At the heart of the training I deliver on conflicts of interest is this: a conflict of interest is a situation, not an accusation. And so the ethics of conflicts of interest lie not in being in one, but in how you then handle it. And the most fundamental of all conflicts of interest in insurance lies in claims: the amount you pay out directly affects the return you make on that business.
The policy wording does of course set out the rules for how that conflict of interest is to be managed, yet they are invariable long and complex documents. Some personal lines policy wordings require a PhD level qualification to understand. Is this then just the downside of greater legal certainty for policyholders? I don’t think so.
Who is cashing in?
I’ve recently come across what I would describe as an open door into a dark room in how household claims are settled. When my house was struck by lightning last month, a number of electrical items were destroyed. Some of them were replaced with similar items through the insurer’s supplier, while for some others, a cash settlement was agreed. And for each of those items, I was offered a cash settlement discounted by between 5% and 30% of the value of the item on offer. Even a cash voucher offered for an item that was no longer made was discounted as a cash settlement.
The insurer’s response was that this represented the net price that they would pay out to the supplier on a replacement basis, and their policy wording (in a somewhat general way) supported this. And one bit of my head recognises the logic in this, yet another bit of my head says: hold on, where is this mysterious discount percentage coming from? And given the percentage spread I experienced, how do I know that it is fair?
Transparency is key
Conflicts of interest are properly managed if there’s transparency to the situation, hence my description of these mysterious discount percentages as an open door into a dark room. ‘Who knows what’ about the validity of what lies within?
Again, one bit of my head says that no claims professional would work within so dark a room, for it leaves their credibility open to question. So perhaps I should just trust them to know what they’re doing. Yet another side of my head, having seen some blatantly ignored conflicts of interest earlier on in my claim, wonders whether enough is being done to fully earn that trust.
Have insurers ever fully vetted their claims supply chains and decision processes for their handling of conflicts of interests? Some evidently have not; I wonder if not more? As I also point out when training on conflicts of interest, they are not rocket science.
I’m preparing some in-depth material on conflicts of interest and influence mapping, to be released in the New Year, so watch this space!