Marsh’s latest Global Insurance Market Index provided a snapshot of where the UK property insurance sector stands today, revealing a rate decrease of 2% in Q2 2024. Citing reasons for the decrease, the broking giant noted that long-term agreements (LTAs) were offered to many insureds and that some included built-in reductions in years two and/or three.
The report also highlighted that more underwriters are now considering individual risk profiles, which has led to increased competition where insurers perceived risk management practices as being of high quality. With that backdrop in mind, the question for the market is how to create a healthier and more secure property insurance market - and the answer for many is found where the promise at the core of insurance is delivered: the claims sector.
Toby Knight (pictured left), property practices director at McLarens, said the age-old adage of “claims being the shop window of insurance,” could not be more pertinent than it is today. With so many shifting variables continuing to evolve the property insurance landscape, the claims sector is proving an indispensable component and integral to its stability.
“While the demand increases for easy access to appropriate cover and more self-service options, the claims process is well and truly where the insurer’s promise is evaluated,” he said. “The performance of the claims function directly impacts the finances of the insurer, the reputation of the broker and, last but not least, the customer’s satisfaction in the insurance purchased.”
While a crucial part of the property insurance ecosystem, it’s clear that the claims environment is under immense pressure and needs to continually adapt and evolve to the challenges. Over the last few years, these have included unpredictable weather events, inflation, outdated property valuations, increasing construction and labour costs and supply chain disruptions.
Looking across the market today, Paul Lofkin (pictured right), head of platforms, UK & Ireland at Crawford & Company, noted that the property sector remains challenged due to ongoing issues such as the lack of skilled labour, supply chain issues, and continued high inflation, which are driving up material and labour costs and extending project completion times.
“In such an environment, property insurers are seeking to control their indemnity spend,” he said. “While we are perhaps past the inflationary peak in many regions, levels remain stubbornly high. From a claims perspective, Crawford is seeing an uptick in clients seeking managed repair services rather than cash settlements following a property claim. This puts increased pressure on supplier networks particularly following largescale losses such as flood which can impact significant property numbers, with supply and demand dynamics severely impacted.
“A further developing factor is the increasing focus on sustainability in the managed repair environment. The entire insurance value chain, including Crawford, are keen to ensure this process is managed in a sustainable manner, with the focus on building back better. However, sustainable materials can be harder to source, and more expensive, with specialists in related construction methods harder to source.”
In such a complex environment, ensuring claims are managed efficiently and effectively to meet customer expectations and Consumer Duty requirements, as well as maintain reputation, is paramount for insurers. With that in mind, Lofkin emphasised Crawford & Company’s belief that, “an informed customer is a more content customer.”
Knight highlighted that the property insurance market is as competitive as ever and with regulatory pressures increasing, customer satisfaction and retention are key. A streamlined and transparent claims process plays a vital role in this. “With customer expectation ever rising, fair treatment, effective communication and tailored claim solutions around specific needs are a must. This empathetic culture within the claims sector plays a huge part in the ongoing sustainability of the property insurance product.”
He also noted that a now ever present and ongoing challenge for the claims sector is increasing climate risk leading to more frequent weather events and unpredictable severity. Through close claims sector collaboration between broker, insurer, adjuster and other supply-chain networks, surge plans become more tried, tested, and efficient. With effective triage at the start of a claim, the correct specialist approach is applied to the situation meaning the loss is mitigated, reserves are accurate and overall settlements are equitable and timely.
“It is important to remember that, as claims managers, we are controlling considerable spend on behalf of our insurers, and we must ensure that we positively influence the claims process from a sustainability perspective,” Lofkin said. “This process extends from ensuring the customer is fully informed of all sustainable options, which include labour and time neutral activities such as using water-proof plaster and valve bricks in flood-impacted properties, through to conducting thorough sustainability assessments at the outset following major losses to assess all options to reinstate sustainably and calculate the carbon footprint associated with each of those.”
Activities can also include how firms operate and manage the site itself. For example, he said, Crawford offers a ‘Zero to Landfill’ programme, a soil management policy designed to promote sustainable soil management in the aftermath of a polluting incident. “Our role is to work with our client to support both their sustainability aspirations and those of their clients.”
Knight added that, underpinning the evolution of the claims sector is the mandatory need to embrace and integrate technology into the claim process. From initial digital notification of the claim through to the speeding up of settlements, investment in technology can enhance the already present human empathy element in dealing with claims.
There have been many advancements over the years improving triage services, fraud detection and investigative support such as video calls or drone technology. In addition, he said, the use of artificial intelligence will also continue to support the sustainability of the claims function. “The claims operation is an essential component in the property insurance sector,” he said. “It will continue to be as agile as ever to adapt to the challenges ahead, evolve with the changing landscape and develop solutions ensuring the long-term viability of this vibrant market.”
