News Article : Losing the ball at the breakdown
|Category:|| Short-Term Insurance : Motor Vehicle|
|Posted:||02 Nov 2008|
SAMBRA gives notice that its members want payment before releasing repaired vehicles
Recently Saxum Insurance posted advertisements to the effect that their relationship with Niche Administrators had been terminated.
This was not the first time I had heard of Niche.
A while ago SAMBRA (South African Motor Body Repair Association) had indicated that their members were no longer prepared to deal with Niche either, but more about this later.
Saxum terminated their relationship with Niche on the 11 September, and at the same time informed the FSB.
Saxum cited endless delays with the administration of claims and policies and non-payment of premiums.
Severing the Saxum link also terminated the relationship Niche had entered into with Innovation Group in July. Innovation Group handles claims on behalf of multiple insurers including Saxum.
According to Peter Olyott - Chief Sales and Services Officer, Innovation Group SA, they encountered capacity problems with Niche on the length of time taken to manage claims documentation, bordereaux payments and ultimately they found an underestimation of loss ratios on this portfolio.
"Our relationship with Niche was short-lived and was terminated in mid September 2008 due to Saxum withdrawing from the arrangement. During our brief tenure we experienced delays in receiving payments for service providers who had rendered services following our instructions on behalf of Niche."
Last week the FSB visited Niche to conduct an investigation.
According to Niche, they came up with a clean bill of health in this process, though the FSB remains tight-lipped in terms of section 22 of the FSB Act.
Martin van Rensburg of Niche claims that they have successfully hawked their book to at least 5 insurers though he is silent on who these providers may be.
According to Martin, Niche is
an administrator does admin work for an insurer and receives remuneration from there, it is a function that insurers would normally do. None of the admin functions are paid for by clients it is paid for by insurers. These premiums that are negotiated by Administrators and Insurers are also in many occasions way lower than clients dealing direct because of volumes placed. The % of the fee is therefore irrelevant.
I would further like to point out that at all times do we work through the broker and we do not communicate with clients directly if we can help it.
...our contact with clients must be kept to the minimum and we have to communicate through the broker. We further have an agreement with brokers that we will not communicate with clients (this is in our broker agreement) as we would not like to risk the fact that brokers might accuse us of dealing behind their backs with their clients or advising the clients incorrectly as they could be liable.
The above remains simply an industry issue and of academic interest until one sees what happens to a policyholder with a claim actually caught up in this process.
A consumer experience
Patrick Msiza works for Avis and has been appalled by the shocking service he received after having to claim for repairs to his vehicle through his broker Aquarius Insurance Consultants.
He puts it this way:
I work for an international organisation where no issue is to big or too small for our MD to handle and will take a call from any of our customers. That is why we exceed customer’s expectations at every interface.
And here is his story:
My car was stolen by my cousin on the 17 May 2008 and the theft was reported to the police (Temba Police Station) via telephone on the 17th of May 2008.
When the police recovered the car it was already involved in an accident and the suspect was arrested on the 18 May 2008 morning, I called AQUARIUS (Alicia) on the 19 May 2008 to report the case and I was told to report it to Niche (brokers), the police case number 558/05/2008 was given to Niche Administrators on the 19 May 2008, the person I spoke to was Liesl and she told me to get a panel beater that can get the car from the police and do a quote for me to submit to them.
I only found out that the police circulated the wrong vehicle registration number on their system by error, mine is WLB 407 GP and they captured as WLD 407 GP hence we had a delay with the police in getting the car from them.
It took me time to sort that out with the police and on top of that there was another car with the same registration number as mine that was used for crime in Bloemfontein after my vehicle was impounded by the police and I sorted that out again myself, someone used my vehicle registration number and used it for crime while my car was with the police.
Niche and AQUARIUS came in to place when I had everything sorted with the police as they could not assist with any of the above mentioned, at the time I requested an authorization letter from Niche to allow Franco Auto Body (which I also got from my side) to remove the car, and I had to wait more than two months for them to comply with the letter.
When I requested to speak to Liesl as she is the one that assisted me in the first place I was told that she is no longer with Niche Administrators and I was referred to Chentel to assist me.
Chentel asked me to fax the copy of my drivers license and the pictures of the damaged car and I did that on the 14 August 08 and she then faxed me the letter of authorization that was meant for Schalk and not Franco Auto Body, I asked her why is that and she told me that they have to use their own assessors.
After that I have been making several follow ups with them to get the car from the police, until the time when Schalk refused to assist them for the lack of information supplied to them by Niche.
I was not given a claim form or anything and my broker AQUARIUS told me that they will assist and give me feedback but nothing was done from their side.
To date I have not yet got any help from Niche or AQUARIUS with regards to my claim and I’m still paying for the vehicle insurance (Niche Administrators policy number MOTO9102) on a monthly basis.
I also have to continuously do follow up’s from my side since I get very limited communication from either Niche or Aquarius.
I have attached a few of my communication with Niche.
In the interim I have to make use of public transportation and also keeping in mind that my office will be relocating in two months to new premises, which will mean it will become more difficult to get to my workplace on time.
All of this because of the lack of professional support from the company I’ve put my trust in.
