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UK Insurers resistance to claims preparation clauses – at what cost?

insurance claim form

Nobody wants to have to make an insurance claim. Generally, it means that a serious event has occurred and even if financially compensated. There are many statistics on the percentage of businesses that fail following a loss, with most reports concluding that between 50% – 75% of businesses will close within two years following a large loss. Although insurers aim to indemnify customers against loss, there is likely to be a significant impact on the business, not least in having to prepare the claim to present to the insurer.

It is not as simple as just supplying spreadsheets and data, a vast amount of detail is required with accompanying annotation and failure to do this can lead to protracted claims settlements and reduced payments. Whilst the client’s broker may offer a full claims service, this often bears additional costs and may be restricted to very large losses only.  Also, emerging risks such as cyber losses mean that the complexity of claims is increasing, making it difficult for insureds to prepare claims without the help of an expert.

There are solutions available to insureds however. Claims preparation clauses typically allow the client to appoint a professional claims advisor to manage the claim, setting the clients expectations on how the policy will react and laying out the mechanics of the claim. Arguably, it is in the insurer’s interest to include such a clause as it means that they will receive a professionally presented claim in a timelier manner than if the insured were preparing it themselves. It can also help to reduce fraud as the claims representative has a professional reputation to uphold.

Whilst these clauses are common in the USA, Australasia and Europe, they are uncommon  in the UK market. Given that the UK often leads the way with insurance innovation, we appear to be lagging behind the rest of the world in this area. There is a healthy market for loss assessors but commonly these assessors are funded by taking a percentage of the loss, meaning the client does not receive the full settlement they need in order to continue running their business effectively.

The other option available to customers is to purchase an additional insurance policy which will pay for a qualified loss adjuster to act for them in the role of an assessor, but given that adjusters are bound by CILA, they are acting in a more professional and regulated environment. These policies are typically rated by taking a small percentage of the main policy premium (typically around 3%), making them a cost effective way to get expert claims preparation assistance. When purchasing such a policy it’s important that the insured considers the features and extent of the coverage – policies from different providers will only cover certain classes of insurance so the insured should ensure that what they are purchasing will respond in the event of a claim.

Whilst there is no ideal solution, buying a claims preparation policy from a reputable company ensures that the adjuster is acting completely independently for the insured.

Temple Legal Protection is a legal expenses insurer which provides both before and after the event legal expenses insurance as well as commercial claims preparation policies to the commercial sector. The Temple claims preparation policy extends further in offering insurer dispute fees for declined or disputed claims, serviced by award winning law firm, Fenchurch Law. This ensures a complete claims solution for clients and ensures the best outcome is achieved following a loss.

For further information please contact us on 01179 595 495