If processing a claim is indeed the moment of truth in aninsurer's relationship with customers, why are small-businessconsumers apparently being kept in the dark when it comes to how aloss will be handled?

That was one of the critical questions raised by participants ina pair of focus groups run on behalf of Deloitte Research,featuring buyers from a variety of industries responsible forinsurance issues at their respective companies—with halfrepresenting those employing 10 or fewer, and the other half atfirms with between 11 and 50 workers.

The focus groups generally found the claims-management processto be something of a mystery. Most said they were not told whenthey bought or renewed their policies—either by their agents orbrokers or by their carrier—how a claim would be processed orinvestigated, other than being given a toll-free number to call incase of a loss. There was often no mention of how any dispute overa claim could be reconciled or how a rejection might beappealed.

An insurance buyer for a finance company suggested policyholdersneed to take the initiative when it comes to learning about theclaims process, speculating that insurers and agents might not wantto talk about any potential friction down the road over a loss. Hedescribed the industry's policy on claims management as “don't ask,don't tell.”

In my last blog, I noted that most of the small-businessconsumers taking part in Deloitte's focus groups could not makeheads or tails of what their policies said, and many no longerbothered to read their insurance documents as a result. Such buyersdepend on their agents and brokers to reassure them that theircoverage is sufficient.

The same attitude prevailed among the group members when itcomes to claims management. Small-business buyers taking part inthe focus groups expect their agents and brokers to guide themthrough the claims process, as well as to stand up for them and betheir advocates if a dispute arises—especially if it's a matter ofan exclusion or condition in their policies they either hadn't reador couldn't understand.

“Come renewal time, I make it clear the decision whether to keepthe broker and the insurer would depend on how they performedduring the claim,” said a business consultant in the focusgroups. “The broker must be part of the [claims] process andbe held accountable.”

“I already have lots of other fires to put out,” said a buyerfor a wireless company. “I delegate claims to my broker, whoI trust to handle this.”

Others in the two focus groups echoed oneanother in contending that it's only natural for small-businessbuyers to lean on their agents and brokers because, as one put it,“they know the drill” in terms of managing a claim from firstnotice of loss, through the investigation, resolving any conflictsand closing the case—hopefully to the client's satisfaction.

Indeed, a number of the buyers noted, agents and brokers havevery practical reasons to be actively involved in a disputedclaim—not only to demonstrate their added value but to avoid anerrors and omissions suit if they failed to detect, anticipate oralert the buyer about a potential coverage gap at the time ofpurchase.

Such “intangibles” can make the difference in deciding whether apolicyholder sticks with a carrier or agent, according to a buyerfor a chain of dry-cleaning services. “My basement was flooding andmy agent just showed up even before I had filed a claim to see ifthere was anything he could do to help contain the damage,” henoted, adding that the agent earned his renewal that day because“he goes that extra mile.”

Some of the focus-group members said they understand that agentsprobably cannot be there to hold their hands through every claimbecause they simply cannot afford the time and effort, given therelatively modest commission generated by many small-businessaccounts. “We may be too little of a client to earn that muchattention [from the broker],” shrugged the business consultantquoted earlier.

Still, I found it somewhat alarming that so many of thesesmall-business consumers were ignorant about how a claim ishandled, particularly if the facts of the loss or coverage detailsare brought into question. It sounded to me as if insurers wereasking for trouble—in the form of reputational damage, the loss ofbusiness and the threat of bad-faith litigation—as long as buyersare often clueless about their coverage and the claims-managementprocess.

At the very least, they are correct to expect the agents andbrokers who sold them their coverage to lend a helping hand ifresistance or confusion is encountered during the claims process.Those who come through for their clients, or at least make theexperience easier to understand and navigate, will have earnedtheir commission as well as the loyalty of their clients.Otherwise, agents are reduced to being price shoppers and policypeddlers—which in an increasingly Web-driven, self-service,commoditized insurance world makes them easier todisintermediate.

However, that doesn't mean agents and brokers should be expectedto shoulder the entire burden here. Insurers also have anobligation, I would think, to not only clearly communicate theircoverage up front in terms most small-business consumers couldunderstand but to make the claims-management process moretransparent and user-friendly as well.

Those carriers that work in tandem with their agents and brokersto enhance the customer experience at both the front end of thetransaction (when a policy is issued at purchase or renewal) aswell as the back end (when a claim arises) are more likely to enjoya competitive edge, with their distributors as well as theirclients.