“Third party claims inflation has been going through the roof for the past 10 years and it’s not really getting any better,” said Glen Eastwood, managing director of MSL, at a recent MGAA conference on reducing motor claims costs.
As a customer-focused claims business, MSL has a broad overview of the impact of claims inflation and its impact on loss ratios and, subsequently, premiums.
“Traditionally,” Eastwood said, “non-fault third parties were treated very badly. Insurers made it hard work for third parties, and, in retrospect, that was an own goal, because…about 20 years ago along came a knight in shining armour – the credit hire industry.”
Due to the gap in the market, the credit hire industry was built around non-fault third party claims. Credit hire quickly branched out into credit repair and personal injury services, all of which created substantially higher costs for the insurer.
Intervention – the act of making an early offer to a non-fault third-party – was born out of necessity and Eastwood believes it is the greatest way to minimise third party claims inflation.
“[Intervention] gives you the potential to provide a great service to the third-party,” said Eastwood, “and save between £2,000 and £3,000 per claimant.”
In an environment where a non-fault third-party is seen as a commodity, Eastwood outlined, the key is to take the initiative by acting quickly and offering your services on a direct basis.
“Intervention is a really key element of good claims handling,” he said, “if you want to reduce your third-party spend, you have to be doing this and you have to do it well.”
Eastwood detailed the key building blocks of excellent intervention as:
- Having a detailed offering
- Assembling a well-trained team
- The ability to act quickly
- Excellent communication and the capacity to handle objections
- Delivering on your promises and treating the third party fairly throughout the process
- Working with trusted partners.
The importance of working with trusted partners highlights the role of the broker in claims handling and intervention and, according to Ben Clarke, national sales manager at MSL, there is a strong pricing consideration to the brokers’ involvement with this area. He outlined how the broker reporting of the FNOL can be necessary to protect the brokers’ ratio with the insurer which might indirectly affect any profit share they possess.
Eastwood stated that the broker is often essential in ensuring that the FNOL is issued as quickly as possible.
“Sometimes people report the incidence to their brokers…so the brokers need to be working with the insurer to get that through quickly,” he said.
With substantial costs per claimant at stake, speed is essential when it comes to non-fault third party claims handling, Eastwood said. Speed of reporting and speed of action are essential in an environment where “a whole host of people are lining up to offer their services.”
From accident management companies to vehicle recovery agents to the third party’s own insurer, intervention is a race against the clock. Incentivising early reporting is an essential metric of the successful utilisation of intervention in non-fault third party claims. From making it a policy condition, to developing applications for the reporting of claims, to supplying ‘accident cards’ which customers can use to supply insurer information, there is a wide variety of ways to encourage early reporting.
Eastwood said that an offer to waive the excess in the case of early reporting is an especially powerful motivator. He highlighted how making people aware that reporting a claim quickly will save them money is a great way to ensure a claim is actioned as early as possible. This allows the insurer to not just minimise the costs associated with the third-party claim but also to provide an exemplary service to the third-party, Eastwood said.
He went on to specify that it is the latter of these benefits which will help build the reputation of insurers in non-fault third party claims cases and inform the consumer that settling without the involvement of the credit hire industry will not result in the under-settlement of their claim.