Surely a claim is a claim, regardless of when it’s reported? In simple terms that may be true, but the cost of the claim varies over time, and generally speaking, the variation is upwards as time passes.
However, a prudent policyholder should be aware of any reporting requirements or claims procedures on his policies. Failure to comply with conditions or timescales could potentially see the claim payout fall off a cliff-edge and become zero – a declined claim.
Depending on the type of insurance involved, different sets of pitfalls can come into play. Some policies are more time-sensitive than others.
We bandy about the term “motor insurance” as if it was a single entity, when, in fact, most motor policies are like an insurance selection box – cover for damage to own vehicles, the liability cover required by law, some wider liability cover, often some kind of personal accident cover for the driver & passengers, and a bonus section covering damage to windscreens & windows, where claims are usually penalty-free.
Let’s look at a simple incident – no other vehicles or pedestrians involved, but the insured vehicle has struck and damaged a garden wall and gate pillar. There’s only minor damage to the vehicle.
There might be a temptation to try to deal with the structural damage in-house, but garden walls are the resin bumpers of the architectural world. “It’s only a wee crack” and “That’ll polish out, no trouble” are, with frightening frequency, followed by mind-numbing repair estimates. Likewise, what appears to be a minor crack requiring only some cosmetic pointing often requires taking-down and rebuilding to achieve structural integrity.
By the time this time-honoured paso doble has played-out, your insurer has lost the initiative and the opportunity to control the remedial work. An early report of the incident would have allowed immediate instruction of an approved contractor to carry out the repair. Now, the insurer has a substantial estimate from an unknown contractor. To establish that the estimate is unreasonable – and it may not be – will involve instructing a loss adjuster.
Even in this simple case the repair cost is higher than it might have been and the handling cost now has an adjuster’s fee, both avoidable by early reporting.
Having been obliged to submit the third party property claim, you may feel that you might as well claim for the minor damage to your vehicle. If you decide not to, future damage could see the application of more than one excess, if the motor engineer notices the pre-existing damage. At least put the damage on record, to avoid any possible taint to the insurer/insured relationship in future.
In incidents involving other vehicles, similar considerations apply but to an even greater extent. Your driver reports an incident that seems clearly not his fault, so you’re tempted not to report it to your own insurers, but to pursue it through the at-fault party’s insurance. Good luck with that – it might work out fine – but if it doesn’t, you’ve limited your insurer’s options, and potentially breached policy conditions.
Clear-cut incidents are rarer than people generally think and counter-claims are common, whether actual or tactical.
In cases where it appears your driver is wholly or partly to blame, early reporting to your insurers is especially vital. In the first hour after a road traffic accident there is literally a race to contact non-fault parties and try to sign them up for “credit repair”, “credit hire”, “no-win, no-fee” and other tempting, but horribly expensive, goodies. Your insurer can provide these shiny baubles at much lower cost, and under much better financial control. However, to be in the race, they need to hear the starting pistol, which is your report. Occasionally, in track & field, there may be a re-start, but in the claimant capture race, there is seldom a second chance. Once the claims management juggernaut is underway, it’s harder to stop than the Ever Given container ship wedging in the Suez Canal, with costs only marginally less.
Whereas your insurer could quickly supply a claimant with an alternative vehicle at regular rates, claims management companies (CMCs) charge dearly for credit. Your insurer has a network of approved workshops charging agreed labour rates whilst CMCs have their own repair sources charging inflated labour rates for credit and “storage”.
In England & Wales (E&W) the Civil Liability Act 2018 (CLA 2018) belatedly came into force on 31st May 2021, having been delayed by the pandemic. This act addresses the number of exaggerated and fraudulent whiplash claims that initially, the courts had failed to tackle and subsequently, regulation of CMCs and medical reporting agencies has failed to stem. In E&W whiplash claims arising from incidents after 31st May 2021 and valued at under £5,000 must now be made via a new online portal. The time limit for claimants making whiplash claims is unchanged at 3 years, but once a claim is intimated via the portal, defending insurers have only 30 days to investigate and reach a liability decision. Clearly, early reporting of RTAs can forewarn & forearm your insurer.
“Pre-medical offers” – low value buy-offs – are now banned under the CLA. Recognising that many whiplash claims were fraudulent or exaggerated, insurers developed the tactic of making early, low offers without the need for a medical report. Although cheaper than investigating & settling hard-to-defend soft tissue injuries, these were still a costly drain on insurers, and led to higher premiums for motorists.
Scotland has its own separate legal system and the CLA 2018 does not apply here. The former system still applies, meaning that CMCs and lawyers can still pursue low value whiplash claims for accidents in Scotland. Early reporting can often prevent CMC involvement.
