Igrea in discussion with market to ‘significantly improve’ claims handling

Spanish risk management association Igrea believes there is significant room to improve claims-handling services and is pressing ahead with a campaign to tackle the issue on behalf of corporate buyers. Igrea’s president, Augusto Pérez Arbizu, has urged underwriters to engage in discussions with the association on claims handling, particularly to improve the speed at which coverage is affirmed and ensure advanced payments are more readily available to clients. Igrea called for action in a manifesto launched towards the end of last year that aims to reduce tensions in relationships between insurers and buyers when large claims occur. “It is not that we have a bad relationship with insurance companies. It is an excellent relationship, and they are essential partners in our work as risk managers,” Mr Pérez, who is also the director of risks and corporate insurance at telecom group Telefónica, told Commercial Risk Europe. “But we are positive that it is possible to significantly improve claims handling processes.” A core complaint made by Igrea relates to the excessive length of time that underwriters can take to simply tell insureds whether a loss is covered or not. Its members are concerned that the process often lags for several months, or even over a year, even though Spain’s Insurance Contract Law specifies that claims should be settled in no more than 45 days. “Regulators are much more worried about enhancing protection for buyers of mass insurance products, and it has helped to bring considerable improvements to claims handling processes in segments like home and auto insurance, for example. But, correctly, they are not worried about protecting the rights of large insurance buyers, who have significant resources at their disposal. So we have to talk to insurers and define together what is a quality claims handling process,” said Mr Pérez. Igrea argues in its manifesto that underwriters should tell their clients whether a loss is covered within 30 days of being notified. Currently, insureds can be asked for lots of documents and information even before the client knows whether the policy will be triggered, explained Mr Pérez. “Loss adjusters start requesting information and documents to adjust the claim even though the insurer has not stated yet if the loss is covered,” he pointed out. “The decision on the coverage can be made much sooner. The two sides can sit around a table and discuss how each one sees the claim. Thus we can manage expectations, and avoid the situation where we learn that the loss is not covered after many months of hard work just garnering information for the loss adjuster, who is most times only focused on the quantum.” Any prolonged claims process can cause friction between insurers and risk managers, as well as stir up trouble between insurance buyers and stakeholders within their organisations, Mr Pérez pointed out. He accepts that some complex coverages present complications that make it hard for insurers to tell exactly how the coverage is going to work. But even then, a degree of clarity would be welcome, for instance by making clear the circumstances in which the coverage will be triggered, he added. “We accept that, in some cases, in coverages such as casualty and financial lines, claims can present some complexities that can make it hard for the underwriter to make a decision in 30 days. But it is always possible to at least say something about it,” he said. “With more transparency, risk managers can share information with financial and procurement departments, and we can all better manage our expectations,” he added. The second issue flagged in Igrea’s manifesto is lack of advanced payments from insurers to buyers for large claims. This problem is directly linked to the length of time it can take insurers to tell clients whether the loss is covered or not. Igrea points out that a large loss can significantly impact an insured’s balance sheet. If claims payment does not take place in the same fiscal year as the loss, companies will rightly question the benefits of cover, it added. Therefore, the association is proposing underwriters make advance payments no less than 30 days after an insurer decides that the loss is covered. Given that Igrea also wants to ensure a decision on cover is made up to 30 days after the loss is notified, the association is calling for advanced payments to be made no later than 60 days after the loss is notified. The final value of the claim can then be settled later, the association said. “It is good practice to make payments on account in large claims once it is clear if the loss is covered, fully or partially,” Mr Pérez said. “Most companies already do that in many cases, but the ambition should be to turn it into a general rule. If the claims manager works with this goal in mind at the beginning of the claim, he or she will be prepared to propose partial payments even before the insured requests them.” Igrea also wants to see other parts of the claims-handling process clearly defined in the policy or claims protocols. “Loss adjusters, lawyers and brokers can act as facilitators to the claims-handling process,” Mr Pérez said. “It is not only up to insurers to improve the system,” he added. Mr Pérez stressed that Igrea’s manifesto aims to stir up debate in the market so that more efficient claims-handling processes can be implemented to the benefit of all involved. He said the association has been positively surprised by the reaction of market players. Insurers have contacted Igrea to express their desire to present suggestions. No brokers, however, have so far followed suit. One of those underwriters, Zurich, has gone as far as sending Igrea an official letter stating its commitment to meeting the three demands detailed in its manifesto. “In addition to Zurich, four other companies have sought us to talk about our claims document. We expect more companies to follow suit,” Mr Pérez said. Igrea is also planning to launch a ranking of insurers based on their performance in relation to the measures proposed in its manifesto sometime next year. This will likely encourage better performance. But Mr Pérez believes the message is already getting through to the market, which has started to show a commitment to better claims handling. To view Igrea's manifesto click here.

Igrea in discussion with market to ‘significantly improve’ claims handling

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