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From the insurer’s perspective the return is perfectly asymmetric: In any year, 999,500 customers expect nothing in return for their outlay. But 500 expect ''enormous'' payouts. averaging £200,000. And a person who has a claim in one year is highly unlikely to have another claim the next year. | From the insurer’s perspective the return is perfectly asymmetric: In any year, 999,500 customers expect nothing in return for their outlay. But 500 expect ''enormous'' payouts. averaging £200,000. And a person who has a claim in one year is highly unlikely to have another claim the next year. | ||
It is possible to treat 99.95% of your customers fabulously by doing ''nothing''. They will be happy as long as signing up is easy and you have a jaunty marketing campaign with meerkats or comedy opera-singers. | It is possible to treat 99.95% of your customers fabulously by doing ''nothing''. They will be happy as long as signing up is easy and you have a jaunty marketing campaign with meerkats or comedy opera-singers. For the unaffected what they are buying is their own peace of mind. You don’t have to do anything. | ||
The other 0.05% are far more expensive to keep happy, but here is the thing: you don’t really, have to keep them happy. So ''what'' if you are late in replying to their claims? So what if you make | The other 0.05% are far more expensive to keep happy, but here is the thing: you don’t really, ''have'' to keep them happy. Actually, you ''can’t'': in their best case scenario, ''their house burned down''. Even if you pay them out, they will lose their no-claims bonus and find you have altered their situation of risk and jacked up their premiums. But they represent half of one percent of your customers. So ''what'' if they don’t renew their policies? So ''what'' if you are late in replying to their claims? So ''what'' if you make the claim process confusing, slow, laborious and prone to error? Indeed, the harder you make their process, the better for your business it will be. There it is again: form over substance. | ||
Of those 500 claimants, 450 will have open-and-shut cases. Fifty will be somewhat arguable but, ultimately — if it ever went to court — the insurer | Of those valid 500 claimants, 450 will have open-and-shut cases. Fifty will be somewhat arguable but, ultimately — if it ever went to court — the insurer will have to pay. Nonetheless a rational but unempathetic insurer should, at first, ''decline'' those claims. | ||
Now, | Now, insurers are bound by obligations of [[Uberrima fides|utmost good faith]], and there are deterrents to acting unconscionably — regulations, consumer watchdogs, ombudspeople and ultimately legal action — but, basically, ''so what'': the insurer can settle the moment these agencies get involved. The option it is exercising is seeing whether the customers will invoke those mechanisms. Statistically, some portion of these valid claimants won’t: they will be put off by the rejection, or just the insurer’s silence, and never make any complaint. If an customer don’t press its claim, the insurer will not have to pay. | ||
Any such cases represent pure profit for the insurer. | |||