How good is your insurance policy? - Business Works
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How good is your insurance policy?

Danny Cooper, MD, The Insurance Manager We started doing a 'survey' of the insurance industry in 2007 to help substantiate our complaints to certain brokers and insurers who, we felt, were not meeting reasonable delivery standards. This has since become an interesting annual measure of wider market standards and an independent assessment of the quality of customer service in one of the largest 'service' sectors.

At The Insurance Manager, we provide an outsourced insurance management service to a wide range of clients who do not have the resources to employ their own team. Part of this role is the procurement of appropriate insurance from a very wide market spectrum. This produces contact and negotiation with, and documentation from, dozens of brokers and insurance companies and a unique vantage point to compare and contrast. Effectively, we become 'the client', but one that knows what they need, when, how soon and whether it’s correct.

Unless the insurance market is treating our clients any differently (if anything our buying power suggests we should actually be receiving preferential treatment), then it is a fair assumption that what we experience year-on-year is a mirror of the service provided to clients across the board. This produced the realisation in our 2009 survey that "Millions of insurance documents might be wrong". Who would know until the time came to make a claim?

Survey measures

We use two very simple comparative measures.

The first is a check on technical standards and risk knowledge, as well as the ability of the insurer and broker to produce a correct policy document. We simply keep a log of documents received and whether they are correct or not. We take the view that the document is right or wrong and, whilst we might let a spelling mistake go until next time, we will reject any policy that differs from what we have negotiated and purchased, especially where extra conditions of cover or exclusions have been sneaked in. (Minimum sample 150 documents).

The second is to determine the quality and efficiency of the service received. What percentage of the average working day relates to deadlines missed and promises broken and to correcting errors? This is measured in time spent on calls, letters and emails. (Assessed on one day in first week of each quarter).

Results to date

  % errors % day 'wasted'
2007 * 64% n/a
2008 * 66% n/a
2009 37% 48%
2010 34% 51%
2011 24% 46%
2012 38% 41%

* In the early years our figures were only based on a two week sample which might account for the apparent massive improvement in subsequent years. The efficiency part of the survey was not introduced until 2009

So, what does that mean?

  • At best, one in five insurance policies are issued incorrectly, at worse – one in three
  • Extrapolation of our sample points to millions of policies issued incorrectly to businesses each year
  • The Insurance Manager loses the equivalent of two days a week to insurance industry inefficiency. We have no way of measuring the cost to the industry as a whole, or the cost to individual clients of this inefficiency
  • Standards are not improving and, arguably getting worse
  • Whilst acknowledging “nobody’s perfect”, brokers do not seem over concerned at the ramifications of our findings and will blame the production line nature of policy issue and processing

Selected highlights

  • One business combined document, issued by Insurer A and allegedly checked by broker P, contained 14 separate errors including a waste burning exclusion when the company’s heating system was driven by the waste produced.
  • A small business insurance policy, issued by another insurer A, was finally issued correctly at the seventh attempt. Unfortunately, the broker D did not have the abilities to argue a case and ultimately played the role of post office.
  • Legal Expenses insurer D took six months to finally agree their policy wording was ambiguous and our claim should be met. The file includes at least 30 reminders to the company relating to failure to return promised calls.
  • Business Interruption seems to be the cover least understood by brokers and insurers and the area of the policy most likely to contain errors.
  • Private insurances such as motor and house represent a small percentage of our work, but are more likely to be issued correctly than large commercial contracts. One sector where the simplification of cover and single input of information has been able to contribute to improved efficiency.

Factors contributing to deteriorating standards

  • Cost cutting places extra pressure on remaining staff who have other priorities
  • Lack of training and knowledge – how are mistakes to be spotted if the person charged with checking a document has insufficient knowledge to do so?
  • Broker focus on sales rather than servicing
  • 'The computer says ...' so it must be correct
  • Inadequate management direction
  • Compliance systems create uniformity rather than questions
  • A reluctance to take responsibility

Will the Insurance Institute's Chartered status help?

Two years ago the Chartered Insurance Institute (CII), launched a commitment to improve professionalism in the insurance industry. This was assessed to relate to a firm having a greater number of qualified people on their board and a higher number of employees achieving professional qualifications. Many insurers and brokers have since been granted chartered status but this has had no significant effect on service standards or technical ability.

It is recognised these are still early days and that a professional body is likely to want to increase numbers of qualified personnel, but will this naturally translate into improved delivery and better customer service?

Early signs aren’t particularly promising.

Out of our sample (not helped by the preponderance of brokers with chartered status, who tend to be the larger firms) chartered brokers make up a significant proportion - but then the same brokers equally figured before they claimed chartered status!

So, what does this all mean to a business?

Many business people won’t be too bothered how long it takes for an insurance policy to arrive. It’s only going to go in a drawer anyway and the broker’s letter says he’s checked it, so what’s the problem?

Insurance companies are increasingly using 'the policy says' defence and will not accept any blame if the policy was issued incorrectly. It’s also unlikely that the broker will admit to any culpability – he did say to check it in case he’d missed something. Even if we’re only a little bit right, there’s a massive time bomb sitting in the desks of Financial Directors.

Danny Cooper is Managing Director of The Insurance Manager - for more information, please visit:

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