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2nd February 2016

Roadside recovery costs driven down by Insurers - Time for a rethink

Insurers have driven down costs in roadside recovery and the end result for customers is poor service - is it time for a rethink?

Any accusation that insurers don't put customer service at the heart of what they do is likely to be met with howls of protest. I've worked in insurance as a claims director and as a supplier, both poacher and gamekeeper. Suppliers that proclaim they have the insurers' and customers' interests at heart are often met with some cynicism and the feeling can be mutual.

Take roadside recovery, a market dominated by some big names. Insurers, comforted by brand familiarity, will generally lap up the connection with another household name on the assumption the service provided to customers will be tip-top. Unfortunately, that's not always the case.

Once the cost has been trimmed, service levels agreed, contracts signed everyone should be happy. The reality is the vehicle recovery operators charged with the service delivery are having unacceptable demands placed on them for little reward. The accelerating decline in VROs in recent years is due to a constant squeeze on work rates which has driven many out of business, leaving swathes of the country with little cover.

Well-known names like Dragon Recovery have folded and those that remain are pressured to reduce response times for less money. The end result is fewer operators, longer waiting times and poor service.

Unhappy customers won't stick around in today's disloyal world. Secondly, VROs are working on such fine margins as hostages to the big providers, they cannot reinvest in equipment or training. Running costs are increasing notwithstanding current low oil prices. There are increased burdens from compliance with HSAW legislation and PAS43 compliance.

Insurers are complicit because there is a dysfunctionality within organisations between product and claims teams with different goals. So often both fail to understand some fundamental differences between mechanical breakdown and accident recovery and assume an operator can do both for the same base price.

If this looks familiar, then compare it to what has happened to bodyshops. The number of UK body shops has declined by 32% over the last decade. Low rates, increased repair costs and specialist equipment and small margins have driven many to the wall.

Research by Trend Tracker predicts a further 9% decline to just 3020 shops by 2020. The effect will be an 11% shortfall in repair capacity, meaning backlogs, delays to repairs and declining customer service. Insurers need to address this.

Yet in this battleground for the customer, trying something different is a risk to the brand.
Or, as a supplier, that ‘our customers want a brand they have heard of'. If, as Dr Johnson proclaimed, ‘patriotism the last refuge of the scoundrel' then the familiar brand is the last refuge of many an insurance scoundrel obsessed with brand over customer service.

The insurance industry is behind many others when it comes to developments and understanding exactly what customers want. Disrupters entering the market can be a force for good.

As someone who did something different at Swiftcover, the effect was profound. We created an entirely online insurance solution and quickly acquired more than one million customers.

I'm a huge advocate of entrepreneurship and disrupters in the financial and motoring sectors.

VROs respond with better service by putting customers first. Customers want professionals who can get to their stricken vehicle promptly and fix the problem there and then, or at least put a solution in place and get the motorist and any passengers on their way. Do they really care about the colour of the van or a brand at 2am?

Strange then that disrupters are sometimes viewed with scepticism or concern. Think how Virgin challenged BA for transatlantic routes, or how Easy Jet low cost flights gave people what they wanted. So insurers and other well establish financial organisations should rethink their attitude otherwise it could result in a total breakdown between customer and insurer.

Robin Reames
Director of RecoverMe

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