Does this feel like groundhog day?
Six years ago, LASPO, the bill which banned referral fees for personal injury (“PI”) claims was implemented and brokers were scratching their heads about how this would impact both their bottom line and policyholders. Wind forward to 2019 and the same concerns have hit the broker market with the government’s controversial PI reforms!
It seems clear advice and guidance about how this will impact brokers has not been forthcoming, but I’ll give you my opinion, for what it’s worth.
The impact to brokers
Most UK motor insurance brokers will outsource their claims handling, vehicle replacement and legal services, including LEI. In doing so, the majority will generate revenue by entering into a profit share agreement with their outsourced partner. The revenue will come from a share of the non-fault hire, repair, legal, ATE and medical income. Some outsourced providers still rely heavily on PI recommendation income; this is where your claims revenue will be impacted!
At present, around 30% of the claims income received by brokers is derived from PI. This will significantly reduce when the reforms are implemented in April 2020. Not only that, your policyholders who assume they have access to a solicitor (if they suffer injury), may no longer have that access for a ‘minor’ PI claim! How are you going to deal with the fall out, especially returning customers who are used to a certain level of service?
The key focus is to protect your customer to ensure the level of service is not impacted. In the post-reform landscape, individuals will be expected to negotiate their own PI claim directly with the at fault insurer, via a new claims portal built and managed by the Motor Insurers’ Bureau. There have been obvious comparisons made to the PPI claims process. With PPI, individuals can claim directly from the at fault party, but the majority choose to instruct a claims management company to manage the process for a % fee deducted from their compensation payment. Many believe the new PI process will take a similar path.
Brokers should be aware of impending leakage and a drop in claims ratios and revenue, if their policyholders choose a claims management company instead of the insurer path. Not only will they lose control of their customer’s claim and suffer a reduction in claims revenue from a non-fault claim, but losing that policyholder at renewal becomes more likely. This process creates a financial risk to the broker. Brokers should now be looking for a partner who can continue to provide a full, seamless claims handling service, including the management of ‘minor’ PI claims in order to deliver on their customer’s expectations and ultimately create loyalty at renewal.
How AX can help
At AX, we are perfectly placed to support a broker before and after the reforms are implemented. We have everything under one roof.
We already manage a number of full accident management solutions for brokers, insurers, fleets and dealerships through our own large vehicle fleet, our nationwide network of approved vehicle repairers and our Alternative Business Structure, True Solicitors LLP.
By consolidating every element of the claims function, we can continue to offer policyholders the same level of service, whilst protecting the broker’s income stream.
We have also partnered with a recognised provider of Legal Expense Insurance to ensure your policyholder continues to benefit from an add on policy that provides legal expenses cover in the event of a motor incident.
If you wish to discuss your concerns around the impending reforms or wish to understand how AX can support your business, please get in touch.