Three reports from the XL Group - JLT breakfast seminar

Members warned that reforms will change the rules for EL and PL claims

The proposed EL/PL portal for claims under £25,000 will be with us this year – possibly as soon as April – but many companies have not begun to think about the implications. Members attending the XL Group -JLT breakfast briefing were urged to start piloting the high-impact requirements of the protocols now or face confusion when the portal is eventually implemented.

The portal, one of the main outcomes of the Jackson reforms, allows for fast track personal injury claims to be handled electronically within a 30-40-day time limit for a decision on liability. Whilst some features such as the cap on fees payable to claimant lawyers will help reduce costs, other aspects of the system will cause headaches for risk managers and their insurers.

Tracy Head of Kennedys Law LLP said that the experience of the RTA portal and the increase in claims in a climate of no increase in the numbers of  road traffic accidents was of concern and raised issues relating to fraud.

The portal is officially due to go live in April and, although October might be a more realistic start date, there is still no time to lose in getting ready for it. The short timeframe made it important to be able to collate information rapidly, she said.

Insureds need to be prepared, and to get their internal systems and communication channels geared up for a faster way of doing things. The task is made more complicated, she admitted, because the rules are not yet finalised; even the claims form for using the portal has not to be published.

In the wider discussion, participants considered whether or not the introduction of the reforms would change approaches to claim resolution strategy.  One compelling factor was the proposed cost protection for claimants who conduct their claims properly.  With very limited exceptions, including fraud, personal injury claimants will no longer have to pay towards defendant’s costs if their claim fails. 

Essentially, the cost of contesting some of the smaller claims will be greater than their value, leaving defendants with the choice of either losing money on the case even if they win or sending out the wrong signals if they fail to contest them. To quote, Gary Pomfret of XL Group: “If an insurer  pays a certain type of claim because of economics, will it open the floodgates?”

The association’s technical director Paul Hopkin summed up the mood of the meeting when he said, “I’ve learnt more about the portal in the last five minutes than in the previous five months.”

Importance of relationships when making large claims

Get to know the key claims people at your insurance company before you have a big loss; it could make all the difference. That was one of the messages to come out of the recent XL Group-JLT forum.

Mike Brown of JLT set the scene with the observation that claims handling has lost some of the personal touch. Thirty years ago it was a slow methodical process and, whilst the greater speed expected today is a good thing, there is now less interaction between clients, insurers and brokers.  The most desirable outcome would be to combine the modern demand for instant answers with some of the older values.

Relationships are key, advised Paul Fox of XL, who described himself as passionate about claims. “If you haven’t met the guy who’s going to cut the cheque, you haven’t got a relationship. Where we have that relationship we don’t have any problems. Otherwise, it’s when the large claims, the contentious claims arrive that things tend to break down.”

Both speakers recommended the use of claims protocols, which are becoming increasingly evident as relationships weaken. “The protocols are there to assist … not to get in the way of your workflow,” he said.

This topic led naturally to the contentious subject of Reservation of Rights, an area where Airmic has been active recently with its model clause (see Airmic News, December 2012). This generated a lively discussion from members of the audience who had unhappy experiences.

These difficulties only highlighted the importance of relationships, said Fox. He expressed his support for Airmic’s work in this area, but implied that some buyers could do more to avert problems. “If we don’t understand each other it’s very easy for us as an insurer to bung in a reservation of rights.”

Buyers were advised to take a closer look at the following market on shared risks. It was often, said Fox, the smaller risk carriers down the slip that “put a spanner in the works”.

Lesson for CBI claims from Thailand

Members who attended the XL Group -JLT briefing were given a reminder of the lessons from the Thai floods and Hurricane Sandy when making CBI (Contingent Business Interruption) claims.

CBI cover is, admitted Adrian Brennan of Echelon Claims consultants, a contentious subject. Members of the audience could, though, learn a lot from the lessons of recent events, especially the Thai flooding of 2011.

He reminded the audience of some aspects of the flooding that had exacerbated disruption, most notably just-in-time production, reduced stock capacity and growing use of single-source suppliers to reduce costs.

Localised supply chains, useful in keeping down costs in normal times, can come back to haunt you in the event of natural catastrophe. “One of the issues in Thailand is that there were some customers with suppliers on the same site, sometimes even next door,”  said Brennan.

Just as devising supply chain strategies can be complex, so can the exercise of placing CBI policies and making claims on them, with legal clarity often difficult to establish. The recent Orient Express test case* in the United States had been highly influential in relation to Thailand, said Harris. It is especially important to understand your policy, the way it would play out in practice.

He added that jurisdictional issues, such as repatriating money from claims, could also be complicated.

Among the many pieces of advice offered to the audience, was the value of creating supply chain teams, whose tasks, might include working out how supply chains could be reworked in emergencies. Companies might also consider moving away from single-source suppliers and do more to understand their suppliers and the locations where they are situated.

*In the Orient Express case, an insurer declined a business continuity claim from Orient Express Hotels in New Orleans following Hurricane Katrina. The insurers’ main argument was that, because the whole city had been devastated, the client would have lost business even if the premises had not been damaged.

“If I pay a certain claim, will it open the floodgates?”

Gary Pomfret of XL