Insurers Dispute Half of All Business Claims

Insurance is so boring that few outside the industry pay attention - which is exactly how the insiders like it. 

Whether in a professional or personal setting, we tend not think about it - until we need it. This has allowed certain processes to evolve that greatly benefit the insurers at the expense of the insured. But what it particularly amazing is that businesses appear to suffer to the same degree that individuals do.

This is surprising because given the laser like focus of the financialization avatars on everything from salaries to real estate to legal representation, it would be reasonable to assume that the growth in insurance premiums would have been given the same treatment. Not only does this not appear to be the case, but as the following article explains, insurers challenge fully half of all business claims and take almost three years to settle even the most prosaic claims.

The insurance industry may finally be receiving some of the same scrutiny that so many others have had to endure, almost always to their disadvantage. The only question is why it took so long. JL

Alistair Gray reports in the Financial Times:

Insurers take an average of 35 months to settle disputed claims, often through arbitration proceedings with gagging clauses and for a fraction of the sums sought.
Insurers dispute almost half of claims made by businesses and typically take three years to reach settlements, according to a study that will put pressure on government to take further action against what it calls “systemic problems” in the industry.Research to be published this week by insurance governance specialists Mactavish will say that nine out of every 20 claims described as “large” or “strategically significant” by the company making the claim have been contested by insurers since 2008.
The research lends weight to complaints from companies that insurers dodge legitimate claims and that the law gives them inadequate protection, and comes after the Treasury unveiled plans to revamp the 100-year-old legal regime that governs business insurance contracts.A measure recommended by the Law Commission but dropped by the Treasury would have entitled companies to seek damages from their insurer if their claims were delayed.
Mactavish found insurers take an average of 35 months to settle disputed claims, often through arbitration proceedings with gagging clauses and for a fraction of the sums sought.
Among the most frequent reasons for claims being denied were supposed breaches in conditions attached to the policies or inadequate information disclosure.
Claims for complex policies such as business interruption, professional indemnity and product liability were especially problematic.
Mactavish, which advises corporate insurance buyers, gathered data in 2012 and 2013 from 410 companies with annual sales of more than £50m. It said its research covered a “statistically significant sample of corporate Britain”.
About two-fifths of the companies had made a big insurance claim within the prior four years but only a quarter of the cases were resolved to the policyholders’ satisfaction.
Brokers say smaller enterprises with limited clout encounter the biggest problems, but even some of Britain’s largest companies have supported calls for reform. Tracey Skinner, director of insurance and risk financing at BT Group, said of the Treasury’s proposals: “The changes [from the Law Commission’s original plan] are a little disappointing although we shouldn’t detract from the fact that a great deal of progress has been made.”
The research findings come ahead of a planned review by the Financial Conduct Authority in the autumn into commercial insurance. The regulator said it would look at whether “customers’ expectations are met in the claims process”.
The Association of British Insurers said in a statement: “Our members are taking this review seriously and will co-operate with the FCA as they progress their work. There is no room for complacency, and insurers are continually looking at how to further improve the claims process.”
The Treasury has committed to revisiting the business claims issues not addressed in its latest proposals, people familiar with the process said.