we will deliver it, and we’ve made sure that this is always communicated to the customer.
The sector needs to shift from the process of restitution to the service of prevention, underpinned by innovation and proactivity May 2017
FEATURES
Whether walking home alone from a country pub after a shift, cycling somewhere or driving at up to 60mph, the drones will light your path. All of this works with the GPS on your smartphone and is as straightforward as ordering a taxi Purposeful innovation: Fleetlights
In 2016, to show how we are taking the need to move to a prevention model seriously, Direct Line applied its high performance ‘fixing’ to a unique project: Fleetlights, drones that light your way on the path ahead. It’s so important to be proactively seeking solutions and new ways of looking at the problems your customers have. For Direct Line, a recurrent problem we see is the feeling of being unsafe on darkly lit streets, especially as long winter nights approach. Distressingly, it’s not an irrational fear; despite there being 7.5 million streetlights in the UK, more people are killed on the roads in the darker months of autumn and winter due to poor visibility. It’s simply not possible for there to be efficient lighting absolutely everywhere, so we decided to find a way to fix this. The result was Fleetlights. Having identified that the issue probably stemmed from the fact that streetlights are unmovable, unattractive and vary in number across urban and rural areas, we collaborated with leading technology expert Michael Oborne of Mission Planner to create new ‘Fleet Control’ technology. The Fleet Control prototype software enables Fleetlights to be ordered via GPS and mobile technology directly from the user’s smartphone. The technology lights a pre-determined path ahead of the user, while responding and adapting to changes in the user’s journey. Whether walking home alone from a country pub after a shift, cycling somewhere or driving at up to 60mph, the drones will light your path. All of this works with the GPS on your smartphone and is as straightforward as ordering a taxi. As the issue of darkness and the feelings of vulnerability that come with it are more prevalent outside of urban areas, where there is more open space, and less chance that streets are properly lit, we
May 2017
tested the drones in a place with such little light that it’s actually an International Dark Sky Reserve: Petworth. In this situation, using drone technology to address a specific customer problem enabled us to demonstrate thinking outside of the box and futuregazing in a tangible way. It also showed customers that we are one step ahead on issues that might affect them. However, the aim of Fleetlights was more than just to have a striking campaign. We were very clear that we wanted to open up a discussion around the problem and create a starting point for future solutions. Both the hardware and software designs were created from scratch and are open-source, making them accessible to any group that may wish to build on the prototype and apply the tech to a community. The campaign has had recognition as far and wide as Argentina and Australia, reinforcing our belief that it is possible to lead meaningful and valuable disruption in the insurance sector and be on the front foot when it comes to problem-solving for the consumer.
The future of insurance
Technology offers a fantastic opportunity for insurers to transform the sector. However, for the team at Direct Line the future will always be about how we can solve the next problem for customers, so technology will only ever be one part of that. For us, the bigger shift, as illustrated by Fleetlights, is how we can move to a model of prevention. How can we use all of the tools at our disposal to create offerings and services that add value to consumers’ lives? How can we prevent them having accidents? How can we show we’re future-ready, innovative, and always thinking about protecting customers? For us, this is the holy grail for insurers over the coming years, and we believe it’s time we all stepped up to that challenge. Mark Evans is Marketing Director at Direct Line Group.
Modern Claims 41
FEATURES
Sector Soapbox Modern Claims’s panel of resident associations outline the burning issues
Right about the Discount Rate he reaction to the reduction in the Discount Rate has been as predictable as it has disappointing. When Liz Truss announced the first change since 2001, it was certainly the legally correct thing to do. As she said, “the law was absolutely clear – as Lord Chancellor, I must make sure the right rate is set to compensate claimants. I am clear that this is the only legally acceptable rate I can set”. In finalising compensation on the more substantial claims, the courts apply this calculation with the percentage linked typically to Index-Linked Gilts. In cases where there is any element of future loss, but particularly where the claimant is relatively young or the multiplicand is relatively high, this small change in the Discount Rate will potentially have a significant effect on the value of future damages.
T
The previous rate was quite simply not adequately compensating seriously injured people for their future losses in the way the law intended. It was also the morally correct approach. Those innocent people who are unfortunate enough to suffer severe and life changing injuries deserve to have their compensation awards set at an appropriate level adjusted for the current economic environment.
