Softening commercial insurance prices aren’t lowering the cost of claims, but they are putting claims service providers under heavy pressure on fees, according to Wendy Scott (pictured left), president of ClaimsPro Canada.
Insurers’ premium revenue may be falling, but claims costs, litigation costs, catastrophe exposure and service expectations keep rising, Scott told Insurance Business. For adjusting firms, she said, the effect of the soft market is indirect, but commercially significant.
“There is a significant pressure on fees,” she said.
Carriers are scrutinizing cost per claim, hourly rates and expense budgets, and procurement teams are now part of conversations in ways they weren’t before, Scott said. Adjusting firms are seeing more requests for proposals, more panel reviews and more consolidation of supplier relationships.
Read more: Davies doubles down on Canada – and goes all-in on AI
“I think, from an adjuster perspective, over the next sort of 12 to 18 months, we see a real competitive marketplace in terms of pressure on claims fees, greater scrutiny for supplier performance, and increased differentiation between providers,” she said.
Clients are also looking past hourly rates to productivity and results, including efficient file handling, reserves, reporting, reduced claims leakage and faster cycle times, Scott said. While carriers push for lower adjusting fees, she said, claims firms are “in business too” and need to make a margin.
Premium growth doesn’t always translate into revenue for adjusting firms, Scott said. Third-party administrators need to look at which exposures will actually produce assignments, recurring contracts and higher-value claims. Construction, cyber and climate are the hottest areas, she said, along with industrial property, business interruption and complex liability.
“The higher value specialty work is where we see some growth right now,” Scott said.
That expertise is hard to substitute, whether the loss is a complex property claim, a catastrophe event or a litigation-sensitive file, she said.
“That need for specialized adjusting remains difficult to replace,” Scott said.
Firms that compete mainly on price will be the most exposed, she said. Those with specialist expertise, national reach, strong catastrophe capacity, trusted client relationships and demonstrable claims outcomes should be able to win market share even in softer conditions.
Looking ahead, Scott said she expects the market to soften further, but not dramatically.
“I think my expectation over the next probably 12 to 18 months is that we’ll generally see a softer market,” she said. That won’t mean a return to any highly aggressive pricing cycles of the past, Scott said, because “insurers will remain mindful of the volatility.”
Catastrophe exposure in particular has changed for good, she said.
“That’s definitely the new norm,” Scott said.
Brooke Gracious (pictured right), chief client officer at Davies North America, said claims firms facing fee pressure need to show value beyond handling individual files. That means helping insurer clients solve wider business problems, such as staffing shortfalls or technology gaps, when they come up in conversations with adjusters, she said.
The firms that do that become “a total solutions partner and not just a claims solutions partner,” Gracious said.
Read more: UK's Davies Group acquires Canada’s largest claims firm in landmark deal
Specialization matters too, she said. Claims providers need to organize their expertise around the way their insurance partners structure their own businesses. Davies, for example, is building industry verticals in transportation and cargo, agribusiness, energy and aviation, with construction next.
Gracious said consolidation is reshaping the market at every level, from brokers to carriers, with heavy investment flowing into MGAs, particularly in specialty business. Scale brings broader capabilities, technology investment, geographic reach and specialized expertise, she said.
“But at the end of the day, the clients don’t want to lose the things that made the relationship valuable in the first place,” Gracious said.
Clients still want someone who understands their business, is accountable and has local knowledge, she said.
Scott said preserving those relationships is especially important in Canada.
“I think the Canadian market has always had a reputation of being relationship-driven,” she said.
Gracious said firms that get consolidation right will combine the resources of a larger organization with a personal understanding of each client.
“Scale creates capability, but the challenge is making sure it doesn’t create distance between you and the client,” she said.
