CHAPTER 6

Insurance and Claims Handling

Although this book is intended to help you manage the underlying risks in your business, rather than advising on how to insure them, I am so often asked questions about insurance that I have included a chapter on various aspects of that subject.

I have also included a few paragraphs on the handling of liability claims, which may be relevant whether you insure against them or not. Managing the claims is a separate issue from managing the risks that are apparently giving rise to them.

How to Reduce, or at Least Control, Your Insurance Premiums

There are two things you can influence which affect premiums: cover (i.e., what and how much you are insuring) and claims.

There are four main elements to cover, and you need to look at all of them:

1. Excess: the amount of each claim, which you, not the insurers, will pay. Increasing this should lead to a reduction in premiums. How big an excess you should have depends on how much you or your business could afford to pay.
2. Limit: a maximum that insurers will pay, either for each claim or incident or in total for any year: the lower the limit, the lower the premium. The right limit for you depends on how likely it is that you will have a claim above that level, and how damaging it would be to your ­business.
3. Exclusions: things the policy does not cover. There should be a reduction in premium for each exclusion. There is no point in paying a premium to cover an event that is not possible in your circumstances, for example, demolition work, if you only build or repair property and never demolish any.
4. Extensions: the opposite of exclusions: nonstandard items added to your policy, at extra cost. Do you need them?

If this process results in higher premiums, because you decided to opt for more cover, you should still see it as a saving, if you compare the extra premiums with what an uninsured claim might cost. Real waste usually occurs when you are paying for more insurance than you need, not when you make an informed decision.

What Can You Do About Claims?

The more claims you have, and the more they cost, the higher your premiums will be, and insurers will think about possible future claims as well as actual past claims. Therefore, these six tips are worth thinking about for every kind of insurance, but are really important for liability policies, that is, those that pay for claims brought against you by people who blame you for injuries or damage they have suffered.

1. Claims-handling system. Make sure you have one in place that will work for you, and that everyone involved knows what his or her part is: your insurers, any specialist claims handlers, any solicitors you use, your staff, and also yourself.
2. Keep it moving. Time really is money where legal costs are involved. Make sure claims do not get stuck on someone’s desk. If you have not got the time, delegate this task.
3. Learn the lessons. Get feedback from insurers, investigators, or claims handlers as to the reasons they believe the accident happened and what they think could be done to prevent it happening again.
4. Look ahead. Think about all your activities and see where there are possible risks, even if nothing has gone wrong so far. You may find it worthwhile having someone else look at them with you, as it is very easy to miss the obvious when you see it every day.
5. Balance the risks and costs. List options for controlling each risk and pick one or more which you think will work best for you, taking into account such things as the cost of the control measures and the possible cost of a claim and its effects on your business.
6. Do not try to create a risk-free world. It cannot be done and would not be a good thing!

It is important that you spend some time thinking about each of the points in this section, and especially that you then act upon them, if you want to take at least some control of your insurance costs and not let them just seem to drop on you out of the sky.

Twelve Steps to Follow if Someone Brings a Claim Against You

Big businesses and other large organizations receive claims from their employees and the public regularly and have people and systems to deal with them. You may not be so lucky, and receiving a claim when you are not used to it can be confusing and stressful. If it is a motor claim, you can probably rely on your motor insurers to deal with it, but if it is a public liability claim or workers’ compensation claim, here are some tips on what to do. If you want to avoid paying a claim you did not need to, or paying more than you should, follow each of these steps and keep a record of everything you do at each stage:

1. Acknowledge the letter, without commenting on the contents.
2. Ensure it is a claim, that is, a demand for money (compensation or damages) and not just a complaint or request.
3. Check whether you are covered by any of your insurances. This may be a specific workers’ compensation, public liability, or ­combined ­liability policy, or it may be included as part of a household or ­business policy so do check.
4. Certain kinds of claim may not be covered, or may be on a separate policy, such as:
   • Libel and slander
   • Environmental pollution
   • Cyber risk
   • Professional negligence
5. If you are covered, or if you are not sure, inform your insurers or brokers.
6. Always comply with any instructions they give; otherwise, you may invalidate your policy.
7. Always give your insurers promptly any information or documents they ask for, or let them know you do not have them.
8. Let your insurers know of any suspicions you have that the claim may be fraudulent, but remember suspicions are not the same as proof, frustrating as that may be!
9. If you are not insured, you may be able to investigate and deal with the claim yourself, or you may wish to seek help from a professional. They may be able to save you time, money, and stress by advising you and managing the process They should be able to give you some initial advice to enable you to decide whether to engage their services.
10. Whether insured or not, you may be able to get some help from any trade or professional association you belong to.

Finally, deal with the claim promptly: it will probably not go away, and in the United Kingdom, there are time limits set by law. Then, keep the process moving: time really is money as far as the claimant’s lawyers are concerned. If you have not got the time to deal with it properly, make sure somebody does so for you, whether an employee, friend, or someone you are paying to look after your interests.

