The new claims pandemic: How has COVID impacted the claims market
The financial industry has never seen a greater need to cope with the abundance of pressure placed on them. Tens of thousands of additional work-from-home (WFH) financial services negotiators are needed by banks, insurers, and credit card firms to help them cope with the unprecedented volumes of claims in the wake of COVID-19. We estimate that this sector could need up to 30,000 additional contingent resources. With insurers and banks alike, the new normality will be putting contingency plans together to cope with the sheer volumes of general inquirers, a record level of claims applications, and deferred debt collections.
The government and the FCA have ruled that car finance deals, mortgages, and another consumer borrowing will not be enforced in the same way that it would under BAU. Car finance and mortgage lenders have been instructed/are being encouraged to offer repayment holidays – either from just the capital element or in some cases from the whole payment. It has also been estimated that 1 in 9 people in the UK have applied for mortgage holidays.
Individuals and organisations are facing new financial uncertainties and with this comes a plethora of questions around their financial futures. General inquiries have risen significantly with some banks seeing record levels of these that they are struggling to keep up with. Firms have turned to remote contingent workforces to deal with these telephone and email inquiries.
Time is of the essence. Businesses and individuals will already be on the verge of bankruptcy and are desperate to get in touch with someone who could help them not only make sense of the issue but work out an action plan that will suit both parties. There is no ‘quick fix’ to this and organisations cannot sweep these queries under the rug so to speak. If this is not addressed promptly, it could result in an influx of customer complaints resulting in the FCA or the PRA investigating the unfair treatment of their customers.
Added to that are the borrowers who have simply, and unilaterally without consultation, canceled their direct debits because they perceive they are entitled to do so, resulting in arrears, and becoming a further credit risk. Lenders are faced with an increased demand placed on their call centres as borrowers are waiting hours to try and rectify payment terms and conditions. Some lenders are now asking borrowers to get in touch with them via online request forms as the demand is too high to deal with. So, what will be the result when the payment holiday comes to an end?
Consumers are concerned that the over-indebtedness where interest continues to accrue during a payment deferral period will be too much to cope with once things start to stabilise and payments holidays come to an end. Processing these applications for payment holidays and dealing with the number of calls and other consumer contracts are placing an unprecedented amount of pressure on providers to cope with the additional demands. It’s safe to say that the loan market is positioned to have some significant change, but are the insurers facing similar pressures?
Global insurers have been inundated with claims not just relating to health or personal investments. Insurers have been swamped with claims relating to everything from travel to event claims and their resources have been significantly impacted as a result. This has led to spiralling claims from companies going bankrupt. SMEs are at the highest risk now, lacking the capital they needed to survive. 5.8 million small businesses exist in the UK highlighting the potential volume of claims that could be made in the following weeks.
Now to address the more sombre aspect of the pandemic, we are seeing the devastating realities affecting Pension funds and other funds alike. A sad reality is that thousands are dealing with the loss of a loved one and with that comes the intricacies’ of sorting out their affairs. Many have had to contact the deceased’s pension schemes to make them aware of the death and discuss the next steps. Pension schemes will have to ensure that their records are updated and either distribute funds or follow up on any receipt of funds of the individual. This alone is another administrative pressure placed on pension scheme providers.
In the UK you cannot usually take out your pension fund before the age of 55, however, in situations where extreme illness prevails on an individual, pension funds can be withdrawn. There will be a rise in these types of situations, creating a surplus of administration and review, to ensure each case is handled fairly, efficiently, and effectively.
Speaking of handling things fairly, it is important that with all the additional work placed on firms and banks, they don’t forget about the regulators keeping a watchful eye on everything they do. The UK has seen some insurers being faced with legal action as certain SMEs who have claimed for Business Interruption have been unfairly turned down. The FCA has warned insurers who are liable to pay for Business Interruption Policies to halt dividend payments to allow them to pay claims and warned insurers it expects them to treat customers fairly.
With all the talk on innovation and technology solving the day, I think we must remember that when we are dealing with intricate and emotionally fuelled requests AI cannot solve a very human problem. When dealing with the sensitivity surrounding COVID-19 related queries, automation tools simply will not place your customers at ease. What is needed is calls handled by relatable, empathetic, and resourceful negotiators. This has led to financial institutions requesting UK-based skilled roles include mortgage negotiators, collections handlers, and affordability controllers.
There has never been a greater need to staff these vital industries which essentially governs people’s livelihoods under the extreme circumstances in which we find ourselves. Record levels of demand have been recorded for the need for contingent roles that require skilled individuals to staff customer and public-facing call centre operations, claims management, and loan deferment roles.
For over 30 years Momenta has deployed skilled contingent professionals within the Financial Services especially during times of crisis when organisations need to implement contingent workforces on a deadline due to market disruptions. Today, our global ecosystem of over 30,000 associates, provide professional services to leading companies worldwide. Our clients rely on this knowledge and experience to fill their own skills gap, delivering on key projects both efficiently and economically.
More importantly, Momenta understand the actual tasks that you may want assistance with. So rather than merely sending you CVs or bodies, we can ensure that we pre-screen effectively. Further, our account managers will be familiar with your challenges and understand not only the deliverables you need to provide within your organisation but the challenges you will be facing in setting up the units you need to satisfy your organisation’s requirements and the public’s expectations of it.
FCA. “Insurance and Coronavirus (Covid-19): Information for Consumers.” FCA, 19 Mar. 2020, www.fca.org.uk/consumers/insurance-and-coronavirus. Accessed 24 Mar. 2020.
J Hay, Laura. “Do Insurers Have COVID-19 Covered? – KPMG Global.” KPMG, 27 Apr. 2020, home.kpmg/xx/en/home/insights/2020/03/do-insurers-have-covid-19-covered.html. Accessed 29 Apr. 2020.