Look out! – its behind you!

Look out! – its behind you!

Recent reports, of the vulnerability of brokers to being sued in the wake of the Covid-19 coverage litigations, mostly by parties that stand to gain work from litigation, are understandably causing firms to be concerned.

We have already reported in our Recent Covid-19 Bulletins the hurdles that will have to be overcome in a successful claim against brokers, generally, and subsequently BIBA published its own opinion with the support of Weightmans, solicitors which also offers reassurance.

However, already we are seeing other consequences of the lockdown that should be taken seriously into account by brokers and insurers, of errors and omissions that are apparently a consequence of working remotely from the office; at home in lockdown.

 A Greater Threat than Covid-19 Litigation

As the lockdown eases, the reality of having to cope with the business workload from the isolation of one’s home is gradually becoming apparent. The business world of insurance is not going back to pre Covid conditions for a long time, if at all and already coming to light are errors of judgement, of communication and in the delivery of services, that could be a future cause of complaint or claim against the unwitting insurance practitioner. This could be a greater threat to us than the prospects of Covid litigation.

Without Precedent

The signs and symptoms of the pressures on our industry are clearly there to be observed. They are not only the obvious financial concerns of potentially expensive Covid – related claims, solvency and compliance but also the less visible costs of the severe  business Interruption to the industry itself. The industry was not designed to be a nation of homeworkers. Adapting to the interruption to ordinary business practices and methods will undoubtedly throw up some elephant traps that we didn’t foresee.

The downsizing of organisations and the cutting of salaries in our own industry is becoming public knowledge and the ensuing pressure on management is further fuelled by the reluctance of some people to go back to full-time work; for fear of Covid; or fear of the future?

The realistic prognosis for the rest of 2020 is one of a dysfunctional society. Social distancing, shielding, quarantine and relentless fear of the unknown and unfamiliar is beginning to give rise to all kinds of unintended consequences in human conduct. Being sentenced to “solitary confinement” has tested to the limit peoples’ ability to operate as a cohesive team; and the insurance industry needs it team-work to function and to survive.

Dispute and Distress

We have experienced a marked increase in the number of policyholders seeking advice about their distressed and disputed insurance affairs. These are not the Covid-related problems but complaints arising from ordinary day to day insurance services.  Some of the communications we have seen between our industry and the policyholder-public are alarming in their lack of tact, reason and accuracy. The only explanation can be that some insurance personnel are under stress and strain in the unprecedented, enforced and prolonged home-working environment.

The expectations of some policyholders are evidently not being met and this is not solely arising from Covid- related claims. So what is going on?

Communication – Permanent and Damaging

It has been said multi-millions of times in management and training courses that most problems in business start from poor communication. Lockdown has forced upon the world a rather unsuitable state of communication for most people; the deprivation of interpersonal contact. One cannot even make eye contact on Zoom and certainly not gauge the body language of people whom we may be trying to assist, or influence.  The expectations and needs of customers are not the same as pre-Covid and our industry’s personnel have been under pressure to manage their own lives at the same time as meeting new customer demands, needs and expectations. It is not surprising if corners have been cut and tempers have become frayed; but we cannot afford to let it affect our individual business judgement and duty of care.

The written word has never been the easiest form of communication to master in a business context and the traditional brevity and informality of email and text language is resulting in mis-communication reigning supreme in some quarters; particularly when we are delivering bad news; and especially concerning payment of claims.

The problem for the industry begins with the fact that most of its communications are in a permanent form, for all to see in the future; and can too easily be used as evidence to pursue a claim against the firm at a later date. Therein lies a future problem that should be addressed now.

Help? Or Help!

The majority of people in the industry dealing with the day to day affairs of customers are young and have never experienced a hard market. Dealing with it from the isolation of a home office “cell” deprives them of the mentoring and experienced help that is available in most offices. This has implications also for mental health.

Public Reaction and Action

It is evident already that the mood of the industry appears to be turning towards a much harsher claims-paying regime, which reflects the costs it faces. This can only make worse an already bad situation for our industry which has been created by the media coverage of denial of Covid related claims that have affected so many business and consumers.

The next months and possibly years are likely to see a hostile attitude of the insuring public towards our industry and we must collectively be prepared to manage and protect against that. Lawyers are easily accessible to the public who will readily bring claims, against insurance brokers and intermediaries in particular. Even where the merits of the claim are questionable it will not stop them trying and the time and cost of dealing with them will be exhausting and expensive.

In this unprecedented and unpredictable environment it is in the very best interests of every insurance broker intermediary to be alert for customer dissatisfaction and to immediately seek early advice at the first sign of either a disputed or rejected claim or a distressed insurance problem.

Conflicts of Interest

The relationships between producing brokers, placing brokers, MGAs and insurers are complex and do easily give rise to disputes that can be complicated and time consuming to resolve. The absence of experienced managerial guidance “on tap” when needed is a matter for managers to consider in the new environment.

It is well understood that there exist conflicts of interest in the insurance industry, recently highlighted again by Mactavish, who are encouraging a wholesale re-modelling of broking practices but surely now is not the time to promote that debate.

It is fair to say however that the conflicts have been managed well for a very long time but they are far more difficult to recognise and to manage when in the “solitary confinement” of a lockdown society.

Now is the time to be extra vigilant about how the services provided from our home office might cause a difference in the outcome to the customer.

Roger Flaxman
Chairman and Principal Advocate