Philip Grant examines the run-off industry’s efforts to improve claims management.
John Tiner’s speech in December 2004 is remembered largely for his preview of the Financial Service Authority’s (FSA) contract certainty initiative. But also buried in the text was a small but significant paragraph:
“Further down the line we expect to follow this [the FSA’s other priorities] to its logical conclusion by looking at the quality of claims handling. Our new regime expects insurers and their agents to handle claims promptly and fairly.”
For those in the legacy management sector, “further down the line” has become “now” following the recent launch of a thematic review of claims handling of discontinued business by the FSA.
The review’s first phase is limited to fact-finding and to concentrating on firms that are wholly in run-off, but it may in due course be extended to cover the handling of legacy business within otherwise live operations.
It is of course possible to see the review in a negative light. There have been well-publicised suggestions in the recent past that some companies in run-off have deliberately slowed down, or taken an over-pedantic approach to, claims settlement. This could therefore be seen as the preliminary to wielding a big regulatory stick.
“In an era of principles-based regulation, regulators are increasingly looking to collaborate with market leaders and representative organisations to recognise existing best practice and devise new standards.
Philip Grant Chairman of the Association of Run-Off Companies
However, this does not appear to be the FSA’s purpose. Indeed, the regulator seems genuinely keen to understand the dynamics of claims handling practice in the legacy sector and the Association of Run-Off Companies (ARC), which is eagerly looking forward to the review’s outcome, will facilitate the process in any way it can.
In an era of principles-based regulation, regulators are increasingly looking to collaborate with market leaders and representative organisations to recognise existing best practice and devise new standards.
This initiative gives the UK’s burgeoning legacy management sector a significant opportunity to show both the FSA and the broader insurance industry that it has come of age – that, free from the distractions of underwriting and marketing, we have developed a class-leading ability in the field of claims management.
Chairman of the Association of Run-Off Companies