How will consolidation impact

Canada’s independent claims adjusting landscape?

 

By Dara Banga

FCIP, CFEI

Fifty-nine percent of Canadian executives plan to actively pursue acquisitions in the next 12 months, placing M&A appetite at a six-year high, according to EY’s 2015 Canadian Capital Confidence Barometer. While this statistic reflects business in general, the insurance industry is following the trend.

 

A 2014 survey by Towers Watson found that 86% of North American insurance executives expected to see an increase in M&A activity in the next three years and 78% were actively considering acquisitions. Top Canadian Insurance Broker reports, “M&A activity has moved beyond just insurance and brokers. Other vendors to the industry – such as tech companies, claims adjusters and restoration firms – are consolidating dominant positions by buying companies that expand their service offerings and broaden their reach.”

 

Recent insurance M&A examples include the ACE acquisition of Chubb; the Towers Watson and Willis merger; Hub’s acquisition of two home warranty companies; and SCM Insurance Services’ acquisition of Granite’s Claims.

 

What does all this M&A activity mean for independent claims adjusting services? Two words: Buyer beware.

 

While acquisitions may yield positive results five years down the road, the transitional period – while two companies struggle to integrate goals, people, systems and processes – can be nothing short of chaos. And the biggest losers during the transition period tend to be clients. Just ask Comcast/Time Warner Cable customers following their failed merger. Customer satisfaction scores dropped 10 percent and 9 percent respectively.

 

In the serious and time-sensitive business of claims management, there’s simply no room for error or ambiguity. People’s lives, assets and futures are at stake. Insureds trust that the policies they’ve diligently paid for will deliver in spades when they need them most. They are 100% reliant on an adjuster’s rapid response, investigation, reporting and action.

 

Then, there’s the bottom line to consider. Insurers and self-insured organizations rely on adjusters to defend their profits and reputations with quality claims services – keeping policyholder retention levels high and fraud and claims leakage low. These goals may be difficult to achieve with an adjusting partner who is in the midst of merger chaos.

 

Take charge of change

 

Smaller North American brokerages outperform larger ones in overall satisfaction according to the J.D. Power 2015 Large Commercial Insurance Study. Smaller brokers received higher satisfaction ratings in three key areas: quality of advice, guidance provided and reasonableness of fees, Canadian Underwriter reports.

 

Likewise, if policyholder satisfaction and profitability are important goals, insurers and self-insured organizations may want to choose smaller, service-driven adjusting firms rather than larger firms in transition. They should look for adjusting firms that are focused on clients and the crises at hand, who aren’t burdened by satisfying shareholders’ expectations. They should insist on adjusters who aren’t inhibited by big-company bureaucracy or unclear protocols, who can respond to changing needs with speed and agility.

 

By partnering with smaller adjusting firms, insureds and self-insured organizations can take charge of change before it takes charge of their claims results.

 

 

Dara Banga, FCIP, CFEI, is the President and Chief Adjusting Officer of DSB Claims, headquartered in Brampton, ON. To learn more, visit www.dsbclaims.com.

 

 

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