Members will recall that FCA visited the MGAA in June 2014 to discuss how MGAs handled SME claims. This was part of the FCAs process in scoping out a thematic review prior to their findings being taken to the FCA board for approval.
On Friday 22nd May, 2015 FCA held a seminar, hosted by Simon Green - Head of General Insurance & Protection, where they detailed their findings and identified potential failings highlighted by the thematic review. This analysis was based around 200 claimants and FCA used the services of a loss adjuster in a “deep dive” into a select number of claims files to establish some of the identified failings.
FCA carried out this review as they “wanted to understand the extent to which claims from SMEs who are less likely to be sophisticated customers and who often exhibit similar knowledge and experience to that of retail consumers, were handled promptly and fairly. We also wanted to understand the role that different firms played in the handling of claims, particularly given the prevalence of outsourcing of claims by insurers.”
FCA consulted 25 firms, including 5 MGAs, and as part of this review interviewed senior managers and claims handlers. Due to the potential size of this review FCA restricted their investigation to first party claimants where the claim was settled for in excess of £ 5,000. This review excluded motor, liability and indemnity policy claims and related to claims which occurred in the previous two years.
FCA commissioned an independent research agency to carry out qualitative research with 100 SMEs that had made a claim, which was in addition to the 100 businesses interviewed directly by FCA.
It was identified that the larger claims were more complex, so to understand how each party interacted in the claims process FCA commissioned a specialist firm of loss adjusters to look in-depth at 20 claims. These claims were drawn from the SMEs included within their research.
- There was a gap between SMEs expectations and the claims service they received.
- There was an overall poor perception by SMEs of the claims experience.
- Claims were not always being managed effectively in the interests of SME customers – the most common cause of dissatisfaction was a lack of clarity over who was responsible for driving the claims outcome.
- There was often poor-communication between the different parties handling the claim and the claimant about progress which led to delays in reaching a settlement.
- A significant number of instances where the sums insured were inadequate to cover the loss incurred. The underlying reason for this was not always apparent but FCA’s review did highlight the material impact this could have on the claim.
The key message for the MGA insurance market was that FCA would again focus upon their “outcomes” principle. Therefore, they would be seeking evidence that policyholders were at the heart of MGAs’ business plans and that claims were being handled fairly and promptly. Communication was at the centre of this review, consequently MGAs will need to establish a clear process for continued dialogue with the policyholder where they are handling the claims process. In circumstances where claims are referred to TPAs or back to the insurers, it will be seen as good business practice to monitor the claims process between the various parties.