If processing a claim is indeedthe moment of truth in an insurer's relationship with customers,why are small-business consumers apparently being kept in the darkwhen it comes to how a loss 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 how a claim would beprocessed or investigated, other than being given a toll-freenumber to call in case of a loss. There was often no mention of howany dispute over a claim could be reconciled or how a rejectionmight be appealed. 

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.”

Most of the small-business consumers taking part in Deloitte'sfocus groups could not make heads or tails of what their policiessaid, and many no longer bothered to read their insurance documentsas a result. Such buyers depend on their agents and brokers toreassure them that their coverage 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.

Others in the two focus groups echoed one another in contendingthat it's only natural for small-business buyers to lean on theiragents and brokers because, as one put it, “they know the drill” interms of managing a claim from first notice of loss through theinvestigation, resolving any conflicts and closing thecase—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],” said one business consultant.

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 to not only clearly communicate their coverage up frontin terms most small-business consumers could understand but to makethe claims-management process more transparent and user-friendly aswell.

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.