There seems to be quite a deal of anecdotal evidence to suggest that liability claims are on the increase. It is over 10 years now since the wave of tort reform which attempted to change the liability landscape. We are seeing increased activity in our client base and filings of writs for personal injury are also on the rise. So why are claims increasing, and why do we seem to be dealing with a more informed consumer?
It is fair to say that access to instant information about everything is redefining the rules of business to consumer relationships (and B2B for that matter). The imbalance of information that once existed is no longer the norm. So just as people try and self diagnose problems with the assistance of the web – whether they be medical issues or fixing a shed – they will turn to the web in the event they might have a claim and find out how they go about getting compensated. And some will end up in chat rooms with people who have been though the process and learned from the experience – and are more than willing to share.
A simple web search for “I have fallen over in a supermarket” yields pages of resources, from plaintiff lawyers to chat forums to complaint sites.
You can no longer assume you are dealing with an uninformed claimant. This relatively new phenomenon has 2 main consequences for companies with liability claims, but it has wider implications for all insurance claims. The first main issues we need to understand is that , clearly, we are dealing with a better informed potential claimant. The consequence of that is, in our view, that old business models built around defaulting to a position in a claim (traditionally a denial) no longer works. In this day and age you need to be open and transparent. You also need to default to first dealing with a claimant in good faith, which is sensible given most claims remain genuine. It is true that some claimants may be opportunistic, and some even fraudulent, but that can – and ought – be established after investigations and not be the primary position.
The second and more significant risk in managing claims now with social media so prevalent lies in the potential for significant brand damage when claims are not handled professionally and openly. In the past insurers have had to weigh threats of unhappy claimants “going to the press”. But these days every claimant has access to social media and so every contact with a consumer has potential brand consequences.
One of the important guiding criteria for brand value is Presence. This is seen as the degree to which a brand feels omnipresent and is talked about positively by consumers, customers and opinion formers in both traditional and social media. Clearly a claim handled poorly has the potential for significant and immediate brand impact.
How do companies minimise potential brand damage? By having best practice claims management. What is best practice depends very much in the landscape and environment ion which claims are managed. It is interesting that there remains two schools of thought in the corporate world on managing claims to protect your brand. The first, and more traditional theory, is to retain this function internally, even if it is not a core competency of the business. The other school of thought is that your brand is protected best when functions that impact your brand but are not core are performed by external specialists in that function. Our experience is that the traditional model may retain control but under estimates the difficulty of the claim environment and so tends to yield poor results, which ultimately reflects negatively on the brand.
It has been a tough time for companies with liability claims frequency. Tort reform offered a glimmer of hope but over time has been unwound and is now a distant memory. Claims are now starting to increase and we have seen claims inflation running at over 5% a year for seven or more years. Now we also have to deal with social media issues. The environment is quite challenging. Now ,more than ever, you need a responsive, open and transparent method of managing claims. If you don’t, the risks to both your bottom line and to your brand will be significant.