Insurance claims files can offer a more revealing picture of how businesses manage risk than any proposal form or pre-sale questionnaire, exposing decisions made long before a loss occurs.
For Paul Upton, chief commercial officer at claims specialist Acumen Claims Limited, that makes claims experience an important part of the broker conversation – but one that has traditionally received relatively little attention during placement.
Upton spent much of his 35 years in insurance underwriting business placed through brokers and said questions about claims service were surprisingly rare.
"In my experience, having underwritten millions of pounds of business through brokers over the years, you very rarely got a question about what's your claim service like," he said.
Poor claims handling still quickly becomes known in the broking market, he added, because brokers ultimately have a choice over where they place business.
The bigger problem is that businesses do not always fully understand what they have bought until they need to use it. By then, weaknesses in valuations, sums insured, policy conditions or the scope of cover may already have determined the outcome.
Business interruption claims, in particular, can expose decisions made months or even years before anything goes wrong.
When a claim is made, insurers scrutinise the values originally declared by the insured. Upton said businesses can then regret not spending more time on valuations, or paying for professional advice before a loss occurs.
Common problems include miscalculated gross profit figures, outdated sums insured and cover that has failed to keep pace with rising rebuilding costs.
In one case, Upton recalled customers being left 40% underinsured because index linking had never been applied to their sums insured. The resulting shortfall was severe enough, he said, to prevent the business from continuing.
Where assets are under-declared, an average clause can proportionately reduce the amount paid following a claim, an issue explored in Insurance Business UK's coverage of commercial underinsurance.
Yet preventing those problems creates a difficult balancing act. Upton said relatively straightforward policy conditions, rather than complicated exclusions, are often what catch businesses out.
"I feel sorry for brokers because you're not going to sit there trying to win a client and tell them the 50 things they've got to watch out for, because the insurer won't pay if you don't get this," he said. "It's just difficult in the sales process to get that balance."
The conditions themselves can be mundane: extraction filters that have not been cleaned, combustible waste left against buildings or alarm systems that have not been activated when staff leave.
Price adds another complication. A broker may understand why broader protection matters but still have to convince a client that the additional premium is worthwhile.
"It's very difficult to persuade a client, if you're a broker, for example, to buy a £12,000 policy that covers all these extra things as opposed to a £10,000 policy that just does a bare minimum," Upton said. "And that's the challenge that brokers face."
The consequences extend beyond the individual claim. If a cheaper policy fails to respond as the client expected, confidence in insurance itself can suffer. Upton pointed to legal expenses and directors' and officers' insurance as examples of protection that can still be treated as optional rather than considered against the client's underlying exposure.
Despite spending three and a half decades in the industry, Upton said he would still use a broker rather than buy insurance directly because of the complexity of the purchase.
That complexity also creates an opportunity to put more emphasis on what happens after a policy has been sold.
Upton said claims receive relatively little attention during the sales process despite becoming one of the most important measures of value once something goes wrong. As insurers find it harder to differentiate on price alone, he believes claims service, and the advice surrounding it, can become a more important part of the broker proposition.
That means the claims conversation starts well before a loss. Checking valuations, explaining the conditions most likely to affect cover and challenging a client's focus on price can all influence what happens months or years later.
By the time the claims file is opened, many of the decisions that determine its outcome have already been made. It does not just reveal how well the policy responds; it shows the value of the advice that came before it.
