Opinion: The tortoise and the tortoise

Opinion: The tortoise and the tortoise | Insurance Business

Opinion: The tortoise and the tortoise

Claims performance may be the most important aspect of an insurer’s service, but are we measuring it all wrong? Claim Central's Darren Trott has a different approach in mind.

I’m sure many of us analysed the results of the inaugural Brokers on Insurers special report, published in the July edition of Insurance Business. It certainly caught my attention, as it highlighted claims turnaround times as the single most important aspect of an insurer’s offering, as rated by the 342 survey respondents. 

But it also got me thinking. Why don’t insurers publish their actual results against this critical claims performance indicator? What if the gold, silver and bronze medalists are the winners, but in a race that’s more tortoise versus tortoise than tortoise versus hare?

There is no doubt insurers should have a strong focus on reducing claim lifecycles. It generally results in a more positive customer outcome and minimises the potential for cost blowouts.

However, the report also provided respondents’ comments concerning unnecessary claim delays and inconsistent outcomes. Let’s not forget, nearly half of the respondents considered that claim turnaround times had actually worsened.

Clearly there are differences in each insurer’s claims portfolio mix, depending on individual risk appetites and line of business focus, which can make direct comparisons difficult at first glance. Some types of claims are more complex than others.

At the same time, we should be in a position to compare insurers against each other’s performance in average sedan motor claims lifecycles, or average small to medium property claims lifecycles, for example. We could then compare apples with apples.  

I’m of the view that the average claims lifecycle is one measure which ought to be widely publicised and promoted, especially if an insurer is able to transparently and objectively demonstrate a market-leading performance, or a significant improvement upon earlier results.

Alternatively, the alarm bells ought to be ringing loudly if you’re one of the insurers contributing to the decline in claims turnaround times, as perceived by 44% of the survey respondents.

Although the recent launch of LMI Group’s claims comparison website is an excellent initiative, four of the key comparisons are based on data published by the Financial Ombudsmans Service, specifically around claim disputes.

Insurers are rated more highly for having fewer disputes or resolving disputes quickly. This is a valid comparison of course, but isn’t it disappointing how one of the few public and objective measurements comes from such a negative factor? It’s a bit like comparing lawyers by how many cases they’ve lost, rather than by how many they’ve won. It’s a measure of customer dissatisfaction.

In reality there are plenty of objective measurements and, in my experience, most insurers capture them, it’s just the results aren’t published or promoted. Why not?

The following factors would provide brokers and customers with a higher degree of objective measurement, and if made public, would lead to greater competition, and ultimately raise the bar across the entire industry.

My list would start with:  

  • The number of claims managed per claims handler – by line of business, as it directly impacts turnaround times and customer service responsiveness
  • The average claim lifecycle – by line of business, measuring the length of time from first notification to final settlement
  • The ratio of claims paid to claims reported – a positive measurement of how many claims are accepted and paid, rather than denied or disputed.

I’m also a fan of customer satisfaction benchmarks. One of the best-regarded measures is the Net Promoter Score (NPS) methodology. Products or services are rated by customers according to the extent to which they are prepared to refer a product or service to friends and family.

On a scale of one to 10, a score of seven or above means customer satisfaction is strong and customers are likely to be advocating a product or service. A score lower than a seven suggests customers are ambivalent, and at the lowest end of the scale they’ve become detractors, telling everyone about their bad experience….a bit like my own experience with Hudson’s Coffee, but that’s another story.  

Karen Hardy of Acme Insurance Brokers in Tully understands, as shown by her company motto: “the greatest compliment I can receive is a referral from my clients and friends”.

Let’s see who will take up the challenge. I’ll award my gold medal for claims performance to the insurer who can transparently demonstrate the best average claims lifecycle, the highest claims paid ratio and an average Net Promoter Score of eight or above. Game on! 

Darren Trott is Executive General Manager of Claim Central and Insurance Business’ new regular columnist.