Lloyd’s plans to streamline claims scheme
Corporation proposes raising the financial threshold for defining a claim as complex to up to £5m and reducing the number of non-financial triggers from 15 to just three
Thresholds for involving a second lead managing agent in a claim would be increased under proposals outlined in a new consultation
Lloyd's has proposed changes that would increase the threshold for involving a second managing agent in a claim.
The proposed changes to the Lloyd's Claims Scheme would see the financial threshold for defining a claim as "complex" – and therefore involving a second managing agent – increase to up to £5m ($6.2m), depending on the type of policy.
Similarly, the change would also reduce the number of non-financial triggers from 15 to just three. The name of the scheme would be changed to the Lloyd’s Claims Lead Arrangements. There would be exceptions for co-lead binding authority arrangements.
The aim is to establish a “default expectation” that claims will be dealt with by a single Lloyd’s lead syndicate, the corporation said.
“It was apparent the current criteria for complex claims were resulting in too many claims being assigned as complex when they could readily be managed by a single managing agent, tying up valuable managing agent claims resource,” Lloyd’s said in its consultation document.
“Skilled claims resource needs to be allocated efficiently. However, it is evident due to the current claims scheme provisions too much of that resource is currently being allocated to acting as a second pair of eyes on claims where that additional expertise is not necessary.”
The claims scheme has been in place with slight variations since 1998 and gives authority to the managing agent of the leading Lloyd’s syndicate to determine all claims.
However, if a scheme is considered sufficiently complex then the second leading managing agent becomes jointly responsible for determining the claim. Under the current rules this happens if the Lloyd’s syndicates’ share of the claim is more than £500,000, increasing to £1m for property treaty reinsurance and energy claims.
In addition, there are 15 non-financial criteria, which include the potential or actual denial of coverage, allegations of bad faith and notice of complaint from a regulator among others.
Under the proposals, the financial thresholds for a complex claim would be increased to £1m for third-party claims, £2m for first-party claims and £5m for non-proportional treaty reinsurance claims.
At the same time there will be just three non-financial criteria: if there are actual or pending dispute resolution proceedings, if there are claims against a re/insurer seeking extra contractual damages or if there are allegations of potential breaches of regulations.
The consultation on the changes is open until February 27.
