Quality of risk becoming a big issue for insurers

06 April 2010

Short term insurance companies are analysing more carefully than ever the quality of individual clients brought to them by brokers as they seek to become more selective about who they are insuring. This is the view of Rachel Stevenson, head of performance improvement at Ovations.

“Short term insurance used to be very much a volume based business with insurers not paying that much specific attention to individual clients within group schemes brought to them by brokers,” she says.

“However, with the market more competitive than ever amid major pressure to reduce costs, insurers are scrutinising claims histories, more proactively deciding the type of clients they want to insure, raising premiums where necessary, weeding out bad risks and generally trying to improve the quality of their books.”

In addition, says Stevenson, insurers are attempting to cut down on the human effort that is needed to follow up on clients’ claims by getting “stickier” on things such as the time allowed to provide needed claims information.

Car hire provided in policies is being closely managed to reduce unnecessary costs due to supplier (panel beater) over-runs and preventative or proactive measures are being implemented to curb unnecessary spending (chipped windscreen repair versus replacement etc….)

In an effort to cut costs, she says insurers are examining their geographical footprint and asking whether a physical presence in some areas is worth the operational cost.

They are also focusing on business process management initiatives to fine tune their operations and make their technological and human resources as productive/efficient as possible “This is leading to consolidation, minimising actual on the ground presence, increasing virtual processing and pushing back office functions into lower cost locations,” she says.

While Stevenson believes policy lapsing is starting to improve along with the economy after a bad period in late 2008 and early 2009, she also says improving new car sales figures in 2010 will assist insurers’ volumes after poor sales figures in 2009. Finance providers make it compulsory for any car purchased through an installment sale agreement to be adequately insured.

Meanwhile, the environment is starting to play a much bigger role in insurance companies’ lives. Stevenson says there is increasing pressure on salvage exercises – especially those involving hazardous substances – to be handled as efficiently and as environmentally friendly as possible.

 

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