Zurich’s Claims Commitment: a positive step forward in creating a clear and transparent claims protocol dealing with policy coverage, there is still more to be done

Go Back 28.7.19 INSIGHTS


Zurich’s large and complex loss team should be applauded for setting out in “blue and white” on page 14 of the claims journal their claims commitment which involves (amongst other things) a promise to:

– Provide “an initial view” on policy liability within 48 hours of first notification if “it is clear what caused the incident”;

– Hold a “conference call” with the policyholder and their broker within 5 days to agree a claims strategy;

– Inform the policyholder what further information is needed to confirm cover within 7 days of first notification; and

– Provide an “initial view about paying your claim” within 72 hours of receiving the information needed.

These are bold and market leading promises from the policyholder’s perspective and another example of Zurich’s market leading claims team’s culture of “trying to support policyholders” and raise the claims handling standard, great to see.

The purpose of writing this blog is to share with my network a few observations that might, I hope, lead to further improvements.

A number of important questions arise from Zurich’s “claims commitment”:

(i) Most noticeably, what does Zurich promise to the policyholder in circumstances where cover is disputed?

(ii) How long does Zurich say it should ordinarily take to confirm its position on cover either way?

(iii) In the event of a policy challenge from the policyholder, whether direct or through its broker or claims professional, how long should it take Zurich to consider that communication and respond formally?

(iv) What happens if, after that initial exchange, the parties still disagree about policy coverage?

(v) How does Zurich ensure, before the event, that the policyholder is given a fair hearing within the confines of the claims team?

There are plenty of further questions but these questions serve the broader point I am trying to make in this blog.

Disagreements about policy coverage (and I’m trying to avoid the word “dispute”) come in different shapes and sizes, they arise for different reasons and can be resolved fairly with or without lawyers in a myriad of ways, that’s what coverage work is about. But in all cases, the policyholder is entitled to know, and market leading insurers should not fear setting out, alongside the terms of the policy, how any coverage dispute (there, I’ve said it) is to be resolved amicably before the problem turns legal and the parties rush for the dispute resolute provisions of the policy (that is a whole different subject: see Colin Wynter QC’s various articles about Arbitration provisions).

There is a real need, indeed a real commercial opportunity for market leading insurers such as Zurich, to do something different in this space and to change the way such coverage disputes are resolved, and I mean resolved, not simply paid.

I accept it is difficult to cater for and prescribe rules and processes for each product line or claims team because claims in the casualty space for example are usually very different to claims in the financial lines space and the solution in one area may not necessarily work as well or at all in another. Suspected issues of dishonesty and fraud also need to be handled in a completely separate way. However, why not simply start with a general promise to “work towards a prompt, fair and proportionate way of resolving such coverage issues as and when they arise with the overriding purpose of trying to avoid legal disputes or complaints or referrals to the FOS”. Build from there with specific timescales fit for typical coverage disputes for each product line or claims team and a genuine attempt to embrace such principles. A promise such as this could be built into a service level agreement with a broker to ensure that claims are handled in a particular way.

One example of embracing this general promise, and this is by illustration only, might be a service level agreement or “claims commitment” that sits alongside the policy terms that includes some form of early, but crucially, neutral evaluation within a certain timeframe by an appropriately qualified and sufficiently independent person from within the legal or insurance industry. It could serve as non-binding referral point – that could be accepted or rejected but either way would no doubt give both parties something to think about before embarking on a formal process with the usual cost consequences. This might resolve a fair proportion of disputes amicably whatever the outcome without the need to “go legal” as the parties and other relevant stakeholders might feel that matter was given a fair hearing by someone suitably qualified that the parties respect (and I’m not thinking FOS here) outside of the four walls of the claims team that made the initial decision or outside of said insurer’s panel arrangements.

This is just one idea, it’s clearly not and never will be the panacea for all coverage disputes and one has to be careful about being too prescriptive about such arrangements, but there are plenty of other options available that are in the right spirit of the general promise to “work towards a prompt, fair and proportionate way of resolving such coverage issues as and when they arise with the overriding purpose of trying to avoid legal disputes”. Market leading claims handlers/adjusters always have such tools at their disposal, we know that, then what’s the point in having a non-binding determination I hear you say?

Response: what’s the point in having a before the event claims commitment?! I think the point is, the claims commitment is trying to create an improved claims experience for policyholders with more transparent timescales and mutual objectives that yield a fair outcome, whatever the outcome. By agreeing in advance to first seek to resolve coverage disputes in a particular way, in this case by agreeing to refer the matter promptly to an appropriately qualified neutral third party, prevents both parties from hiding behind the usual rules of combat that all too often increase costs, end in complaints or worse still formal dispute resolution. The important thing, and this is the whole genesis of the claims commitment, is that the policyholders’ experience of the claims experience is improved and Zurich and others retain more business whatever the outcome of that initial process.

There are many other alternatives and many practical questions that follow but that should not stop insurers/brokers/policyholders trying to create new conventions and claims cultures notwithstanding hard market conditions that we are presently experiencing. This should be seen as a commercial opportunity, not a threat to the loss ratio, by market leading insurers and all stakeholders in the process – policyholder lawyers included – have a responsibility to consider and embrace change for the overall benefit of the market. Likewise, this issue shines a light on the growing need for our industry to develop and lobby for a change of procedural law so that the parties to an insurance contract, when they find themselves in a formal dispute, and the terms of the policy simply refer the laws of England and Wales, understand what is required of each other in the Pre-Action Protocol period. Given the vast number of bespoke Protocols that already exist and work effectively, I still find it frustrating that the parties to an insurance contract (and those advising them) have no clear procedural rules governing pre-litigation conduct.

These are my personal views intended as a blog, nothing in this blog is intended to be or should be relied upon as legal advice, every claim is different. Please do however contact me or this firm for more ideas on the subject regardless of what side of the market you represent.

Dan Brooks

Wynterhill LLP

This post is intended to provide guidance of a practical nature but does not contain legal advice or advice as to what action you should or should not take specific to your insurance needs or those of your business, or with regard to any particular situation.