These seriously injured people are financially dependent upon the compensation, which they must live on for a lifetime. If the lump sum received is less than is necessary to cover daily expenses due to not being able to work or for care costs or ongoing treatment, this can cause severe anguish and hardship. To be blunt, the adjustment should now free these people from the fear that the money will dry up whilst they are alive. The only person to benefit from the new rate is the claimant. That typical punchbag, legal costs, will not be impacted. The response from the insurance sector was that it was “crazy” and that there would be an “inevitable” increase in motor and liability policies, wiping out any proposed savings from the whiplash reforms. The reality is that insurers have long known that the rate should be adjusted and could have taken appropriate steps for consumers. As the legal expenses insurer ARAG has said, the insurance industry’s response to the adjustment may give the impression of an industry that is “shallow, self-interested and heartless”. It was the right decision, and lobbying to the contrary should be resisted. Simon Stanfield is Chair of the Motor Accident Solicitors Society (MASS) and a Partner of Simpson Millar.
What appears to be a small change has massive consequences n the 27th February, the Lord Chancellor confirmed that the discount rate, which is a key component of calculating long term personal injury claims, was to change. Whilst it was long expected that a change would occur, it was felt by even the most pessimistic commentator that the actual change would not be as radical as the decision that was actually taken.
Whilst those involved directly in this issue would have accepted a movement may be necessary, there did not seem to be a great move of disquiet from those who had previously received compensation, or their representatives, to suggest the levels of compensation that have previously been paid were inadequate, again leading to questions as to why such a radical shift.
The change took effect on 20th March 2017 and has already had a significant impact on the costs of serious injury claims. It is anticipated that the overall cost to the industry on all impacted claims outstanding on 20th March is around £7bn, with further additional annual cost increases of around £1.2bn thereafter, according to industry estimates.
So whilst the debating of claims for personal injury is mainly in commercial and motor, employer’s liability, public and products liability insurance is undertaken by insurers in terms of them making adequate provision for dealing with claims. The impact on the pricing models of insurers has had to change almost overnight. This will have a direct impact on all policyholders, as the rating of an insurance product contains proportion relating to all catastrophe claims, which is borne from the principle of the “premiums of the many pay for the claims of the few”. Industry concern has however led to a Government review of the situation in the near future.
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The national press coverage and the in-depth analysis of its consequences has been scarce, as “Large Cost to Insurance Industry” is not a headline that would sell many newspapers or gain much sympathy. An increase in costs is a very difficult message for insurers to convey sympathetically, particularly about serious injury. While a change to the discount rate may have been necessary, suggesting that a lump sum payment to a claimant assumes a loss of investment return on the lump sum could be construed to be a flawed argument and undermines any justification that the government had to move the rate so far.
42 Modern Claims
This change will mean that those suffering serious injury will naturally receive more compensation, but perhaps the unfortunate and unintended consequence is that CMCs may well benefit the most from these radical changes. Andrew Gibbons ACII, Managing Director, Mason Owen Financial Services Ltd and BIBA.
May 2017
FEATURES
Will Rehab be the new credit hire or can it be nipped in the bud? n March 2017 we had yet another Court of Appeal decision on credit hire, this time relating to rates evidence in the case of McBride v UK Insurance Ltd 2017, which clarified the calculations regarding basic hire rates. In the same month I “celebrated” twenty years since qualifying as a solicitor.
