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

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

The focus groups generally found the claims-management process to be something of a mystery. Most said they were not told when they bought or renewed their policies how a claim would be processed or investigated, other than being given a toll-free number to call in case of a loss. There was often no mention of how any dispute over a claim could be reconciled or how a rejection might be appealed.

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

Most of the small-business consumers taking part in Deloitte's focus groups could not make heads or tails of what their policies said, and many no longer bothered to read their insurance documents as a result. Such buyers depend on their agents and brokers to reassure them that their coverage is sufficient.

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

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

Indeed, a number of the buyers noted, agents and brokers have very practical reasons to be actively involved in a disputed claim—not only to demonstrate their added value but to avoid an errors and omissions suit if they failed to detect, anticipate or alert the buyer about a potential coverage gap at the time of purchase.

Such “intangibles” can make the difference in deciding whether a policyholder sticks with a carrier or agent, according to a buyer for a chain of dry-cleaning services. “My basement was flooding and my agent just showed up even before I had filed a claim to see if there was anything he could do to help contain the damage,” he noted, 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 agents probably cannot be there to hold their hands through every claim because they simply cannot afford the time and effort, given the relatively modest commission generated by many small-business accounts. “We may be too little of a client to earn that much attention [from the broker],” said one business consultant.

Still, I found it somewhat alarming that so many of these small-business consumers were ignorant about how a claim is handled, particularly if the facts of the loss or coverage details are brought into question. It sounded to me as if insurers were asking for trouble—in the form of reputational damage, the loss of business and the threat of bad-faith litigation—as long as buyers are often clueless about their coverage and the claims-management process.

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

However, that doesn't mean agents and brokers should be expected to shoulder the entire burden here. Insurers also have an obligation to not only clearly communicate their coverage up front in terms most small-business consumers could understand but to make the claims-management process more transparent and user-friendly as well.

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

Special Reports /

Small-Business Consumers Need to See the Light on Claims Process

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