Transcript 1430 Sudharmin

KHAERUDDIN SUDHARMIN
MBA (Hull), LS7037 (Malaysia), Fellow PWI (UK)
Managing Director & CEO
MOTORDATA RESEARCH CONSORTIUM Malaysia
in partnership with THATCHAM UK
Agenda
Prologue
 Claims Management overview
 MRC case study
 Epilogue
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slides 2-6
slides 7-21
slides 22-34
slides 35-37
What is Motor Takaful?
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Takaful insurance principles:
a protection plan based on Syariah (Islamic laws)
principles where a sum of money is contributed
to a common takaful fund in the form of
participative contribution (tabarru’). A contract
(aqad) is undertaken to become one of the
contributors by agreeing to mutually help each
contributor, should any of the contributors
suffer a defined loss.
What is Motor Takaful?
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One unique feature of a takaful plan is the
sharing of surplus of the fund between
contributors and the takaful operator based on
a pre-agreed ratio
The surplus is arrived at after deducting
expenses such as claims, re-takaful, technical
reserves, and management expenses
Contributors will be entitled to this surplus if
they have made no claim during the period of
takaful
Year
Conventional Motor
Motor
Takaful
2006
3818.40 261.90
2007
3865.50 337.20
2008
4253.50 391.80
Growth
Rate
Conventional Motor
Motor
Takaful
2006-2007
1.2 % 28.7 %
2007-2008
10 %
16.2 %
1.reducing the cost of claims
2.treating customers fairly
both goals can be achieved
simultaneously by reducing
the claims life cycle.
• Handled; Viewed;Managed
• Are claims evolving?
• changes are incremental
and accumulative, rather
than sudden and
dramatic…
Considered as a back-
room function only five
or ten years ago with
little importance to the
industry
from an
administrative function
to a
key business driver
 agreed that claims is much closer
to the heart of the industry than
ever before and in many cases
claims is believed to be the
biggest trigger to an
organisation’s profit and loss
it is not surprising that
in this ever-competitive
industry, claims has a
greater presence
it would be unfair to say that claims has
changed whilst the rest of the
insurance and takaful industry has
stood still. Claims has evolved to reflect
the dynamic nature of today’s industry
but claims has experienced some of the
greatest changes within insurance and
takaful in recent years…
utilisation of new and
better technology
 better business processes
offshoring
 having the right claims professionals
is vital
 attracting, recruiting and retaining
the right claims staff is one of
today’s most pressing issues and
reinforces the need for the
continuous development of
professional standards in claims
practice. (talent management)
 better technology
 better understanding of
claimant satisfaction/loyalty
 understanding of financial
influence and
 the reduction in costs
Someone who gives a
claimant half of what he
claims, leaving him feeling
he has received twice as
much as he deserves…
 First and foremost, a
company should place the
highest priority on conducting
all facets of its business in an
ethical manner, including
claims management
Just a few people acting
unethically can have a
negative impact on the
performance of a
business
Most claims professionals
agree that claims is in a
perpetual state of change
and it is inevitable that
more is on the horizon…
 Claims management is an area
that can and has attracted abuse in
the past (NY Fraud investigations)
so its appropriate that we are
mindful that claims management
can have a dysfunctional
consequence…
A Malaysian Case Study
Helming through the barriers of technology
Skippered by
‘Captain K. Sudharmin’
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Implement and localise a single and standard database
of replacement motor parts nomenclature, price
reference and repair times – based on the
internationally recognised Thatcham Standards
adopted in the United Kingdom – to prepare
computerised estimates;
Establish a shared communications hub or claims
processing centre (CPC) through which all estimates
would be routed so that a reliable statistical
database and information bank is available for the
industry and regulatory bodies; and
Certify and conduct compliancy audits on all frontend estimating systems developed or marketed by
software houses that are linked to the MRC database
and CPC.