According to Maurizio Scolari Managing Member Aquarius Insurance Consultants
- We as broker for Niche Administrators are not mandated in any way to handle, authorise, appoint assessors, repudiate any claim a client may have with the administrators / Insurer or make any representation or promise thereto; that rests with the claims department at Niche administrators.
- We obviously are entitled to assist the client in any way possible to ensure his claim is registered properly & keep the client informed as much as possible pending information we receive back from the claim operators.
- We do notify the client if there is outstanding paperwork like quotations, ID documents & the like & forward that off to Niche Claims dept.
When client phoned in to report claim, he spoke to Melissa Whitwham who correctly pointed him in the right direction as far as claims registration is concerned & that would have been to contact the Innovations Call Centre to capture the claim on their system. Following that an operator from Niche would then receive an electronic report & proceed with appointment of assessors etc.
As you can see Mr Wilson, we do not feature in the claims process & this is the norm with all their brokers.
Several aspects of the above accounts by Martin, Patrick and Maurizio are problematic:
- It was impossible for Innovation Group to be involved in this claim as they only came on board with Niche through Saxum in July. The broker must therefore have referred the claimant directly to Niche at this point.
- No claim forms were completed by the claimant.
- It is clear that outsourcing to an administrator involves a great deal of trust in the capacity of the partner to deliver on service levels. In this case it is clear from Patrick’s account that Niche dropped the ball on more than one occasion.
- However it is ultimately the broker's duty to become involved when a client has a claim to ensure that potential or actual problems are dealt with.
- A clear delineation between the roles played by the broker and the administrator in this case is patently missing and it is for this reason that service to the client fell between the cracks. The accounts by Martin and Maurizio conflict in terms of responsibilities. In brief it appears that the broker abandoned responsibility to the administrator who was keen to limit their own responsibility.
I would imagine that the FAIS Ombudsman would be keen to handle a complaint from Patrick if his claim is declined for whatever reason.
And this brings us to SAMBRA.
Richard Green, the National Director, has been extremely busy on behalf of the association, speaking to insurers and the regulator about the ills that beset insurance claim systems.
According to him:
SAMBRA' governing board has taken a decision to move (within max 6 months) to a 'Pay before release system'.
The Motor Body Repair industry, which SAMBRA manages, has taken the brunt of underwriters’ decisions to 'move' their administration burdens to intermediary companies.
This action has had 2 main effects, viz that those intermediaries pay our members very poorly and moreover the intermediary companies finance their operations off our invoices by deducting so called early payment discounts, which in many cases, are 10% of the gross invoice value!
Try calculating the net profit effect of that and you will have some idea of how damaging the action is, especially when the payment arrives many times slower than promised.
This intermediary system is resulting in our members businesses being threatened and although our intended action will substantially inconvenience insured consumers we have been left with no choice but to demand payment before release of the repaired vehicle, something that is common place when e.g. servicing your vehicle, but through insurer dominance of our industry has been allowed to creep in over time.
He goes further:
For far too many years the Motor Body Repair Industry has been subjected to an ever increasing level of dominance by short term insurers and their intermediary partners.
One of the more damaging of these is the practice of demanding the release of the vehicle, to which our SAMBRA members have often added masses of value during the repair process without receiving payment first, i.e. our members release the vehicle and then (without any form of lien retained) have to beg for payment.
This practice has resulted in the creation of a completely new industry in the form of thousands of small intermediary companies who approach insurers and offer to manage the claims process on their behalf, often without remuneration from the insurer (hence the attraction to the insurer).
These companies then enforce the deduction of 5-10% of the gross invoice value of the Motor Body Repairer and finance their business with that cash extracted from the MBR’ invoice.
So essentially, the underwriters have shifted the administration burden from themselves to intermediary companies without costing the underwriter anything in many cases. This very clever system severely impacts the nett income and cash flow of the MBR.
Well, things are about to change!
From 1 March 2009 our entire membership will shift to a ‘Pay before Release system’ for all insurers/underwriters and intermediaries who do not appear on SAMBRA’ good payer list.
This list will be made up of companies who SAMBRA deems to be excellent payers, who do not deduct any form of deduction in excess of 2.5% of the gross invoice.
This will be the maximum allowed and only for those of our members that choose that deduction method and ONLY for companies that pay 7 days after submission of the SAMBRA member invoice.
Since our most recent communication to our members regarding certain insurers and intermediaries there has been a flurry of market activity and one insurer and one intermediary have already, with immediate effect, been placed on the pay before release system.
Quite simply put, enough is enough! Our members deserve the same respect as other traders and there are none that release this value of goods without being paid first, so we will merely be exercising those rights as of 1 March 2009.
Speaking to Richard last week, he indicated that there was a consensus that the plethora of intermediaries had significantly depleted the industry’s capacity to pay claims.
There is simply not enough money left over after some of these administrators have fed at the trough to pay motor body repair claims.
In addition, where administrators such as Niche and more recently, New National, prove themselves obstacles rather than efficient facilitators, outsourced partners threaten the client-broker and client-insurer relationship at the point where most relationships have been proven to break down.
In an industry where service is a key differentiator, it is clear that brokers and insurers alike will have to relook at their intermediary relationships to determine whether the value provided, and risk created, is justified by the expense.