We reported yesterday (1oth June) on intelligence we had received that Keoghs were likely to be making an internal announcement in respect of up to 250 employees being furloughed. This is an update based on additional intelligence received from several employees.
One individual, not directly impacted by the decision to furlough, has reported that there was little to report of any consequence other than a few admin staff have been furloughed. That is probably the line that management will adopts and it is not an unreasonable approach to take bearing in mind that several million people are currently furloughed as a consequence of the Coronavirus epidemic.
However, we also have received reports that those more directly impacted who were either given more information or have been prepared to share that intelligence. Keoghs have not yet made any public statement but it is inevitable that their business will have suffered a reduction in new business volumes associated with the incidence of road accidents during the lockdown period and will have been impacted by the effective closure of the civil justice system.
According to sources impacted by the decision to use the Coronavirus job retention scheme, the amount of work introduced by insurers is at 60% of pre-lockdown levels and so 40% of the litigation team and over 60% of the pre-litigation team are now furloughed.
One Forum member commented yesterday that Keoghs did manage FNOL and GTA activity on behalf of a number of insurers and pointed out that the volume of FNOL activity must have been impacted by the reduction in driven miles and the reduced incidence of accident claims during the lockdown. Consequently, it is perhaps not surprising to also have been told that up to 50% of fee earners and other employees engaged in managing GTA claims have been furloughed in addition to 70% of those involved in pre-litigation work.
Clearly, Keoghs are not alone. Every repairer, CHO, insurer and solicitor is facing the same challenges during this period of economic uncertainty. Controlling their cost base until such time as the market comes back to pre-lockdown volumes does not appear an unreasonable strategy for Keoghs to follow. However, insurers are not facing the same economic challenges.
Motor insurance premiums have been largely unaffected by the lockdown (my renewal has increased materially) despite a reduction in accident volumes enabling them to chase increased profitability. The extent, therefore, to which Keoghs reduction in operational numbers leads to a deterioration in the settlement rate of claims is an unnecessary aberration when insurers are not economically challenged by the same issues.
That aside, the reduction in front facing staff at Keoghs should serve as a warning to CHOs that until such time as the number of staff on furlough are unwound, claims with Keoghs may prove more difficult to resolve than they normally are. Those insurers that routinely outsource their FNOL and GTA activity to Keoghs, especially as accident rates appear to be recovering, may result in fewer claims being settled within the 60-day GTA settlement period. Of more concern, however, especially considering the current constipation in the civil justice system, is that those claims that have not been settled in the GTA, and where litigation either proves necessary or is already underway, are likely to take longer to resolve and as the timeframe for a hearing stretches out beyond normal. This may result in fewer settlement offers being made in litigated claims until matters return to normal. Strategically, that plays into the defendant solicitor playbook allowing them to wait for cash-flow pressure to build for the CHO and then prompting them to offer heavily discounted settlements which, if accepted, simply improves their reputation and credibility with their insurer clients.
Tactically, it appears that there is little a CHO or claimant solicitor can do. However, where claims appear to be frozen as a consequence of an insurers decision to outsource their claim handling to Keoghs, and where Keoghs then appear to have become inactive as a consequence of current events, CHOs may wish to draft a template letter and write to the Financial Conduct Authority ("FCA") highlighting the specific impact on their lay client. On 19th March, the FCA set out their expectations of General Insurance firms during the crisis. In particular they stated that they expected "firms to consider very carefully the needs of their customers and show flexibility in their treatment of them".
Allowing claims to stagnate due to a lack of proper resource being deployed by the at fault insurer and their agent, whilst the agent taps into taxpayer funding, is inconsistent with that obligation. Where the effective outcome is likely to be detrimental to the claimant, either in respect of the inconvenience sustained and/or the financial consequences where a claimant's no claims bonus is impacted and renewal premium increased, is a point worth making. It might seem an ineffectual step to take but, the FCA is currently collating evidence of inappropriate behaviour and conduct of the general insurance sector during the Coronavirus epidemic in conjunction with their investigation into the fitness of motor insurance rental premiums. We suggest that such complaints are sent to Matthew Brewis, the director responsible for general insurance conduct at the FCA.