Recession Impacts on Claims
End of the Celtic Tiger
The effects of the recession are having a pronounced impact on insurance claims in Ireland. Since the end of the Celtic Tiger the gross written premium in Ireland for General Insurance has fallen by 38%. This is as a result of cancellations of policies through individuals not being able to afford them, reductions in sums insured, company failures and personal insolvency.
Cost saving measures
Insurers have had to implement cost saving measures, and the two big overhead costs are claims and staff. As a result, staff have been let go and severe pressure has been applied to effect cost savings on claims. The rates applied to settle claims has been cut to the bone. A take-it or leave-it attitude has been adopted by many. We are being told about “agreed rates” – but agreed with who, by whom, and for whose benefit?
Loss adjusters are constantly worrying about their Principals looking over their shoulder, and being subject to increasing ‘audit’ on their files. The threat of ‘leakage’ being deducted from their fees, leaves them in a position of diminished ‘delegated authority’ as we once knew it.
Loss Adjusting companies have had to cut staff numbers over the past two to three years. And now, as the back-log of claims submissions from the winter storms and floods reach a peak, the entire system is grinding to a halt, as they cannot cope with the volume. So not only are claims being squeezed harder, they are now taking twice as long to settle. The Consumer Protection Code requires Insurers to issue responses and up-dates to claimants, and issue settlement cheques within 10 days of an acceptance of the settlement, we see many instances of breach of the CPC.
Banks and Mortgages
Another impact of the recession is the issue of Banks and Mortgage companies being noted on policies and settlement cheques being issued in joint names. The client needs the money to get the works done, but if there are arrears on the mortgage, or if the bank want to see evidence of the repairs before they agree to release the funds, they can divert or with-hold the funds. This is fundamentally wrong. If Insurers are holding a retention pending the re-instatement, then the banks interest is protected and the client should not have a further layer of bureaucracy and delay foisted on them by the mortgage company.
We have seen several instances in 2014 alone, of banks appointing receivers to companies as soon as the settlement cheque issues. This is a clear case of mortgage companies abusing their position of power over borrowers to call in loans and burn smaller creditors who are being victimised by their actions.
It behoves us all to put the consumer first. The interests of large financial institutions are there to serve the interests of consumers and not the other way around.
Let’s hope the long awaited green shoots arrive soon and are accompanied by a renewed focus on putting the consumer back at the forefront of the relationship.