I
Whilst these two events may seem unconnected, it reminded me that when undergoing my training contract, credit hire was a significant issue, with the House of Lords having recently handed down judgment in Giles v Thompson 1994. I didn’t imagine that twenty years later the courts would still be called upon to adjudicate fairly basic principles around what the rate should be. In my early career, I assumed naively that the industry would devise a better solution quite quickly; however, this never happened. I will not go into any detail around credit hire, there are far better commentators in that area than me, but it has long struck me that there are similarities between the development of credit hire in the early nineties and the progression on claims for rehabilitiation. Of course, rehabilitation is an admirable and longstanding concept in personal injury claims as the best way to try to restore the injured person to the position they were in before the accident,
as quickly as possible. However, alongside the growth in whiplash claims, we have seen a significant increase in the frequency of rehabilitation claims, mainly for physiotherapy and cognitive behaviour therapy. These are often driven by commerciallymotivated entities based on quasi-referral fees and increased profit in the claims process at inflated amounts, with arguments over rates and the number of sessions plus, in some cases, queries over whether rehab actually ever took place. All of a sudden the similarities between credit hire and rehabilitation start to appear. There have been many attempts to produce an industry solution, including the rewriting of the Rehab Code in late 2015 to deal specifically with low value claims, but without any sign of the bad behaviours dying down. So, I was pleased to see the MoJ recognise the issue in the recent Call for Evidence attached to the Whiplash consultation, and put forward possible solutions. I hope we will not be arguing about physiotherapy rates through the courts in 20 years’ time, and that the industry can identify a solution before the MoJ unilaterally imposes one. FOIL will continue to work with stakeholders throughout the industry to do exactly that. Nigel Teasdale, President of the Forum of Insurance Lawyers (FOIL) and Partner at DWF LLP.
On the road to competitive automated driving insurance T
he Vehicle Technology and Aviation Bill made its way through the committee stage of the House of Commons during March.
The ABI has played a central role in working with the Government to shape the proposals in this legislation, and we were invited to give evidence to the committee scrutinising the legislation alongside Iain Forbes, the head of the UK Government’s Centre for Connected and Autonomous Vehicles. This was an opportunity to emphasise to MPs our support for the proposals, while also highlighting areas where more clarity will be needed before the vehicles themselves become commercially available. A key issue will be a practical system to access data and allow claims to be settled quickly and fairly. That issue will be the focus of the ABI and Thatcham’s Automated Driving Insurance Group this year. In addition to this, we’ll need absolute clarity about the authorisation process to verify how this technology can be used safely, something the ABI are working closely with Thatcham Research on. The ABI agrees with the assessment the Government has made, that we’ll need more clarity over how the international regulatory framework for vehicle type approval will work before we can meaningfully legislate for this in the UK. The Vehicle Technology and Aviation Bill won’t answer every question about what will be
May 2017
a radical shift in driving technology and behaviour, but it does provide clarity about the role every stakeholder will play in the process, with insurers settling claims and manufacturers then being responsible for meeting those costs where appropriate. As the Bill progresses through Parliament, we can expect to see some minor amendments to ensure the wording is watertight. For example, the Bill refers to ‘vehicle operating systems’, but is likely to need to provide more detail on the distinctions between underlying systems and application systems built on top of the hardware. However, it has been clear from the debates in Parliament that there is broad political support for the new framework that will be created by the Bill. The legislation will make the process of insuring automated cars simple for consumers, and will ensure that any road users injured as a result of a problem with an automated car won’t become embroiled in complex technical disputes with manufacturers. Insurers are not complacent about the need for innovation to address the challenges created by automated driving. Ultimately, however, this is an opportunity for insurance to demonstrate its value to society, allowing society to adapt to an ambitious technological change, and be confident that the risks are being managed. Ben Howarth, Senior Policy Advisor, Motor & Liability, Association of British Insurers (ABI).
Modern Claims 43
FEATURES
Interview with Peter Oakes Fraud is a constantly growing problem in the insurance industry, explains Peter Oakes, Hill Dickinson, who talked with Modern Claims about the evolution of fraud and the subsequent evolution in counter fraud this necessitates.
Q
How have fraudsters and the methods they use evolved in the 21st century, and how has the claims sector adapted to meet this?
