Asia C-Suite: Improving China's claims

It is globally recognised that the claims function is the shop window of insurance. Our market's offering is not tangible and, as a result, if we cannot instill confidence then our consumers would not pay their premiums.

However, while the majority of multinational players pay considerable attention to constantly improving their claims' services, many of the major players in China don'tt appear to share the same vision.

Although the Chinese insurance market is growing rapidly, with more than 25% annual premium growth, some commentators believe this expansion belies an unhealthy market beset by misleading sales activities and difficulties in claims settlement.

The basis of insurance, regardless of the geographical location, is to compensate economic loss. It can help to stabilise the whole of society. In order to achieve this valuable function, the claims process must be efficient, accurate and delivered with a service-orientated attitude.

Claims statistics are also a clear measure of an insurer's performance. It is a reflection of whether the insurer has delivered skillful underwriting, if risk mitigation has been effective, and if the premium level was high enough and fair. In addition, claims can provide a good ‘health check' view of solvency margins.

Unfortunately, the situation in China is not as positive as in other parts of the world. Chinese insurers have a reputation for not honouring their responsibilities, and as a result the general perception is that insurers are avoiding legitimate claims or reducing indemnity without reason.

The underlying claims service is also often delivered poorly, with insurers frequently erecting unreasonable hurdles or delaying the process. Many believe they are hoping the claimant will simply give up on securing a settlement.

The authorities are aware of this situation and in response have created a team tasked with closing long outstanding and disputed claim cases. In 2014 they dealt with more than 12 million cases with a success ratio of around 70%.

Fundamentally this unacceptable behavior is a result of a lack of a reliable legal system to resolve issues in China. Most of the time a client has to accept a compromise, which is often far less than their expectations. The end result is diminishing consumer confidence.

At a market level this damaging approach is also preventing Chinese insurers from reporting an accurate picture of their financial performance. This means they are not able to analyse whether their premium rates are sustainable, risks are correctly evaluated or loss prevention measures are satisfactory.

While the insurance industry in China has experienced sizable growth in the past, it is rather volatile. To restore the true functions of insurance to the economy and to deliver sustainable and healthy growth, insurers must act quickly and revise their attitude to claims.

Only then can we anticipate an even bigger, stronger and consumer supported insurance market in China.

Conrad Wong, pictured, is a director of Nova Beijing, a member of Brokerslink