ILC ARTICLE

Managing and mitigating claims inflation

21st November 2023

The challenge of understanding and managing claims inflation while at the same time continuing to deliver excellent customer value was the topic of a far-reaching discussion at the Exclusive Motor Claims Conference, which took place at Landing Forty-Two in London recently.

The event was held in partnership with ILC’s Motor Corporate Partners: Activate Group, AkzoNobel, Autoglass, BHR Assist, CAPS, Carpenters Group, Copart, DAC Beachcroft, e2e, Entegral, Enterprise, Gemini ARC, GT Motive, Innovation Group, Kennedys, S&G Response, Solera Audatex, Synetiq and Thingco, and sponsored by headline partner Enterprise along with sponsors BHR Assist, Clearspeed, EDAM Group, LexisNexis Risk Solutions and Wiser Academy.

Taking part in the debate were Charmaine Pattenden, Head of UK Claims, INSHUR; Dave Thompson, Claims Director, Tesco Underwriting; and Sarah Lang, Head of Claims Solutions, Admiral.

Commercial

Charmaine said that at INSHUR, serving a commercial customer base means that key-to-key times are paramount, with livelihoods depending on damaged vehicles being repaired safely and returned to the road quicky.

While inflation adds extra burden, the priority for INSHUR customers remains the same.

She explained, “Our customers want to keep their vehicles on the road. They want their cars fixed and they want them back as soon as possible. But challenges around parts supply means longer repair times, while rising mobility costs adds even more expense.”

However, INSHUR’s tech-centric approach is going some way to mitigating this by adding efficiency to the claims process and providing a more streamlined service for customers.

She said, “We’re all about technology at INSHUR and it plays a critical role in helping us to treat our customers fairly.”

Growth

Providing some optimism, Dave and Sarah both agreed that the rate of inflation is slowing and even flattening in some sectors – although this is happening from a high base and the factors that have driven up costs still remain.

Dave said, “In the last 12 months we’ve been dealing with incredible claims inflationary challenges, but we try not to lose focus on our goal of putting the customer at the heart of everything we do, whether it’s a strategic decision about what product we’re going to launch or a day-to-day decision in operational claims management.”

That means understanding what is driving claims inflation, whether they are short or long-term, and then developing appropriate coping strategies.

“Claims inflation is our day job,” he continued. “You can’t tackle it alone and we’ve never worked as closely with our supply chain as we do today. We are now absolutely integrated with our supply chain and consider that crucial in dealing with the very significant challenges we face today.”

He explained that Tesco now sends colleagues into the businesses of their supply chain partners and encourages them to send colleagues back the other way to gain a better appreciation for each other’s objectives, restrictions and difficulties.

This, he said, creates are far more transparent working environment and delivers a deeper level of support for colleagues who are dealing with unprecedented challengers.

“Our industry relies on its people and it’s never been more important to support them. There is a huge challenge around recruitment and retention, so we’ve had to take a lot of steps to improve things for them and one thing I’m convinced of is a fantastic colleague experience drives a fantastic customer experience.”

Technology

Sarah agreed, and said that developing closer working relationships between departments was another way to help soften the inflationary burden. She believes that a better understanding of claims can improve underwriting and help a business reduce loss ratios.

She said, “One big area of development is the closer alignment of claims with product. Traditionally your underwriting and pricing determines what comes through the door in terms of claims. But we’re really working on changing the relationship so claims is also dictating what gets underwritten.”

This is where better use of technology and data plays a part, providing Admiral with granular claims data and enabling it to assess the loss ratios in each specific segment.

She explained, “Automation, new technology and data can bring down inflation. There is a lot of beauty in doing the simple things really well and a lot of the simple things can be automated. There is definitely more we can do in this space.”

Planning

Going forward, she agreed with Dave that it was not straightforward understanding which factors will continue to push up inflation going forward and which are only a result of today’s market challenges.

“There has been a lot of change so it’s hard to work out what is a trend and what is a symptom of the times. It’s difficult to know if claims inflation is genuine inflation or if it’s because we’re not able to close claims quickly. I don’t think the problems causing inflation will go away in the next 12 months, but perhaps it won’t be at the same level as now.”

But even with such uncertainty in the market, businesses need to still deliver a consistent level of service. Consumer Duty has put that into sharp focus, and while forward-looking strategies are important, the here and now demands constant attention.

Dave concluded, “While it’s important to keep an eye on what’s coming next, I would say that at the moment it is more important to focus on the immediate challenges in front of us. You have to focus on the things you know will challenge you in the next three years rather than worry about what might challenge you in the next five to 10 years.”