With the income from whiplash claims slashed CMCs and lawyers in E&W are looking for claims on which to make up the revenue shortfall.
Personal injury claims are ideal. The main liability policies are Employers’ Liability (EL) and public liability (PL).
EL policies, as their name suggests, cover the liability of employers to their employees for injuries or death resulting from accidents at work. Although most government departments and public bodies – councils, police forces, health boards etc – are exempt from the legal requirement to insure their employer’s liability, most of them actually insure, because it’s generally cheaper & easier to do so. Aside from these bodies, only one-man businesses and businesses employing only close family members are exempt from the requirement to have EL insurance.
The EL legislation strictly limits the conditions that can appear in EL policies. There is a vast amount of primary and secondary legislation aimed at making workplaces safe. As a result, EL claims are difficult (but not impossible) to defend, and they are often costly in terms of both damages and the legal costs incurred on both sides. They are therefore sought after by lawyers and there is a large market segment of law firms who pursue only EL claims, often backed by trade-union funding.
Part of the health & safety at work regime is aimed at recording and reporting accidents at work, so it should be a short step to reporting appropriate incidents to the insurers, regardless of whether a claim has yet been received. As with the whiplash claims mentioned above, claimants have 3 years in which to claim. Simple enough in the case of an obvious physical injury, but in cases such as deafness or industrial disease, such as asbestosis, vibration white finger (VWF), the limitation clock runs only from the date of diagnosis. Industrial deafness may manifest itself in 10 years, but asbestos-related diseases, which are usually at least life-shortening, if not fatal, commonly take 30 or more years to appear.
As well as the requirement to have EL insurance, there is a requirement on employers to display a valid certificate of EL insurance at each workplace and to retain EL certificates of insurance for 40 years after expiry.
Early reporting of incidents gives the insurer the opportunity to investigate whilst witnesses are still traceable and alive, and to inspect tools, equipment or workplaces. Photos may be taken and statements obtained. Digital evidence, eg CCTV or dashcam, can be preserved before it is overwritten or lost.
PL insurance is not compulsory, but most prudent businesses have it. The legal duties owed to “third parties” are generally much lower than those owed to employees. PL claims are accordingly much more easily defended, but they offer much potential for fraud. Fraudsters often attempt to increase their chances of success by making “late” claims, some time after the date of the alleged incident. They hope that this will “muddy the waters” and make it difficult to effectively investigate and defend.
Although “late” in this context, it remains important to report such claims promptly to insurers. Because most commercial premises are also workplaces, there will already be a regime of accident reporting and recording which will usually capture incidents involving customers or visitors.
Most businesses will have insurance cover on their premises, unless they are rented and insured by the landlord.
Plant, equipment, machinery, tools, stock and staff personal effects are all commonly insured.
Buildings are generally not insured against everything, but against a list of specified “perils”, such as fire, storm, flood, or theft. Contents may be insured against a similar list of perils, or against “all risks” which is wider, but not quite “everything”.
It is important to report losses or potential losses as soon as possible.
In cases of theft or malicious damage there may be additional reporting requirements, such as the obtaining of a police crime number. Failure to report such losses promptly or to police may mean that CCTV evidence is overwritten before its significance is realised. Opportunities may be lost to carry out meaningful investigations which may lead to recovery of property.
In the case of damage by storm, fire or water, early reporting will give insurers the chance to instruct loss adjusters to quantify the loss. Adjusters are also usually the key to instructing protective measures, arranging clean-up services and disposing of salvage, to minimise loss and maximise recovery.
In the current climate, no blog about the benefits of early reporting would be complete without mention of cyber insurance. In fact, cyber might be the most important of the classes we’ve looked at, as regards “time being of the essence”. Having cyber insurance isn’t enough. Businesses need to thoroughly understand the cover and know who to call in the event of an incident. The action plan should exist on paper, against the possibility that a ransomware attack or denial of service leaves them without access to digital resources. If they rely on digital security for access to premises, there should be a copy of the plan available off-site, in case access codes are hacked. As soon as the business is aware of an incident, they should contact the insurers or their nominated IT contractors. Ideally, the IT wizards can be left to do what they do, whilst the insurers instruct legal and PR teams for support and to handle any flak.
They should not respond to any messages from the hackers, nor pay any ransom.
Whether they’re fans of Cpl Jones or H2G2, the golden rule is “Don’t panic!”
As surely as Dec follows Ant, increased premiums follow increased payouts. One can be avoided by early reporting. Sadly, the other can’t.