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Has Anyone Asked The Claims Department?

Claims practitioners are central to London market reform, and it is time to engage them in the process, says Jeff Ward of TriSystems.

Anyone who thinks the LMP London market reform process has gone away had better think again. The strength of will behind LMP is such that, if anything, it is regaining momentum.

Last month, for example, Lloyd's chief executive Nick Prettejohn (ID December 6) suggested that the LMP Slip should become mandatory, echoing a view also expressed recently by the Ins-sure chairman Sir Laurie Magnus. And Mr Prettejohn made it clear that this would just be a start – the suggestion being that the whole process may be about to move towards an element of compulsion.

Once the Slips are sorted, the spotlight will fall on claims. Although the new Slips offer greater clarity, certainty and accountability, some of the really big potential wins are to be found in the claims area, which is central to the success of LMP.

The vision is set out in the LMP Blue Book, which describes a market that pays claims with lightning speed, at least by today's standards. Under the so-called Claims Protocol, claims will be agreed by the leader, with the following market having just 24 hours to object, and then paid electronically.

However - there always seems to be a 'however' - there is a vast difference between documentation and delivery; inspiration and implementation. A working party's vision of an idealised process will only achieve critical mass and widespread acceptance if it absolutely, without question, works. For everyone.

First, a little history to illustrate a point. In the early 1990's I managed a project involving a large insurer and two major brokers, which had at its core a very similar set of goals to LMP, albeit in a more limited setting. It required, and got, huge technological investment and the complete and unswerving backing from the main boards of all three participating companies.

Once it went live, the claims department file-requested every single electronically presented claim, no matter how small. Why? They wanted to see the Brokers. Case closed. Raise the small claims thresholds? No chance; that's our money until we've seen the file, the whites of their eyes and the sweat on their brow. Sound familiar?

Fast forward to the present Claims Protocol. I've just conducted a straw poll amongst some claims assessors I know from both small and large underwriters. Here is a sample of responses:

• Underwriters at small companies are more likely to be followers, but tend to check claims more thoroughly and often find problems that were missed higher up the chain. They will not cede authority to people they do not quite trust to do the job properly
• The 24-hour limit set out in the Claims Protocol for objections from the claims followers is untenable for small operations with only one or two assessors. And what if the systems are down?
• No claims assessor has the authority to cede control of his company's shareholders' assets to an outsider. Nor does any underwriter
• No claims assessor would want his bosses ceding that control as it would turn them into powerless postpersons
• It is immeasurably harder to get money back from someone than to stop it being paid in the first place

Apart from the principle of the matter, what about the practicalities? Here are two commonly expressed views from the technological standpoint:

• The whole efficiency drive depends upon the omnipresence of solid, trustworthy technology. Yet there is no evidence to suggest that these new systems will work well enough to be completely trusted, especially in a time-critical domain.
• Where is the money coming from to develop and integrate this new technology? Since 9/11 and the Stock Market slide, IT has no budget for anything, never mind all this.

Meanwhile, the Claims Protocol is quite rightly on hold until certain largely technological matters have been progressed. We still need the Electronic Claims Files (ECFs), widespread Repositories and the revised CLASS system, among other things, if it is to go ahead.

So, there is an awful lot to do. It is probably not that alarmist to suggest that if we do not get on with things, then there is going to be a whole heap of trouble in a few years time.

No major working practice changes can be implemented in the claims area until the new technology works. But, even when it does, history suggests that people will not use it as intended. The technology will be relegated to a supporting role in the existing workflow.

In the next two years, if the LMP Claims Protocol is to work, every company must be prepared to operate on the new basis. No arguments; no procrastination; no ifs, buts or maybes. And that has nothing to do with technology. It is change management writ large.

Jeff Ward is a director of TriSystems, a supplier of IT consultancy and software to international insurers and reinsurers.

-   Insurance Day