Against the backdrop of the ongoing referral fee debate and the wider industry enquiry into the rising cost of motor insurance, 2012 is primed to be a turbulent year for the busy fleet manager. With issues surrounding accident claims, risk prevention, insurance ratings, referral fees and strategies for reducing loss ratios, many will be looking at claims exposures with increased intensity.
Throughout all of this however, the objectives remain the same; reducing the number of claims and associated costs against your fleet. I predict there will be an increasing number of opportunities to achieve these objectives as the number of solutions to these problems emerging in the market continue to grow throughout the year.
Pro-activity in claims costs reduction for fleets
The cost of third party injury and hire claims continues to be a focal concern for fleets and we are increasingly being consulted on the methods available to reduce the impact this has on fleet loss ratios.
An emerging trend in response to rising costs, and one that is increasingly gathering momentum, is pro-active intervention into fault claims reported to fleet managers. The general principle is that by reaching the non-fault claimant first and managing the claim quickly will benefit both parties and will reduce legal and credit hire costs. Unfortunately there have been many reported instances of some accident management companies using this practice to generate referral fees for themselves rather than reduce costs, which is a short-sighted measure of no help to the fleet and resulting only in profitable revenue streams for the accident management companies concerned.
Information gathered through active intervention, however, can be used to actively manage and settle the claim against the fleet cost effectively, resulting in substantial and sustainable benefits to fleets, not least in terms of reducing fleet claims costs and loss ratios. Pro-activeness in this area can provide valuable control over claims that otherwise would be difficult to attain. This system is already being executed effectively in some quarters, with the availability of non-credit hire solutions and mediation for injury claims leading to claims costs being reduced in both those areas by over 50 per cent: a prize well worth achieving, especially in difficult economic times.
Even despite this, early notification remains the key to reducing costs and traditionally this has been an issue in fault claims reporting into fleets. The slower the reporting however, the less chance there is of reaching and assisting the non-fault party. If telematics technology can be put to use to provide early notification of incidents that are likely to lead to claims, this could provide a very viable auxiliary solution.
How will a referral fee ban affect fleets?
There is little doubt that some form of ban will now be imposed; the only questions are when and to what extent. Companies that provide services into fleets, and which are also reliant on revenues from referral fees will face difficulties. How will this affect fleets that have relied on their services?
To add to this, the ban on referral fees for injury claims is likely to go hand-in-hand with a reduction in lawyers’ recoverable costs.
Recent reports and parliamentary debates point to a realisation of the connection between these and all signs point to a referral fee ban and a cap on lawyers’ fees happening simultaneously. At first glance, this looks like good news for fleets that could enjoy automatic cost saving in fault injury claims. However, it is not yet clear to what extent lawyers will succeed in their fight for a minimal reduction to be imposed – they are a powerful lobby in the corridors of the legislature.
The flip side will be a reduction in claims revenues for those companies that currently benefit from referral fees. However there are already moves underway to replace these revenue streams through profit-sharing arrangements with the new form of shared-ownership law firms emerging
Reassuringly change is afoot – and where there is change there is opportunity. There are many wise heads in this market and 2012 is likely to see an increasingly creative crop of fresh ideas to fill the gaps in this changing environment. The hope is that this innovation will be used for the right reasons and not for easy profiteering from the plight of victims of accidents. Fleet managers also need to be alert to the opportunities for pro-active control of claims costs that these developments offer.
Peter Ashdown-Barr, Founder Director InterResolve