General - March 4, 2024
The Decline of Insurer Claims Service: A Post-COVID Reality?
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In the aftermath of the COVID-19 pandemic, the landscape of insurer claims services seems to have undergone a noticeable deterioration, leaving a trail of discontent and distrust in its wake. From our vantage point, the once-efficient and customer-focused claims process has been marred by a growing reliance on large loss adjusting firms, resulting in a significant barrier between insurers and claimants.

When COVID-19 struck, insurers faced unprecedented challenges in administering claims efficiently. As a result, many turned to large loss adjusting firms, such as Crawfords and Sedgwick, to handle the influx of claims. While this decision may have been born out of necessity at the time, in this author’s view it has since evolved into a troubling trend with far-reaching consequences.

The outsourcing of claims handling to these behemoth firms has created a chasm between insurers and claimants, leading to delays, frustration, and a lack of transparency in the claims process. What was once a straightforward interaction between insurer and claimant has now become a convoluted maze of intermediaries and bureaucratic hurdles.

Moreover, this shift has fundamentally altered the culture and ethos of insurers, moving away from a focus on providing quick, fair, and reasonable claims service to aligning with a default position of minimising payouts. Insurers that were once known for their prompt and empathetic handling of claims, such as Hiscox, now find themselves mired in a quagmire of arduous processes and red tape.

The consequences of this transformation are palpable. Claimants are left feeling disillusioned and distrustful of insurers, leading to a growing exodus of clients seeking alternatives at renewal. The lack of transparency surrounding how loss adjustors earn their money only adds fuel to the fire, raising questions about conflicts of interest and incentives that may prioritise cost-saving measures over fair claim settlements.

The parallels with the practices outlined in “When McKinsey Comes to Town”* are striking. Just as AllState’s claims department was encouraged to fight marginal claims and make lowball offers, insurers seem to be prioritising financial savings over their reputation and integrity. It begs the question: in the chaos of COVID, were insurers offered cookie-cutter solutions that prioritised short-term gains over long-term sustainability and customer satisfaction?

As we navigate the aftermath of COVID-19, it is imperative that insurers reassess their approach to claims handling. The focus must shift back to prioritising the needs of claimants, fostering transparency, and rebuilding trust in the insurance industry. Failure to do so risks further erosion of reputation and trust, with far-reaching implications for insurers and claimants alike.

Whilst these are personal opinions of the author based on observations of the claims process over the last few years, it doesn’t mean they are untrue, or at the very least match the perceptions of many insured companies and others in the broking fraternity.

* When McKinsey Comes to Town / Walt Bogdanich and Michael Forsythe 

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