[Insurance] Stress testing your arrangements for managing conduct risk - flood claims

Whilst to date it is reported that insurance companies have paid £14m of emergency payments to flood victims, as well as £24m to cover the cost of emergency accommodation, the total pay-out is now estimated to run to over a £1bn. This means that there will be much more for insurance companies to do if those affected are to get the help that is needed. 

For insurance companies themselves it is not just conduct risk that is heightened but reputational risk, given the number of people affected and the media and governmental attention. An area which Mazars therefore see as having paramount importance is treating claimants fairly: a concept which firms should now have fully embedded into their culture.

In practice this means that firms will need to consider the following:

• Ensure that the right people are involved in the claims process;
• The tone from the top - this should be driven from the top with senior management driving the focus;
• Flood claims should be on the agenda of the Board and Risk, Compliance and customer focused committees;
• Communications to call centres and claims teams should convey the company focus and act as a reminder of the regulatory requirements;
• MI should reflect the importance of TCF in everyday business activity and should be carefully assessed and debated;
• Repudiations should be watched with a very careful eye to ensure that customers’ claims are not rejected unfairly;
• If indicators show that customers are not clear on their cover arrangements the sales process and documentation issued to the customer should be reviewed to ensure that the sales process has not failed;
• If indicators suggest there may be a product flaw this should be assessed;
• Claims time scales need to be met (and clients’ expectations exceeded where possible);
• Disputes with third parties need to be considered carefully; and
• Goodwill should come into play in certain circumstances.

Alongside this firms should assess the robustness of claims systems and controls. This should incorporate an assessment of the principals of TCF and should span from the initial claims assessment phase through to the final pay out. Firms should note that this will be of particular importance in light of predictions that the weather in the UK is to become more extreme and recent estimates made by the Environment Agency that 1 in 6 properties in the UK are at some future flood risk.

If you would like more information on any of the issues highlighted in this article please contact Angela Brouner at angela.brouner@mazars.co.uk.