The claims process can be tricky at the best of times, but in a hardening market challenges can be exacerbated.

Gallagher’s latest quarterly market report warns concerns are growing that Australia is entering a hard insurance market cycle – and this often goes hand in hand with disrupted claims experience.

“Generally, the market is hardening because insurers’ bottom lines are hurting,” the broker’s Head of Claims Adam Squire told insuranceNEWS.com.au.

He says one of the reasons for this pain can be claims costs, and insurers often consciously and subconsciously change their approaches.

“The insurer questions where claims costs are coming from, and whether they can be controlled or reduced,” he says.

“Of course, there is never an instruction not to pay claims, but something definitely goes into the subconscious that potentially follows through to how they look at a claim.”

Mr Squire believes that in a hardening market, clients often look to smaller insurers to make premium savings, but with “tier 2 and 3 insurers” it is generally harder to get complex claims paid.

“Smaller insurers have smaller balance sheets, so larger, complex claims can create different challenges for them.”

Likewise, dealing with the Lloyd’s market rather than established Australian players can cause unwanted delays.

“Dealing with the London-based underwriters can often delay claims payments by several days,” the report says. “If you run a business that could have cashflow issues in the event of a claim, it is essential to factor this type of insurance response into your business continuity plan.”

The report also points to the downsides of insurers cutting claims costs by moving claims functions offshore.

“Offshoring or non-replacement of staff are common means for insurers to cut overheads,” the report says.

“There may also be a renewed focus on automation to create more efficient systems and processes. Such actions don’t always improve the client experience and can be poorly received by customers.”

Mr Squire warns predicted savings from offshoring may not flow on, highlighting QBE’s recent decision to bring 190 property claims roles back to Australia from the Philippines.

“Australia is unique, and unless you understand it trying to operate from a call centre a long way away creates some interesting challenges,” he says.

The report warns the hardening market is not “a clear-cut issue”.

“Indeed, we are seeing underwriter scrutiny vary by insurance class during renewal discussions, and some spaces where rates have remained relatively flat,” Gallagher CEO Sarah Lyons says in the report.

She says concerns that Australia might be heading for a recession have not played out, “with recent reports indicating things may actually be on the up”.

But Mr Squire believes the impact of the hardening market is already showing in claims, with his team working much harder than three years ago.

“We are seeing more contentious, contested and complex claims than we have for a number of years,” he told insuranceNEWS.com.au.

He says the harder market places an greater onus on businesses to make sure they are using a broker they can trust and rely upon to effectively manage the claims process.

“Our guys are dealing with these policies day in and day out, and we often know them better than the insurers,” he said.

“With complex claims, I dread to think what the alternative [to using a broker] is. The only alternative really is to go and hire a very expensive lawyer.”

To read the full report, click here.