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Subsidiary company of a homegrown IT
powerhouse
awarded a 10-year concession by the motor
insurance industry to provide a Centralised
Database of Spare Parts Prices & Repair
Times for Electronic Motor Claims
Settlements
Partnered with a software company & a
renowned loss adjusting firm
Business Model was mirrored after the world
class UK Motor Repair Research Centre
(THATCHAM)
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Responsible to electronically link the various
parties;
38 Insurers
12 Takaful operators
40 Loss Adjustors
1500 Repairers (Workshops)
Responsible in facilitating the motor claims
settlement processes
 To provide the industry standards in electronic
claims estimation, thus reducing subjectivities
 Provide key statistics & transparency from the
recorded motor claims transactions between
these parties
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Computerized 190,000 motor claims cases per
year from the traditional manual method
Contain the escalating claim cost paid out by the
insurers (RM1.4 billion a year)
Provide comprehensive updates of spare parts &
repair times database to insurers, loss adjustors
and repairers (end users)
Educate all end users to process
estimates/claims electronically
Record all motor claims transactions and
subsequently reduce malpractice and fraudulent
claims
Insurers in dire to reduce the claim cost which
increases by 11% annually
 Loss adjustors to maintain the long contract
relationship with insurers
 Repairers must retain the escalating profit margin
 Changing the operational mindset of the 30 year old
motor repair industry
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The use of database and system will result in the
following;
 Claims will be itemised and transparent to all
 Claims billings will be negotiated in great depth &
detail
 Claims processing cost will be significantly reduce
 All claims data transactions will be compiled and
reported to relevant regulatory bodies
•The electronic database of spare parts prices dictates the claims
cost and the margin of negotiation between parties was reduced
and contained
•Repairers were branded for malpractices and blamed insurers
and loss adjusters for slashing the claims cost arbitrarily
•Most repairers struggle to use the system due to lack of IT
knowledge
•Repairers, loss adjustors, & insurers had to change their
traditional negotiation method using software & database
overnight
•Repairers organisation was not recognized by any regulatory
party, thus MRC was branded as an insurers scheme to control
repairers’ livelihood
•Complaints were lodged right up to the minister
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The MRC integrated seamless system and database,
provide super fast settlement service in comparison
to loss adjusters’ manual assessment practice
The cost of assessing the claims through technology
were reduced by a stomping 70%
Threatened by the sudden implementation of etechnology, loss adjusting firms scrambled in
securing the business contracts with insurers
Loss adjustors who were out to justify their services
for insurers, suppressed the repairers estimates
further
MRC was starting to become the punching bag
When using MRC database & systems, study
showed that most of the claims managers and
executives never repaired cars before (which is
understandable)
 Only a handful of insurers & takaful acknowledged
MRCs’ benefits then
 Pressured by their top management to reduce claim
costs, claims executives had tough time justifying
approvals electronically
 Now that there’s transparency, past settlement
processes were critically looked into by auditors
and/or regulatory body
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The MRC Database was directed to include cheaper
spare parts prices apart from genuine parts prices
only
The Database was considered inaccurate and not
comprehensive enough
MRC was considered not an independent entity and
makes too much profit
The claims data (transacted) were to be considered
industry’s confidential information instead
Investment on hardware and software was not
justified
Regulatory body was questioned for supporting
MRC system whole heartedly
MRC was in the 3rd year of operation with over
RM6 million spent on network infrastructure
alone
 Quietly new proposals were submitted by other
parties to replace MRC
 Old claims approval practices were still favorable
 MRC Spare Parts Pricing Database was target
locked by the Spare Parts Industry (Total spare
parts traded in year 2002 – estimated @RM 400
million)
 Regulatory body steps in and questioned
insurers & takaful operator’s reluctance in using
MRC system
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Improved turnaround time for
motor claim settlements
 Itemised Billing
 Technology and Standards
 New Guidelines for Motor Claims
Settlements
 Parts Cost Reduction
 Promotion of Genuine Parts
 MRC as Industry’s Platform
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Our data and analysis
has broken down the
wall between users
and suppliers
eg use of parts data provided to manufacturers who in turn review and
reduce the cost of their parts which directly lower cost of insurers
Motor Takaful
(specifically claims
management) is both
a promising oasis and
a treacherous
mirage…
Claims Management a major
component in conventional
insurance and takaful, is strategic
 Dispel the perception that takaful is
religio-centric; takaful is for
everyone
 MRC is an example of
Government-Industry collaboration
 MRC is replicable in other markets
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