A
The last sixteen years have seen an exponential growth in insurance claims fraud. The industry would agree that the motor insurance sector has seen the most significant levels of fraud. Broadly speaking, fraudsters fall into the organised and the opportunistic, and we have seen growing numbers of both types of fraud. The last three years have seen government reform and insurance industry initiatives begin to impact on the problem; it would be fair to say that the very substantial serious and organised insurance fraud rings that we would encounter on a repeat basis between, say, 2000 and 2010 are not quite as common. Nevertheless, motor insurance fraud levels remain a significant threat and we continue to see pockets of serious and organised fraud. In terms of the evolution of fraudsters, we continue to see relatively unsophisticated attempts to defraud insurers. For example, we have recently seen a bodyshop engaged in staged managed accidents targeting the self-drive hire sector. We have three claims for the same vehicle, with no mileage change and identical damage, with the inspection at the same garage; it’s not exactly subtle. On the other hand, whereas organised motor insurance fraudsters would previously arrange for a two or three vehicle staged accident to be accompanied by multiple personal injury claims, we have seen some gangs finesse their approach, with reduced claimant numbers or no personal injury claims at all, demanding vehicles be cut open by the emergency services, disputing liability and other approaches all designed to defeat insurers’ fraud detection systems. One particular problem that continues to frustrate insurers is the induced accident, where innocent motorists are induced into an accident with a fraudster. These incidents can be difficult to detect, especially when fraudsters avoid multiple collisions at the same location or the use of the same professional enablers. What we should never underestimate is the ability of fraudsters to identify how insurers operate to detect them and to change and flex their method of operation to evade detection; we have one very clear example of an accident management business switching between staged and induced accidents and then back again at various times. It is also important to recognise that fraudsters don’t think in product lines. We see both opportunist and organised fraudsters making claims across different sectors. We produced an analysis of behaviour in conjunction with CIFAS; perhaps not surprisingly, there is a clear correlation between insurance fraudsters and those engaged in financial crime. Insurers have worked hard to tackle the growing problem. Putting in place the core counter fraud infrastructure around the IFB (fraud
44 Modern Claims
detection and management), IFED (prosecution and enforcement) and IFR (prevention) was an essential step, in particular, to tackle the very significant threat posed to the motor insurance sector. IFR has possibly been the most frustrating element to bring to fruition, but there can be no doubt that IFB and IFED acting together have had an effect on fraud identification and a deterrent effect generally through well publicised convictions. Other key reforms at a strategic level include the ban on referral fees. The growth of referral fees in the years prior to the ban drove a proliferation in firstly unregulated and then poorly regulated claims management activity. Although accident management companies and their connected claimant law firms have often sought to circumvent the ban on referral fees this has reduced the incentive for some to invent claims. At insurer level across the industry there has been a significant investment in counter fraud awareness and systems. People remain crucial to an effective counter fraud strategy, so raising awareness and retaining relevant fraud indicators, in particular in the FNOL process, remains vital. Insurers now recognise the power of their own data, as well as the importance of syndicated data systems. Occasionally the DPA is misunderstood and has in more recent times frustrated industry attempts to share data and intelligence. By and large, most insurers use one or more data mining and data analytical systems to complement their claims handlers to identify fraud and high risk claims.
Q
Can you explain Hill Dickinson’s ‘cradle to grave’ approach to counter-fraud, and why you feel this is the best way to combat fraud?
A
HDCFG was set up in 2001 in direct response to the growing threat posed by insurance fraud, in particular for our motor insurance clients. From the outset we recognised the crucial role of intelligence and data in creating an effective counter–fraud strategy covering prevention, detection and management. Our aim was to provide clients with a solution to insurance fraud that included identification at the point of claim, specialist claims management, intelligence support, litigation, advocacy, recovery and sanctions. In the same way that fraudsters operate across the market, we have specialists who are able to deal with fraudulent exaggeration in high value PI claims, professional indemnity claims fraud and commercial claims fraud, as well as the more run of the mill trip and slip or motor claims. The effective application of intelligence remains at the heart of what we do. Our commitment to building and maintaining Netfoil as the market leading counter fraud claims database epitomises our approach. Not all of our clients require all elements of our service. However, as the recent successful private prosecution case of Accident
May 2017
FEATURES
Insurance fraud can be relatively complex, in particular evidencing and prosecuting the larger serious fraud rings; at regional level it is virtually impossible to get police interest Exchange v Islam and Khayer demonstrates, we were able to identify the fraudulent claims (at the heart of the prosecution) through automated data analytics, we supplied intelligence to the parties impacted, worked closely with APU (the dedicated investigation unit set up by Accident Exchange) to evidence the fraud, and provided the advocacy services to drive the prosecution all under one roof.
Q A
What is the Netfoil platform, and how does it help in the fight against fraud?
