Last “gravy-train” to Clarkes-ville

This Government (like the last) continue to look like little boys trying to discipline their fathers as we all continue to feel the after-effects of the banking collapse. But, at least, they are picking fights that they can win (with their “little brothers”) by putting a stop to a practice that has added an increasing amount to claims settlements and, therefore, insurance costs

The government will announce plans for a major shake up of civil justice later today. Central to their proposals will be reform of so called “no win, no fee” agreements, which ministers say has led to spiralling legal costs. Muiris Lyons, president of the Association of Personal Injury Lawyers, and Justice Secretary Kenneth Clarke, debate the proposal.

The insurance industry bleat on about the cost of fraud to their dear policyholders! I would have some sympathy with this argument if insurers made the policyholder feel loved in the first place – by providing them with value instead of enticing them with price, only to “disappoint” when it matters most.

Despite the protestations of “interested parties” within the industry, the truth is that insurers have invited many woes unto themselves. In their rush to outsource and attempt to squeeze savings where there was little to be had they helped construct and have (over)fed a network of “specialists” whose power (or is it “hold”?) grew along with their costs, to such an extent that they could not kill the monster they had created.

It has taken a “higher force” to begin to make sense of this. But I wonder if there is the will to set about dismantling what was created and for insurers to start to, again, accept the responsibility they tried to farm-out?

They can moan about fraud perpetrated against them by the opportunist or organised fraudster but fall suspiciously silent when the discussion turns to the “Licensed fraudsters” who feed themselves at the expense of insurers, customers and communities from whom they steal value and peace of mind.

I made the following comments in a recent Linkedin discussion with someone whose knowledge of the insurance industry is, obviously “tainted” by his employment as a “claims specialist”:

Of course people will consider price! We do it all the time when making purchases. This is something that new entrants to a market can use to good effect e.g. Direct Line. Theirs was a disruptive innovation for the industry and the lack of a “claims tail” gave them a competitive advantage. They had no customers so a message promoting disloyalty was vital.

Since then we have peddled it, although we know it is “one dimensional metric” to the point where the ROI is negative and some change is apparent.

We aren’t selling beans! Smarter insurers/brokers/customers look beyond that and buy brands for reliability and quality.

Since then, the majority of companies with historic market share (built upon customer and broker loyalty, resultant stability and profitability) and considerably higher COR’s have overspent on marketing to tell customers that price is what we will give them.

I reckon your reference to Tynan’s isn’t appropriate as my previous contribution is constructive and, I would hope, provides a commentary on (if not an analysis of) the issues that brought us to be discussing this and related topics.

A driver may have the choice of car (BMW or Lada), certainly has the choice of route but the destination for both, presumably, is sustainable profitability. The long but safe route is over known terrain. The other is shorter but prone to landslides or avalanches.

Quantity: Be cheaper and (often) nastier.
Quality: Be better – per Hiscox, etc.

If you have any issues with what I suggest or that the level of satisfaction within the industry, about it, what it does and how it does it indicates otherwise.
From your profile pic I can only assume you are a tank driver!?

To fund a premium race to the bottom, insurers set about: stripping out covers; outsourcing; off-shoring; compromising existing distribution channels; overpaying affinity relationships; subsidising pricing, etc.
Insurer retention rates; profitability, premiums, cover, satisfaction and reputation head one direction whilst marketing, direct/indirect claims costs, etc. head off in the opposite direction. Still that has spawned a very sizeable and lucrative industry in itself.

You may have noticed that, in more recent times that, for example, More Than, Direct Line and Aviva have also tended toward marketing that is more about cover features…even though most WERE common to household contracts over 20 years ago…that should tell you something else you, apparently, need to know. I am no evolutionary expert but I understood that gene mutations were also a one way street?

I want the industry to be better and feel it is important to dispel some of the myths that are created by those who understand (and perpetuated by those who do not think to question) to justify its ineptitude.

It is notoriously difficult to identify causality in complex systems and I believe that this is one such case. Some (you included) believe that we are merely victims of fraud rather than creators or, at least, substantial contributors to our own plight. From your role I can understand how that would be the case but you need to take a holistic view. Sometimes it is difficult to see something that is too close. Expressions such as you “reap what you sew” and “what goes around comes around” are worth considering unless of course millions of people have independently determined…or worse, conspired, to defraud poor naive insurance companies!?

One Response to Last “gravy-train” to Clarkes-ville

  1. Bobby Gracey is VP Global Counter Fraud at Crawfords (and a great guy). If you have ANY interest in fraud and the impact of fraud upon YOUR own insurance costs…and we should be concerned about this…a podcast of his recent presentation at Lloyds can (hopefully) be downloaded here – not sure if you need to be Linkedin user!:

    Some of the statistics and numbers are pretty scary too.


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