Claims conflict mounting in hard market, say Portuguese risk managers

The hard market has affected claims settlements and, as a result, created some friction between underwriters and insurance buyers, according to participants in the Spanish and Portuguese leg or of our European Risk Frontiers survey.

“We have noticed, as a rule, a change in claims management processes, although not in all segments, nor by all insurers. Claims settlement has become slower and more complicated,” said Lourdes Freiria, director of risk and insurance at Grupo San José. 

“The biggest disagreements have been sparked by some clauses being interpreted in a way that is more restrictive than they were in previous years, even though the same typology of the losses and the same clauses are applied. I hope that this is not something that will get even worse, as the provision of adequate answers to claims is the reason why insurance exists, and that should never be questioned,” she added. 

David González, chief insurance officer at construction group Sacyr, agreed that the hardening market has “complicated” claims.  

“We have seen longer claim settlement processes and ever more strictness in the adjustment of losses. On some occasions, there have been more tensions with insurers to solve a claim. It is true that there have been more conflicts and disagreements in the market, and that generates tension. From this point of view, relationships have changed in the market,” he added. 

But claims are not the only concern for buyers in the current market. Luis Campilho, insurance manager at engineering services group Efacec, pointed out that even day-to-day interactions seem to be getting more laborious. 

“We have noticed that the time it takes for insurers to answer our requests has worsened significantly of late, and especially in 2021,” he said. “In one particular case, the issuance of a simple document linked to a policy, which would usually take one or two weeks, took more than 45 days to be delivered by the insurer. Even the underwriting process is taking significantly longer than usual.”

Another consequence of the current business environment is insurance bosses seem to be keener than before to keep a tight rein on the activities of their different departments, which can increase red tape and delay progress between underwriters and their clients.

“In Spain, local subsidiaries have lost authority for both underwriting and claims management,” said Daniel San Millán, corporate risk manager at Ferrovial. “That is making things harder. Local units have to go to referrals much more often than before.”

Ms Freiria warned that underwriters should be aware of this problem and build bridges with buyers in order to maintain good long-term relationships.

“It is important that insurance companies resume their relationship and proximity with clients. The pandemic, along with the dramatic changes that they [insurers] have made to their underwriting policies, taking away local decision authority and increasing the need to seek referral from headquarters, have cooled the relationship down a little, and that is not good,” she said.

Challenges for buyers are compounded by turbulence in the broking market, exemplified by the car crash merger between Aon and Willis Towers Watson.

“The broker market is crazy. There is much confusion there, a lot of people are changing companies, and this confusion is translating into the business. We hope this situation will settle down soon,” Mr San Millán said. “The relationship with brokers is a matter of a lot of caution right now. The Aon-Willis situation was a clear attack against competition and in the end, belatedly, there has been a solution. Now we go back to the starting line and a lot of confusion remains,” he added.

A consequence of this uncertainty is that risk managers like Mr San Millán are building more direct relationships with insurers.

“There have been many changes in teams of brokers in the US and London, and in Spain as well, and as a result the relationship with insurers is much more direct today,” he said. “We are working very hard as a result. It is also true that there are fewer players in the market who are keen on taking some kinds of risks. So we have a heavier workload but fewer companies to deal with. And in a hard market it is good to have a direct channel with insurers.”

For his part, Jorge Neto, insurance manager at retail group Jeronimo Martins, stressed that in difficult times brokers and buyers must make an effort to work together to overcome the challenges that each party faces.

“We do not see brokers as service providers, but as our partners. As partners, they have to understand our needs and difficulties, and we must do the same relative to them. If anything, our relationship with our brokers has become even tighter,” he said.