Regulators circling THE ADJUSTERS

Harmonization efforts on the east coast have not gone unnoticed by regulators nationwide, with most provincial legislators carefully watching Insurance Act rewrites across the country in an effort for more standardized rules and regulations. Most recently, the regulatory sights have been set on the adjusting profession, delegates were told at the recently held 33rd Annual Joint Conference of the Canadian Insurance Claims Managers Association (CICMA) and the Canadian Independent Adjusters Association (CIAA), and while one industry regulator admonished adjusters and insurers to “follow the rules”, he admits they could be changing any day now.

The good news, says Ontario Ministry of Finance director of licensing and enforcement Grant Swanson, is that the regulator has received few complaints about the conduct of Ontario adjusters. The bad news, is that claims professionals conduct, licensing and practicing will soon be subject to change. Both Swanson and Alberta superintendent of insurance Bernard Rodrigues addressed delegates at the recently held CICMA/CIAA Joint Conference and alerted nationwide claims handlers that regulators are eyeing the adjusting profession with an eye towards a more harmonized definition and set of rules province to province.

“The focus today is how to make our regulatory rules more substantial, to better ensure consumer protection,” Swanson says. He is not convinced current regulation is adequate. While independent adjusters pay individual fees and take continuing education courses, Swanson says regulators are concerned the profession does not have clearly defined rules regarding practices and liabilities. “We wonder whether specific infractions should be legislated and regulated as oppose to our current system which just licenses independent, non-company employed adjusters.”

Ontario regulators will examine three issues pertaining to adjusters. “We want consumers to receive better information about the process from insurers, brokers and adjusters including a precise breakdown of who works for who.” The regulator will also look at where adjusters who examine statutory benefits fit into the profession. “Finally, we also need to look at the obvious disparity between staff and independent adjusters in regulatory requirements.”

This new focus is not an indictment of the profession, he insists. “Lots of good things have happened within the industry without any arm twisting from government.” He suggests, though, that it was only a matter of time before regulators, busy addressing primary issues in the Insurance Act rewrites, looked at the adjusting profession. “Before we write new legislation and regulations, the industry itself could do a world of good just by promoting its designations and qualifications for better public awareness,” he adds.

Alberta harmonized

Alberta superintendent of Insurance Rodrigues says his province’s recent rewrite of its Insurance Act has aimed towards nationwide harmonization of its regulation. For the adjusting field, in particular, Alberta is incorporating a nationwide definition of the claims adjuster. The at-present agreed-upon proposal, provided by the CIAA, is “a person who solicits the right to negotiate to provide adjusting services and defining insurance coverage.”

Highly debated was the addition of adjuster as an appraiser in the claims process. “We could not bring in appraisal as a definition of adjusting as it would require a fundamental expansion of the regulatory regime of our office,” Rodrigues reasons. “We regulate insurance contracts, not all forms of loss. So it is difficult bringing that into our adjuster definition.”

He says the purpose of the revamped Act is to modernize it, facilitate competition among all insurance entities, enhance consumer protection and create a more standardized insurance environment nationwide. “We believe a better informed and protected insurer will facilitate the more competitive marketplace.” The bill was passed in May 1999 but has yet to be proclaimed into law.

Regulatory concerns

Licensing has been a late addition to the Insurance Act debate, Rodrigues says, and Alberta is siding with other provincial regulators with regards to individual licensing. Insurers, he says, have serious concerns about the requirement for in-house adjusters to be licensed individually. The issue, he says, ought not be whether licensing in-house adjusters will be difficult or costly for insurers, but rather whether the quality of service is the same for an insured being adjusted in-house or independently. “Consumers don’t care who is adjusting their claim. What they do care about, though, is receiving a standard level of quality.

“If we expect independents to maintain one level of standards, we have got to expect it from the staff adjusters as well.”

Also heavily debated, he notes, was the issue of insurer directed bodyshops. “The consumer has the right to determine where his automobile is repaired unless pre-set in the policy contract,” says the regulator. Consumers should be comfortable with the repair person involved, he adds, noting allowing insureds to determine their body shop preference removes insurer liability in after-market parts cases.

“Know the rules and follow them,” Rodrigues repeats emphatically to the claims profession and insurer conference representatives. “The majority of claims dissatisfaction results from the claims process not being correctly followed.”

Know the consumer

Claims dissatisfaction can also be traced to an increasingly sophisticated and insurance savvy consumer, McKinsey & Company consultant David Krawitz told delegates at a later session. In the past, insureds have been motivated by either a good price or a good consultation (broker) experience. Today, he says, all bets are off. “The price-driven group and the consultation motivated group are both declining. There is a rising tide of consumers who want both good price and good consultation and will not accept anything less.”

Insurers are noticing this new focus, Krawitz says, themselves renewing consumerism and branding efforts with heavy dollars spent on advertising and a rate environment that is softening despite operating ratios suggesting it should not. Not to mention the addition of web sites featuring quote engines.

The consultant suggests online systems must greatly improve to gain greater appeal. “I wonder whether a system can be created for the online quote process to take two minutes instead of twenty. We’re also finding that agent-based Internet structures are not popular with consumers.”

Krawitz likens today’s North American insurance environment to the United Kingdom in the 1980s when direct writers made huge gains, and an overcapitalization resulted in a four-time jump in advertising dollars spent by the industry, and a price crunch that lead to disastrous results costing the industry 800 million pounds.

“Where companies can hit their stride in both operating expense and in goodwill to the consumer, is through the claims process,” Krawitz concludes.

Claims build brand

Sam Malatesta, vice president of marketing & insurance relations at CARSTAR Automotive Canada, believes the claims process is the only time consumers see the value in their insurance purchase. By extension, he adds, any true brand building insurers wish to achieve can be created through quality claims service.

Malatesta says longer claims become bad claims, that every day a vehicle is in the shop past two lowers customer satisfaction index figures by 10%. All the years of paying premiums culminates in service expectation. Every moment of contact we have with the consumer, which amounts to every moment of brand contact, is a moment of brand truth.”

The claims experience can seriously contribute to the loyalty a consumer feels towards his insurers, he says. The flipside, a negative experience will leave a substantial mark. “The experience the insured has on the claims side will imprint upon the customers views of everyone in the insurance distribution chain.”

Mark Webb, chief executive officer of CGU Gr oup Canada, adds a telling remark, “we don’t tend to hear about things that go right, only things that go wrong.” He says insurers must rely upon their service partners to generate good client faith and to plug operating expense leaks. “The model is to standardize our claims functions. We can negotiate lower costs with our suppliers, but if they don’t have the efficiencies and the operations in place, we cannot fulfill our promise to our customers and achieve our end objectives.”