Netfoil is our counter fraud database – we hold in the region of 300 million claim records relating to about 12.5 million incidents resulting in insurance claims. The key to Netfoil is that the majority of the claim records are supplied by the genuine claims and accident management businesses, many of the members of the CHO trade body. At a point when many in the industry perceived the genuine CHOs to be a part of the fraud problem, we recognised their frustration at having no desire to either facilitate or be associated with fraud, yet having no means to validate either individual claims or referral sources. We have worked with the genuine claims and accident management industry for over a decade to successfully prevent, detect and manage well over 500 million pounds worth of insurance fraud. We use Netfoil to screen our insurer and corporate clients’ new claims data to identify claims linked to fraud or claims that demonstrate data patterns indicative of fraud. As a counter fraud unit repudiating thousands of false insurance claims every year, we have a clear handle on what fraudulent insurance claims look like both from an anecdotal but also a statistical perspective. Our insight into fraudulent claims allows us to drive effective profiling rules that allow us to accurately predict fraud with a minimum false positive rate.
Q A
What is the role of collaboration in counter-fraud, and how does Hill Dickinson work with its partners to prevent fraud?
Collaboration is essential for the effective management of fraud across the industry. The IFB acting as a central coordinating body for the industry demonstrates the need for, and the effectiveness of, the approach. We look to collaborate both within the sector and outside of it with any body with relevant intelligence or insight. For example, we have had a long standing data-sharing partnership with the Metropolitan Police. We extend them access to our Netfoil database to assist them in their dedicated counter insurance fraud unit. In return, they allow us to hold their Amberhill dataset relating to identity fraud. Similarly, we look to work with key industry and trade bodies including BVRLA, CPT, IFIG and previously CIFAS.
May 2017
Q A
Why might counter-fraud specialists like APU be more effective at combating fraud than the police?
Q A
Do you believe the Ministry of Justice’s whiplash reforms would be a positive step for tackling fraud?
We recently worked closely with APU to bring a successful private prosecution against two fraudsters responsible for orchestrating a staged accident. Their experience was essential in gathering evidence in a format appropriate for a criminal (rather than the more usual civil format). Our collaboration with APU on this matter derives from a long standing frustration shared by many of our clients that police forces at regional level lack the resources to prioritise insurance fraud. Insurance fraud can be relatively complex, in particular evidencing and prosecuting the larger serious fraud rings; at regional level it is virtually impossible to get police interest. IFED offers a route for the subscribing insurers to prosecute in some cases, however, again resources are not limitless and this route is closed to those outside of the insurers responsible for the funding of IFED. Our collaboration with APU on the Accident Exchange case demonstrates there is a clear pathway for victims of insurance fraud to achieve criminal justice in appropriate circumstances.
Most client fraud managers remain sceptical as to whether the reforms will have the desired effect when it comes to organised fraud, though there is optimism that the reduced incentives for claimants in terms of damages, absence of claimant law firms from the majority of cases, and a ban on pre-med offers will combine to reduce the number of opportunistic and farmed claims. Our analysis confirms that for the majority of claims, although there will be a very significant reduction in the overall claim costs, a staged or induced accident would still produce enough ‘return’ by way of damages, costs and peripheral special damages to make insurance fraud an ongoing attractive proposition. Clients remain concerned that the tariff system will encourage minor claims, rather than discourage personal injury claims. Without doubt, claimant lawyers will seek to take as many claims as possible outside of the reforms, and we are already seeing an increase in special damage claims and physical (rather than soft tissue) injuries.
Peter Oakes is Head of Fraud at Hill Dickinson.
Modern Claims 45
FEATURES
Making a claim on transformation Bill Safran, Vizolution, explains how breaking down the claims process and focusing on each step can allow insurers to provide the best possible customer journey to perhaps give them a competitive edge. s customer journeys go, the claims journey is undoubtedly one of the most complex, frustrating and painful. It usually involves multiple parties, complex documentation, compliance requirements, convoluted workflows and the need for immediacy at certain points in the journey. The process has traditionally involved a significant element of human interaction, paper and post. As with all customer journeys, the more complex it is, the more opportunities there are for delays, breaks and failures. The impact of a poor customer journey is magnified as the emotion attached to a claims process is often high, with customers frequently in distress, or even crisis, during the claims process. What’s clear from this is that the quality of the claims process is intrinsically linked to customer satisfaction and retention rates.
