A mixed report for insurers - Insurers came in for praise but also some criticism over claims payments at the recent FERMA annual forum.

Trialogue is a word invented by the European Commission, but is not a bad description for the aim of the three panel discussions, risk managers, insurers and brokers held at the Forum of the Federation of European Risk Management Associations (FERMA). The Forum took place for four days from 29 September appropriately in Maastricht, where the European Union Treaty was signed. 

The risk managers came first. They followed shortly after the keynote address on Solvency 2 by the former head of insurance and pensions for the European Commission, Karel Van Hulle. The panel members, however, were much more concerned about the way insurers deal with their claims than their financial security.  

Asked by panel moderator Cathy Smith to rate the industry out of 10 for its performance, Airmic chairman Chris McGloin gave insurers 9 for their ability to pay claims – but their willingness to do so “more like 5 or 6”. Chris said: “You think you have agreement on the intention, but when a claim comes insurers can change their interpretation.”

The other panel members also expressed frustrations over claims, when as Tjerk Van Dijk, director of insurance for Stork and Fokker in the Netherlands, said: “You need a lawyer to prove you’re right.” Why, he asked, was there so much outsourcing of routine claims to loss adjusters? “Insurers’ claims department are under staffed and they rely on third parties.”

Andrew-Richard Bradley, head of group risk services for Nestlé, said: “Maybe there should be more effort into getting policy documents written and claims paid. You can’t ignore that because they’re not sexy.” He was generous, however, in his overall rating of his relationship with the industry: 8 to 8.5.

The fourth member of the panel was Annemarie Schouw, risk and insurance manager of Tata Steel in the Netherlands and chairman of the Netherlands risk management association NARIM. Her score was 7.5 to 8.

Said Chris: “I would give brokers and insurers 8 for their expertise, and maybe 8 to 9 for individuals. But corporate commitment to change is quite low. I would mark that as 4.” One of the biggest innovations insurers could make, he said, is to provide their clients with good quality information about the basis for their underwriting decision making. “Good information at the right time is like gold dust.”

The market responds

The next day was the turn of the insurers. While still somewhat preoccupied with their own concerns, such as low interest rates and regulation, they seemed to take the risk managers’ comments to heart.

Richard Ward, CEO of Lloyd’s, considered the claims paying rating given by the risk managers, and said “Surely, we can do better than that.”

“Yes,” said Peter Hancock, executive vice president of AIG. “We need to invest so that we can do more to vertically integrate our services. We can do better.” Axel Theis CEO of Allianz Global Corporate & Specialty commented: “Claims can’t nor should they be outsourced. Our business is underwriting, pricing risk and paying claims. These functions should always be under our control.”

Mike McGavick CEO of XL Group went to the heart of the challenge: “We need to think about what matters to clients, rather than what we want to sell. We need to have a dialogue with our customers so they really understand what’s covered and we have a better sense of what clients want.”

When it came to data, Peter Hancock commented: “We are at the stage of hunter gatherers using mostly own data and free public sources. Now is the time to become farmers and invest to get new data for intelligent underwriting and collaboration with our clients.”

The role of the broker scarcely figured in the first two discussions, but it was their turn on the final day of the Forum. They covered similar ground. Robert Brown, CEO of Aon Risk Solutions EMEA and Aon UK, commented: “Too often carriers provide products and too often not solutions. How do we use data, analytics and the understanding we have built up for clients?”

Dominic Casserley, CEO of Willis Group, reflected on the role of the broker said brokers were changing from their traditional transactional role to advisers with an expert insurance transactions at the end of the process. 

So the panel discussions were ultimately a trialogue of a sort. Perhaps the next FERMA Forum in 2015 will reveal whether they have led to progress. It is taking place appropriately in Europe’s original business capital, Venice. 

Chris McGloin