How Home Insurance Companies are Organised
There are a number of home insurance companies operating in the UK, who can offer quotes for home insurance, personal insurances and commercial insurances. How are they managed and organised and what happens to all the premiums from home owners?… Until about 20 years ago, most insurance organisations operated from one head office, with smaller regional offices around the UK. These regional offices would operate by dealing with high street insurance brokers, along with national larger broking offices. Consumers would not be able to deal directly with the home insurance companies, but would instead deal with the brokers (who would place the business with a home insurance company) or in some cases with Lloyd’s of London by way of a Lloyd’s Broker who acted as a “Guaranteeing Broker” for the business placed in to the Lloyds market.
Decentralisation & Mergers – the traditional model changed when direct home insurance companies appeared in the 1990’s, starting to deal directly with consumers over the telephone, then in later years over the Internet. As a result, many regional insurance offices closed. Larger more centralised call centres were opened instead. These are now able to deal with the larger influx of customer direct telephone calls, which would traditionally have been dealt with via local high street brokers offices. Today, insurance organisations typically only have one head office, and just a handful of call centre operations in cities in the UK, most of the regional offices and local inspectors are no more. They may also have a couple of information technology locations, and back office type functions. Rationalisation of home insurance companies locations has occurred, as part of the merger process of competing businesses in recent years. Home insurance companies have broadly similar operating models, with many of the same business functions. The main functions are Sales, Service, Claims and Claims management, along with the usual generic business functions found in all large companies (Finance, Human Resources, Marketing, Distribution Management and Procurement).
Sales and Account Management-sales departments exist within home insurance companies and are often found in the call centre operations. The sales or ‘Account Managers’ own the relationships with corporate companies (whose insurance is underwritten by the insurance company but perhaps branded in another companies name). The sales will be managed by the ‘Call Centre Operators’ when customers of the partner company call to purchase a policy. Additionally, there are usually separate ‘Account Development Managers’ that own the relationship with Brokers, (with whom the home insurance company still rely upon for business). Account Managers are there to ensure that the sales run smoothly for their clients’ business. Its quite typical that many have a varying pricing or policy coverage’s, than those offered to direct customers. In some home insurance companies there are dedicated teams to work for particular corporate clients’ business. In some cases corporate business makes up a large proportion of the overall insurance business for that insurance company. It is for this reason that Account Managers’ are required to keep business running smoothly, to avoid a corporate partner leaving and choosing another insurance company to provide underwriting cover to their end user customers.
Service Departments and Claims Processing – ‘Service Departments’ are often split into two – offering service and administrative support to the Sales teams and separately offering service and administrative support to the ‘Claims Teams’. Service teams will process customer information, make policy amendments, liaise with the accounting and finance departments of insurance companies, issue policy documentation and cancel and lapse policies where appropriate. Service teams within the Claims functions will support the ‘Claims Handlers’ in administrative type functions. The Claims functions will take a policy holders ‘First Notification of Loss’, taking the initial details of a claim over the telephone, validating that a customer has the necessary cover in place, in order to progress any further with a claim. The Claims Handler try’s to ensure that a claim is not incorrectly paid out, or an incorrect amount paid – either too much or too little.
Some simple and small value claims can sometimes be paid out at this First Notification of Loss call. However more complex claims are handed over in some companies to ‘Claims Handlers’. Claims handlers are part of the overall Claims management teams. Their role is to progress or escalate more complicated claims, to appoint ‘Loss Adjusters’ or ‘Claims Assessors’ to review a claim and the damage or loss in person. They may also appoint suppliers to attend the customers house, in order to assess the loss or damage, and to make payments (either directly to the customer or directly to the supplier). In some companies, the management of third party claims suppliers are managed from within the Claims function. Alternatively the management of ‘Third Party Suppliers’ for replacement items, (be they claims fulfilment suppliers or suppliers of other services), are managed as a separate function, sometimes referred to as the ‘Procurement Function’. In the past, many ;’Claims Assessors’ were employed directly by the home insurance companies. However in recent years these roles had tended to be outsourced to ‘Loss Adjusting Firms’. Recently this trend has seen these roles creeping back into home insurance companies, to control service, cut costs, enforce policy cover and validate genuine claims (whilst mitigating losses from invalid claims).
Underwriting Function– the underwriting department sets the prices for insurance. Risks are assessed, on amongst other things the basis of the claims paid out, for a type of risk. Various calculations are applied, which are dependent upon the age of the prospective customer, their gender, postcode, type of property, claims history and many other criteria. The Underwriting department must be closely linked with the Claims departments, to ensure the insurance company continues to make money and avoid losses in the long term. However this is not always the case. Sometimes product pricing may be too heavily swayed by the ‘Marketing Departments’, setting pricing based purely on a competitive market. It is a fine balance to be struck to ensure that claims costs are covered, but prices are attractive enough to secure new business growth. This might be one reason for the new customer deals offered by insurance companies, whose premiums are then typically increased in subsequent years (even if there have been no claims). This is done to attract new customers – a percentage of whom will remain in subsequent years, when the insurance companies can then make up for their marketing investment.
Some insurance companies who operate on a 3 year basis, (i.e. they have 3 years to break even and make a profit on new policies secured in year 1). Other home insurance companies might operate a much tighter budgetary process. This may include having to cover marketing costs after only 1 or 2 years, (which will mean they will only attract customers with profiles that match to their underwriting criteria, policy coverage and who will be loyal customers, who infrequently claim). Of course many companies want to attract this profile of customer, but some are better at doing it than other. This is the main reason Corporate partnerships links are established – where a great deal of data mining information exists on their customers (the ones who are loyal to their brands, will support an insurance company).
For a Home Insurance Quote contact Assetsure. We are able to offer insurance for a wide range of UK property types including nonstandard construction