A
In an industry facing many challenges in terms of downward pressures on profit margins, a lack of perceived differentiation and easy switching, insurers have been left searching for ways to differentiate themselves and secure a long term competitive advantage. With the claims process representing a substantial ‘moment of truth’ that will impact on customer satisfaction and significantly influence whether a customer stays with the insurer at the point of renewal, the emphasis for many insurers is on the claims process. This emphasis on the customer experience has been supported by a McKinsey motor insurance study that identified the top factors in customer satisfaction as employee courtesy, employee knowledge, transparency, ease of process and speed of claim settlement. Surprisingly, the notable omission here is the lack of financial factors such as settlement amount. This illustrates the importance of the customer experience in the claims journey for customers. While the consumer is, and should be, the central tenant of a customer journey; the claims process has an additional layer of complexity with a plethora of partners - assessors, mechanics, doctors etc. - that all need to be included in the loop. A solution that excludes them will in all likelihood not achieve the objective of offering the customer a simple and seamless customer journey.
A single source of truth
So, what does today’s claims journey look like? To offer a truly transformed claims process that delivers on a promise of a frictionless customer journey, insurers need to connect the dots and create a single source of truth. They need to bring together channels, partners, documents and processes into a central point that is managed by an intelligent workflow that engages with the right partners and parties, at the right time in the process. Insurers now have the ability to allow customers to start the claims process through a channel of their choice and then move them seamlessly along the claims path, requesting and providing information online. That process can alert customers when they need to action an item or review and sign documentation.
46 Modern Claims
Successful customer experiences start with a blank sheet of paper. They ignore the restrictions of legacy systems and internal processes that often block the path to a seamless customer journey Similarly, third parties can join the process at the relevant time and access a pre-defined selection of relevant information that will allow them to complete their part in the process. Indeed, best in class insurers have actively integrated third parties into the process. For example, allowing mechanics to upload a report and trigger the next stage in the workflow, without requiring the journey to be paused while the mechanic report is requested, waited for, received and finally shared. The business benefits of creating a single source of truth, or single customer view, are clear and significant. As the process is automated and handled online, the need for paper and manual processes is removed. Through the careful management of permissions, all the relevant parties can see only what they need to see to complete the process, while documentation is transferred between parties electronically, making email, and especially timeinefficient post or fax, redundant. This in turn delivers both the cost savings, reduced time to claim and customer service benefits that insurers are striving for. It’s all very well understanding the art of the possible, but how can insurers achieve it?
Reimagining the claims journey
Successful customer experiences start with a blank sheet of paper. They ignore the restrictions of legacy systems and internal processes that often block the path to a seamless customer journey. Breaking the claims journey down on a granular level allows you to reconstruct the journey from a customer’s perspective. For example, we know that customers arrive at the claims process through a plethora of channels, from email and telephone to Twitter and Facebook. How do you then move them from that channel into the process? Are there points in the process that create delays or force customers into channels that they don’t want to use, such as having to wait for documentation in the post or send it back? Are you forcing customers to carry out their journey at your convenience, during your operating hours? Once you have identified these delays and fractures in the journey you can start to find solutions that are simple and intuitive for the customer.
May 2017
FEATURES
Breaking the claims journey down on a granular level allows you to reconstruct the journey from a customer’s perspective Leveraging technology
There is no doubt that technology can enable improved customer journeys that not only deliver improved customer satisfaction and provide a point of differentiation, but also reduce costs. However, insurers should not fall into the trap of ‘tech for tech’s sake’. The customer journey should always be the starting point rather than the technology itself. By placing the customer at the heart of the transformation and using technology as the enabler rather than the driver, insurers will secure a better outcome that delivers on a promise of a better experience rather than delivering an inward focused solution that fails to meet objectives.
