Claims, global programmes and hard market top agenda as San Millán returns as Igrea president

When Daniel San Millán took over as president of Spanish risk management association Igrea for a second time in May, he was probably entitled to a sense of déjà vu. The association still needs to tackle some of the same challenges that risk managers have been dealing with since its creation back in 2009. Issues such as claims handling and global programmes remain on the agenda, but this time hardening market conditions also look set to be a feature of Mr San Millán’s time in office.

During the past decade, Igrea has evolved from a group of six combative risk managers to now represent 42 of Spain’s largest corporations. It is as as well placed as ever to tackle some of the big problems facing insurance buyers head-on.

Difficulties in changing the slow-moving insurance industry did not prevent Mr San Millán from returning to Igrea’s presidency, despite the extra work it adds to his day job as risk manager of construction and services group Ferrovial.

Mr San Millán is clearly passionate about risk management. This comes to the fore when he talks about seemingly intractable problems that Spanish companies have long since raised with their insurance partners.

Such as: why can’t insurance claims be handled more efficiently?

“The insurance industry is paying many billions of euros in corporate insurance claims every year, but clients are unhappy anyway,” Mr San Millán told Commercial Risk Europe. “How can that be possible? There are so many hitches in the process that policyholders are not happy, even though almost all large-risk claims are paid.”

Igrea is flexing its muscles to finally obtain some significant improvements in claims handling. The association’s most pressing concern is the time it usually takes insurers to simply tell policyholders whether or not a large-risk claim is actually covered by the policy. That, in Mr San Millán’s view, has got to change.

“We are requesting that within 30 days the insurer issues a letter of qualification telling us whether the claim is covered or not, or where are the problems that, in their view, prevent them from telling us whether the loss is covered,” he said.

Mr San Millán pointed out that it sometimes takes five or six months for underwriters to simply tell policyholders if vast amounts of information from risk managers is needed.

“When there is a claim, from the first minute adjusters request a large amount of information that is not really necessary to tell whether it is covered or not. We want priorities established to make the process more efficient,” said Mr San Millán. “We have internal clients who are very demanding and constantly ask us information about the claims process. They often come to the conclusion that the loss is covered, as they have had to provide so much information,” he added.

Igrea’s members all buy significant amounts of insurance every year. Their bet is that if they join forces, the market will listen to their requests. The association has launched the initiative urging underwriters to commit to making a decision on coverage within 30 days. Eight big insurance groups have already formally signed up, with their letters of commitment posted on Igrea’s website.

But actual change is yet to come. The association is working internally to draw up proposals to deliver concrete results.

“I believe the message has gone through but it requires nothing less than a cultural change, which takes time,” said Mr San Millán. “Insurance companies need to give more visibility to their claims handling teams. They have to stop calling them back-office functions. They must take claims officials to meetings with clients, which is something that I still do not see in the market,” he added.

Another lingering issue from Mr San Millán’s previous stint as Igrea president is how to improve the workings of international insurance programmes. Again, claims are a big part of this.

“There still remain many dysfunctions in the management of international programmes. Now we have arrived at a period of hard market, and it is possible that these problems will get worse,” said Mr San Millán.

The main problem, in his view, is that companies opt for international programmes so they can be close to the master policy, with more access to the decision-making process when a claim in a foreign location takes place. In practice, however, this is still not the case.

“If you sign a master policy in Spain, no matter if it is with a Spanish or multinational insurer, decisions on underwriting and claims should be made in Spain. Is it happening today? Not always,” Mr San Millán said. “Local subsidiaries of multinational insurers, especially, tend to gobble up those decisions.”

“No insurance buyer, be it a Spanish, French or German company, buys a master policy in the home country so that decisions can be made elsewhere. Especially when it comes to claims,” he added.

Obtaining improvements from insurers is firmly at the heart of Igrea’s reformist efforts. But brokers are also on the agenda. Once again, claims need to be discussed.

“Brokers can contribute more than they are currently doing,” Mr San Millán said. “We want to implicate them in the efforts to modernise and improve claims processes.”

The pressure for brokers to deliver will only get more intense if the new hardening market trend sets in. And Mr San Millán urged insurers not to “overreact” to hardening market conditions, while advising risk managers to be ready to retain more risk via their captive if things get rough.

He also stressed that tougher insurance market conditions could bring improvements for buyers, by sorting out which partners Spanish companies can really rely on.

Igrea’s president called for restraint from insurance companies now that they seem to have a better hand in renewal discussions.

“It seems that the cycle is changing in the insurance market. What Igrea asks underwriters is that they do not overreact, which often happens in this situation,” he said.

Mr San Millán said the insurance market became so soft that “cowboys” were entering the space, offering prices and wordings that were very good. “But these new arrivals often do not have a commitment to stay in the market,” he warned.

The longstanding soft market conditions sometimes became a problem for insurance buyers who were pressed by other stakeholders in their companies to purchase ever-cheaper coverages, even though they were not sure that the newly arrived, cheaper capital could be trusted when a claim hit, noted Igrea’s president.

This pressure risked affecting long-term partnerships with carriers, he continued. Mr San Millán believes that risk managers who leant excessively on low prices when making transfer decisions, often swapping carriers, tend to face tougher times now the market is more difficult than those who favoured long-term relationships.

As a young organisation, this is the first time Igrea will have to prove its worth to members in anything other than a soft market. Helping them deal with tougher conditions is one of Mr San Millán’s priorities as president.

For instance, Igrea will organise a meeting at the end of the year to discuss the use of captives, which, in Mr San Millán’s view, will become increasingly important risk management tools in current market conditions.

“In the long soft market, it did not make sense to retain risks. Now it does. Companies need to pay more attention to their risks, as higher levels of retention require better risk management,” he said. “Captives are powerful tools in a harder market and will become much more important from now on. I invite companies that still do not have a captive to start working on it.”