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Proclaim’s Managing Director, Jon Broome, attended a working lunch at Hall and Wilcox on the new – proposed – licensing regime for claims handling.  It was an informal session with a good cross section of the industry including adjusters, brokers, insurers (life and P and C)  and claim managers.

There were a few key take-aways, mainly from areas where there was the most interest and discussion. Some of these include:

What is fairness?

Under the new regime claim managers will have a duty to act fairly, efficiently and honestly. Of those three terms, the fairness piece is the most likely shade of grey, as there can be subjectivity in judgment or tests applied. I think we all agreed expert shopping, where you go back to the well for a further opinion if you don’t like the first one, is unlikely to pass the fairness test. But the complication is there can be circumstances you could envisage where it may be fair, so it isn’t cut and dried. Far from it in fact.  It is clear ASIC are on a fairness campaign so this will be an area where there may well be a reverse onus on insurers and claims handlers.

Who is caught and who is exempt?

There is no question that there is the potential for a very wide range of providers to be caught in the definition of what is a claims handling service and thus needing licensing.  The key seems to be that if you have an authority to accept or deny liability for the claim on behalf of an insurer you are caught.  Insurers thus may need to review existing arrangements so builder and adjusters either have to get a license if they have claims authority, or they stick to their service and leave the coverage stuff to their Principals.

There is a broad exemption for lawyers – at this stage at least. Our view on this has already been ventilated in another blog, but I think everyone agreed that while a lawyer is providing advice to a client, they should be exempt. The fuzzy bit is the exemptions which may apply to internal counsel and to law firms if they are doing what claims managers do in trying to negotiate or settle a claim. It seems to me at least this is flawed as it may encourage flipping difficult claims to a law firm so that the claim is exempt from the requirements. It will be interesting to see if this is refined.

And what of Lloyd’s? Will they be exempt as they may have been in the past due to APRA regulation already being in place? And what of their local reps, are they liable for the instructions of their principals….even if the claim isn’t within an authority?

What’s it all mean?

While there will no doubt be higher levels of accountability within the claim industry, the practical impact is there will be 2 streams of applicants for licenses…those companies, like insurers and brokers, who have an existing license and will need to vary it. And then there will be companies like us , who will need a license from scratch. For us and others in our boat, the advice was to start thinking about how you deal efficiently, fairly and honestly in your claims and what you are doing in terms of training and management oversight to ensure that is occurring. Fortunately a lot of what we do for Lloyd’s is already shaped by this, but given there is a tight time frame to get applications in (legislation june, applications in by end of year), it clearly is something we need to start thinking about, even if the final form of the legislation is still to be determined.

Thanks to Hall and Wilcox for hosting a very informative session.