Visibility
A common cause of friction in a customer journey is confusion and lack of clarity. This can create multiple customer queries, breaks in the customer journey and a lack of trust. On the flipside, providing a way for customers (and third parties) to see at which stage the claims process is and where the next action lies, while also providing alerts to the relevant parties, can provide the customer with confidence that their journey is progressing efficiently.
time (AHT), but this can deliver a narrow and misleading view of the customer journey. While AHT tells an organisation how quickly an agent has dealt with a customer, it doesn’t measure the effectiveness of the call; whether a customer’s query was resolved on the first call, or whether the customer had to call back a number of times. A myopic focus on a single measure, e.g. AHT, leads to distorted results, where a customer needing to make two 9-minute calls is better than having everything resolved in one 10-minute call. Similarly, measures need to take into account if the customer has previously used another channel to try and solve their issue, but have been forced to change channels, probably against their will, in order to reach a successful outcome. To achieve an effective claims journey, insurers therefore need to measure the effectiveness of the journey overall. While channellevel metrics are interested in understanding a single measure, focusing exclusively on siloed channels can often be misleading and impacts the overall effectiveness of the customer experience.
Looking to the future
Any successful customer journey is built on a solid foundation of metrics that measure the entire journey. Again, metrics should be viewed from a customer perspective and not from an inwardlooking channel approach. For example, call centre measurement is centred around measurements such as average call handling
The rewards for insurers are clear and have been demonstrated in other European markets. For example, in the German P&C market there has been a direct correlation between providing a best in class customer experience and subsequent profitability. In fact, these companies generated 2-4 times more growth in new business and about 30% higher profitability than organisations with an inconsistent focus.
Insurers should not fall into the trap of ‘tech for tech’s sake’. The customer journey should always be the starting point rather than the technology itself
What is abundantly clear is that a transformed claims process is both possible and necessary in today’s brave new world. Organisations such as Apple and Amazon are setting the customer experience benchmark by customers measuring their experience across all sectors. Customers now expect, and indeed demand, journeys that are faster, more efficient and most importantly, in their control. Smart insurers are already using market conditions to their advantage and breaking free, leaving others to compete on traditional terms (i.e. price) while they build a long term competitive advantage through customer experience.
Measurement – if you can’t measure it, you can’t improve it
Bill Safran is CEO of Vizolution.
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10 MINUTES WITH
Richard Beaven Q A
Has the industry changed dramatically since you started working in it?
Yes, absolutely, and the pace is quickening. Customer demand is changing faster than at any other time in my career. Customers are constantly looking for newer, easier ways to talk to us. To give an example, we launched a web chat so that our customers could get in touch with us more easily online and we received over 300 interactions in the first two days. What has been the key positive/negative change in your area of the market? I think there is a much greater awareness in the industry of the need to be customer-centric. That means not only having a detailed understanding of what the expectations are, but knowing how to deliver on them; that’s now the number one focus for any good broker. The claims environment is a perfect example of where, in the past, the industry had stopped listening to the customer, instead focusing solely on keeping costs down. In reality, customers want more than that from us. I think everyone in the industry is working much harder on being empathetic when customers need our support and helping them to get their lives back on track.
Q A
I think that mantra - making the customer journey effortless should be central to the insurance process, particularly as our customers are often in situations where the last thing they need is added stress
There is a much greater awareness in the industry of the need to be customer-centric
Q A
Who inspires you and why?
Tony Hsieh, CEO of American shoe eRetailer Zappos.com. His whole ethos is ‘how do you make it easier for customers to do business with you?’ The success of the business is entirely down to a model that makes it really easy for customers to buy. Employee engagement is high because they’ve bought in to that and get a kick out of providing good service and getting positive feedback, rather than being solely motivated by ‘making the sale’. I think that mantra - making the customer journey effortless should be central to the insurance process, particularly as our customers are often in situations where the last thing they need is added stress. Do you have/have you ever had a mentor? What was the best piece of advice they gave you? In a previous life, I was a corporate manager at a well-known high street bank. Probably the most valuable piece of advice I have ever been given came from one of my customers there. He said: “If you get up on a Monday morning and you don’t feel positive about going into work, then go in and resign.” It’s a lesson to live by - don’t sit there and be miserable, get out and do something that motivates you. If you weren’t in your current role where would you be?
Q A Q A
I’d probably be travelling. I think striving for a good work/life balance should be a priority for everyone, and part of that is finding time to have new experiences. Thankfully I’m really enjoying the work I do at Swinton, but if I couldn’t do that I’d be lying on a beach in South Africa or trekking over a mountain in Canada.
Richard Beaven is the Distribution Director at Swinton Insurance.
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