How to Get the Most Out of Your Liability Insurers

Here are seven steps you can take to avoid feeling like a bystander when you get a claim and hand it over to your insurers to handle, without understanding either the process or the outcome, let alone what to do to prevent all this happening again. If you are in business, you are likely to think that having a claim brought against you is bad news. Firstly, it can cost a lot of money, either directly or through increased insurance premiums. But perhaps, the thing you hate, as much as the cost, is the stress and confusion the claims-handling process can bring, where you can begin with a feeling of a loss of control and end with a feeling of uncertainty as to whether you have got the right result. These seven steps should help put you back in control and should get you good value for money from your premiums.

1. Clarify the arrangements. Be sure you know what to expect. In particular, be clear about the decision-making process. Do you have any say in it? Do you want to? Wrong expectations cause a lot of stress and unnecessary conflict. The following points should all be agreed from the start:
   • The appointment of lawyers or investigators.
   • Making admissions of liability.
   • Making offers.
   • Payments, including any uninsured elements you may have to pay.
   • Feedback, including lessons to be learned.
2. It would be really good if you sorted this out before you received a claim, so everyone knew what to expect.
3. Ask to be kept informed about the reserve, that is, the amount the insurers believe the claim could cost in the event of its being paid. There should be a separate reserve for legal costs. The reserve(s) should be reviewed regularly as more information comes to light. Being informed of this helps prepare you for the worst and should reduce the shock in the end.
4. Always respond as soon as possible, or within timescales set out, to all correspondence from the insurers or their agents. If you do not understand a question, or do not know how to answer it, contact them and get clarification. Never leave it unanswered. If the answer is “I do not know and cannot find out,” tell them that. It is their job to explain themselves, not yours to guess, especially when they use jargon.
5. Monitor progress. Claims have been lost because each side was waiting to hear from the other. Insurance company employees are human: they can forget to do things, or think they have done them when they have not, like anyone else.
6. Challenge opinions or decisions. If something seems wrong to you, ask for an explanation. If you are still not happy, ask for a second opinion from within the company.
7. Always be sure to get feedback as to lessons to be learned. Why did the accident happen? Why were you to blame? What could you do to prevent it happening again? Even if the claim was successfully defended, there might still be things you could do better in future.

Above all, remember, it is your claim, and you have paid your premium (I hope!), so, get your money’s worth. Your insurers should be glad to help you and should not mind taking the trouble, as in the long run everyone benefits if you take a real interest, so as to manage your risks, and your business, better. If you are unlucky enough to have an insurer who wants only a quiet life, free from inquisitive clients, do them a favor, by taking your business elsewhere. If you and your staff do not have the time to get involved to the extent required, think about using an independent claims handler to do most of this on your behalf, in accordance with your instructions. I say most because it is your business, and you need to be aware of its risks, claims, and how they are managed, but you do not have to make every phone call or handle every piece of correspondence yourself. Take charge!

Four Questions to Help You to Avoid Becoming the Victim of a Fraudulent Public Liability Claim

How Common Are Fraudulent Claims?

Probably quite common, going by the number of claims received by ­British local authorities for tripping on the pavement, for example. If they were all genuine, it should mean you would see someone falling down on the pavement nearly every time you went out.

Are Only Fraudulent Claims Not Paid?

No! Claims are turned down because, on balance, the evidence does not indicate that the defendant was at fault, whether the claimant believed that to be the case or not. Often, there are a number of factors affecting the decision whether or not to pay a claim. When a claim is not paid, it does not always mean that fraud was suspected, and so, no offence need be taken by an unsuccessful claimant. However, fraud is a possibility that claims handlers always have to bear in mind.

What Is a Fraudulent Claim?

There are four main kinds:

1. The claimant’s story is made up: the accident never happened.
2. The accident did occur, but important facts have been left out, added in, or changed.
3. The story is basically true, but the claimant’s injuries or other losses did not occur as a result of the accident.
4. The story is basically true, but the claimant’s injuries or losses are greatly exaggerated.

What Can I Do About It?

It is the claims handler’s job to try to detect fraudulent claims, but the client can help by passing on information, for example:

• About the claimant, including previous examples of ­dishonesty.
• Any motive behind the claim.
• Any connection between the claimant and a witness.
• About the character of any witness.
• About the accident circumstances or location, which might raise questions as to the probability or even possibility of the accident occurring as claimed.
• About other factors causing the injury or loss.
• About the timing of key events, such as the claim being received a long time after the accident, or a short time after any defect or hazard was repaired.

Even Before You Receive a Claim, Take Defensive Action

If you know someone has had an accident, and you think they may blame you or your business:

• Make detailed notes of what happened.
  Get statements from as many witnesses as possible.
• Take photos and measurements of the scene.
  Make sure any CCTV footage is kept secure.
• Keep any relevant documents, such as inspections and repairs of any buildings or machinery involved.
• Get advice from your insurers, claims handlers, or lawyers.
• Give evidence to help someone else who is being wrongly blamed for an accident.

Finally, do try to be objective, you may dislike a claimant, or have reasons to be suspicious, but the claim might be genuine! Whether it is or not, however, you may find the claimant is successful if there is not enough real evidence on your side. Do not be too unkind about your insurers, lawyers, or the courts if things do not go your way, but see whether there are any lessons to be learned.