Technology: Blessing or bane?

Graham Wood ponders whether the rapid advances in technology is all good news for brokers and their clients in the short-term insurance industry.

We often hear that an insurer is centralising their policy and endorsement issuing area, or their claims administration area, with the objective of eliminating the duplication of activities and to ensure continuity of work output under complete supervision. This should translate into cost savings in terms of staff, offices and IT.

High expectations

Similarly, new IT systems are implemented to deliver on high expectations: that policies and endorsements will be issued more accurately and sent out much faster, and that claims will also be settled more accurately and faster. Exception reports will improve the management of any problems and provide time to fix things before the broker becomes aware of a possible delay.

Sound familiar? Did any centralisation or IT programme ever live up to these high expectations? On the contrary, a few insurers learnt an expensive lesson the hard way and had to return to the “old” system of doing things.

Keeping up

Brokers are hard-pressed to keep up with the rapid industry and market changes, new and amended legislation and regulations, and the requirements to prepare and submit statute returns. Many brokers attend industry knowledge sessions to keep abreast of these changes in our industry.

Is it not strange, then, that very few insurers attend these knowledge sessions? Presumably, it is because they know their subject field and have no need to hear anyone else’s point of view. But what about the back room Johnnies of the insurers?

No need to think?

In today’s fast-paced world, everything is automated and computer-generated. We do not need to read anything, since the computer will stop us if we try to do something that is not allowed.

Once the clerk, the input person, enters a name and ID number, the computer system checks numerous data banks for information on this person and completes as much of the required information as possible. A client has really become just a number. Once the data is on record, quotations or amendments are prepared. The client then receives the policy or amendment, and provided the monthly premium is as near as possible to the original quotation, no one queries the value of the policy wording.

Technology is not the panacea

But the proof of the policy - the promise to indemnify the insured and to settle an insured claim in such a way that the insured is placed back in the position he/she were in before the claim - only materialises when a loss occurs. This is when the broker goes into ‘panic mode’.

Most brokers obtain a completed claim form before an assessor or loss adjuster is appointed by the insurer to negotiate settlement of the claim. And it is at this point that it becomes abundantly clear that technology – however impressive – cannot replace the application of knowledge and insight of a trained and experienced person. Below are just a few examples of problems brokers encounter.

Back to the broker

While I was visiting a broker, the claim handler received a call from an insurer asking where in the policy a submitted claim was covered! The broker obliged, but a simple question must be asked: “Is it the broker’s responsibility to educate the insurer’s staff? Should insurance company staff not be trained and encouraged to do their own investigations and learn at the same time? Technology has eroded the value of self-education and the quest for knowledge.

Lack of understanding

I read with interest that some people think that South Africa did have a compulsory motor insurance law which was eventually replaced by the Road Accident Fund (RAF), funded via a levy on fuel. People think that the third party disc on a vehicle’s windscreen is the same thing.

Few insurance practitioners, let alone consumers, understand that the name “Road Accident Fund” was coined to separate the RAF from the MVIA, which required the purchase of cover from an insurer. The government was the insurer of all coverage granted by the MVIA, but used the services of appointed registered insurers as claims handlers, reimbursed monthly via a claims bordereau. Things worked until a couple of the appointed insurers collapsed.

Also, regrettably, not everyone purchased the third party insurance disc. The government of the time called for suggestions to make the granting of bodily injury insurance coverage compulsory and to distribute the cost equitably among all vehicle owners. The most equitable premium collection system was to add a levy to the retail cost of fuel.

In the dark

Following a claim for accident damage on a vehicle, the assessor - after consultation with a panel beater - may decide that the vehicle is beyond economic repair. No one knows that the vehicle has been declared a write-off until an insurer’s motor claims handler asks for the papers and keys.

Has anyone ever offered the wreck to the insured or even advised the broker of the settlement figure? Then, out of the blue, comes the Agreement of Loss form with a figure which no one knows how it has been calculated. When queried, the claims handler makes reference to the average between the trade and retail values, as listed in a motor industry monthly publication.

Motor claims handlers don’t apply their general knowledge to understand that no one can buy a vehicle at the average between the trade and retail values. “Indemnity”, once mentioned, perhaps by the broker, results in the claims handler passing the buck onto a claims manager who is unable to make a decision without referring the matter to the branch manager, who usually refers the issue to head office for a decision. The broker is rarely advised of what is happening behind the scene.

Non-motor challenges

In the non-motor sector, the concept of indemnity is as easily forgotten.The loss adjuster appoints a builder, who is unknown to anyone other than the loss adjuster, to rebuild a chemical storage building. No consideration is given to quality of the workmanship and Municipal Regulations for this type of building.

Why does the non-motor claims handler refuse to secure a full report from the appointed loss adjuster and revert to the broker regarding the action the insurer is taking?

Did you read that part?

Here’s another gem! An insured submitted a homeowners claim and was advised that no excess was applicable. The claim was settled. About two months later, following a lightning claim, the non-motor claims handler casually mentions that the First Amount Payable for both the lightning claim and the previous claim is now due!

Technology cannot ensure that claim handlers are capable of reading an insurance policy wording and conveying the correct First Amount Payable figure for each claim submitted before the claim is finalised.

Training is critical

It seems that even the 3Rs “reading, righting, rithmatic” are not taught at school any more. If the answer is not on the computer, there is no way the enquirer can find the answer, because learners are no longer required to read and interpret. And this is probably largely due to the fact that most educators do not have the technical knowledge to answer questions raised by the learners.

I was recently involved in an initiative to impart insurance knowledge to university-qualified learners. I found that their interpretation of the written word is a major problem. If university students have difficulty in understanding what they have read, where do we stand with the average claims handler? They have no way of addressing any claim that is slightly beyond the norm as programmed into the computer’s software parameters!

The claims department used to be the greatest training ground. But now? Employers in the insurance industry must spend more time on training their staff to ensure they understand their duties and are able to interpret a policy wording and to make decisions that the employer will stand by. That used to be the way things happened.

Now, not even a claims manager has the authority to make a final decision. And even if they have any authority, they still pass the burden onto head office, so that they can not be blamed if management does not like the end result.

Technology offers many benefits, but it cannot replace the value of well-trained, experienced staff who both understand and take the company’s commitments to indemnify its clients, to heart.