Fairness is a complex thing. Insurance people often have a tendency to latch on to one way of looking at fairness and then stick with it through what seems like thick and thin. In earlier posts, I’ve explored perspectives of fairness that fit well with the pricing and design of insurance products, but in this post, I want to explore fairness in ways more relevant to a service like insurance claims.
The four dimensions of fairness I’m going to outline come from academic research into the nature of negotiation, particularly where some sort of imbalance exists between the parties involved. Just the sort of environment in which an insurance claims service is delivered. The four dimensions are…
Structural fairness, which is about the physical, social and issue constraints under which negotiation takes place. In terms of insurance claims, physical constraints could include the ease with which claimants are able to engage in the negotiation process; social constraints could include access to information and technical support, and; issue constraints could include deadlines and ownership.
Process fairness, which is about honestly implementing the terms upon which the parties have entered negotiation. In terms of insurance claims, this could include how the policy is interpreted; how well claims staff have been trained, and; having the necessary resources and authority available to deliver this. One example of how process fairness can influence perceptions of insurance claims is how claimants can feel that insurers too often take an aggressive ‘push back’ stance on claims, while insurers can feel that claimants too often exaggerate their loss.
Procedural fairness, which is about the way in which the interests of the negotiating parties are weighed up and reflected in the settlement decision. In terms of insurance claims, this is about understanding the interests of the claimant and of claimants, and integrating what is learnt into how claims decisions are taken. The findings of the Financial Ombudsman Service are indicative of this not always going smoothly.
Outcome fairness, which is about the extent to which principles such as equity and equality are reflected in the outcomes generated. In terms of insurance claims, this would include seeing a particular decision within both its immediate and wider context.
These dimensions of fairness really do matter. They’ve underlie the recent reforms to UK insurance law, such as the Consumer Insurance (Disclosure and Representations) Act 2012 and the Insurance Act 2015. They are behind the recent FCA finding that 15% of household and travel claimants wanted to make a complaint even though their claim was ‘successful’. And they can certainly influence attitudes to insurance fraud.
One way to start using these four dimensions of fairness is to pick a particular step in a typical claims process and run it through each dimension. The one I’d like to suggest relates to motor claims, in terms of when the provision of a courtesy car comes to an end. Many contracts stipulate that, in the event of the vehicle being deemed an economic write-off, the provision of a courtesy car ends when an offer is made to the claimant.
In a follow up post on Monday, I’ll set out an example of how this particular step would come under some stress when assessed against these four dimensions of fairness.
I’d like to acknowledge the importance of the following paper to the writing of this blog: “Negotiating Effectively: The Role of Fairness” by Peter A. Heslin, in the June 1998 edition of the Journal of the St James Ethics Society.