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Brokers vs insurers: how the war of words erupted

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When it comes to internecine disagreements, the insurance industry is usually pretty placid. Differences of opinion among the various industry tribes are rare, which made the breakout of hostilities between insurers and brokers over the past week unusual, to say the least.

The first shot was fired last Monday when insuranceNEWS.com.au reported on a speech to be given by National Insurance Brokers Association (NIBA) CEO Dallas Booth at the upcoming Australian Insurance Law Association (AILA) national conference, in which he will accuse insurers of mismanaging claims.

Such comments from disgruntled brokers are not all that unusual, but when they’re made by the CEO of the broker’s representative group they can’t be ignored. Nor can the timing.

Perhaps Mr Booth didn’t know excerpts from a speech he won’t be delivering until October 31 in Perth would be handed to insuranceNEWS.com.au in advance of the conference, because what has really got insurers peeved is the fact that his comments were published a week before the industry is grilled by the royal commission into financial services misbehaviour. That’s this week.

Senior sources from the insurers’ side of the fence have been harshly critical of Mr Booth’s comments, labelling them “an unpleasant surprise” and suggesting brokers might be better off keeping their heads down in the current environment.

In the AILA media release given to insuranceNEWS.com.au, Mr Booth says he will talk on a range of issues, including “turmoil” within insurance companies as they look to reduce costs, and an increasing reluctance to pay claims.

“I get regular complaints of claims not being paid for no apparent reason and an inability to get reasons, which reflects on the entire industry,” he says, before reminding insurers that they have a duty to “honour the promise” because “that’s what the concept of trust is all about”.

Fighting words, but who is he specifically referring to? The insurers are unhappy that by not naming names, Mr Booth’s comments have tarred them all with the same brush.

But then again, had he named the company, or more likely companies, that brokers believe are performing badly, he would only have created bigger headlines and even more insurer irritation.

Having poked the bear, Mr Booth has now been supported by some powerful figures in Insurance Brokers Network of Australia Chairman Gary Gribbin and AIMS GM Glenn Schultz.

In an email from Europe, Mr Gribbin tells insuranceNEWS.com.au “it is undoubtedly the case” that insurers are “palpably mismanaging claims”.

“Dallas is simply reflecting the sentiment of the vast majority of the general insurance broking community,” he says.

“There is a clear pattern of spurious, very technical denial (i.e. a lack of willingness to admit claims) on top of which their administration of claims is nowadays abysmal.

“Lack of experience, an absence of expertise, (seemingly) no understanding of the [Insurance] Contracts Act in relation to utmost good faith.

“The claims position is the worst I have seen… so dire is the environment.”

Mr Gribbin does name an individual insurance company, but they’ll be happy about it. He says Chubb – which won last year’s Mansfield Award for Claims Excellence and was a finalist in this year’s award – sets the standard.

 “[Chubb] remains the market leader in terms of attitude to, and management of, claims,” he says.

Mr Schultz says Mr Booth’s comments “are very representative of what the broking industry is encountering”.

 “Insurers are tightening expenses and taking a much harder look at claims,” he told insuranceNEWS.com.au. “This is a time of change in the industry and there is a reduction in the skill level of claims people.”

He says insurers increasingly want to cash-settle claims, which is often not appropriate for the client.

Mr Schultz accepts the vast majority of claims are still being paid without difficulty, but the change in insurers’ approach on a small percentage of claims risks “tarnishing the industry”.

The insurers’ own peak organisation, the Insurance Council of Australia (ICA), has declined to discuss the allegations, but the tone from its official spokesman reveals a degree of irritation that this issue should have been raised at this sensitive time.

“The Insurance Council will consider any concerns that NIBA raises with it,” Campbell Fuller said. “No issues of this nature have been formally identified.”

So there. But senior managers within insurance companies have been a bit more forthcoming, telling insuranceNEWS.com.au Mr Booth’s published comments have caused huge concern. They take particular issue with the fact that all companies are being caught up in the criticism.

“This scattergun approach seeks to tar the whole industry and could exacerbate unfounded stereotypes,” one source said.

“When that sort of commentary comes from within the industry it is very disappointing. [Brokers] are people with a responsibility to enhance the community perception of insurance, not undermine it.

“These comments are a really unpleasant surprise and could not have come at a worse time.”

And while brokers haven’t been identified by the royal commission as a prime target, one senior manager suggested that now might be a good time for them to keep their heads down.

“We hear the words ‘fees for no service’ a lot,” he said. “They need to be really careful. I would have thought in the current environment brokers’ representatives shouldn’t be throwing mud at their partners in this business.

“People who live in glasshouses shouldn’t throw stones.”