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Category:
Insurance
News /
Short Term
Insurance /
Outsurance
/ August 2006
OUTsurance 'divorces' client due to excessive claims
The
issue relates to the fact that we cancelled a client’s cover based
on his claims profile with us.
Yes, our function is to handle and pay claims, yet there is a
responsibility (to other clients and to the business itself) to
ensure that we review client’s profiles and premiums to ensure that
we charge the correct premium and also recognize the groups into
which clients fall as far as their claim profiles are concerned.
There are 3 groups:
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Those who are claim free
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Those who claim within expected norms
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Those who claim excessively
We
take corrective action by charging those who are claim free a lower
premium and giving them their OUTbonuses. Those who claim pay a
higher premium than the other group, and we apply specific cover
restrictions to those who claim excessively.
The
cover restrictions are deemed to be risk management tools which
(hopefully) entrench the notion of risk-sharing in the client’s
mind. In the worst cases, we cancel cover should we deem the profile
to be of such a nature that we are no longer prepared to be part of
the risk sharing arrangement.
We
consider the number of claims submitted, the type of claims and
their value irt premiums paid.
In
Mr Retief’s case he submitted 7 claims in 10 months, making the
frequency extremely high and the expense/premium ratio was
excessive, hence the decision to cancel the cover. He did confirm
that he had also placed his cover elsewhere, having informed the
underwriter of the claims profile and cancellation.
It’s also important to understand that the decision to decline or
cancel cover, or apply specific terms, is not a new phenomenon in
the insurance industry. It’s a common practice among underwriters
and brokers (acting on their behalf) to evaluate their portfolios
and identify the obvious elements which affect the viability of the
portfolio.
Remember that premium increases are based largely on claims
expenses, so if underwriters fail to manage this aspect, increases
will be out of line and may render insurance unaffordable.
That said it’s also important to note that the multi-claimant
segment of our portfolio is less than 0,3%; it’s obvious however
that any action taken against multi-claimants is never easy and
there are sensitivities of which we are acutely aware in dealing
with the situations.
The
difficulty also explains the media prominence of the matter at hand.
Source: ITInews – Insurance
Times and Investments Online
www.itinews.co.za
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