Claims – fail to plan, plan to fail

When a risk manager buys an insurance policy, what is really being purchased is a commitment to pay claims. Risk managers want to know that in the event of an insured loss, anywhere in the world, the claim will be paid promptly and in full.

Therefore, the claims response of the insurer is vital, and the ultimate test of any insurer is how committed it is to its claim service, how well its claim service performs when called upon and how fully it delivers on the promises made to its clients. This is never truer than when a catastrophic event occurs.

Benedict Burke, senior vice president, Global Markets, Crawford, told the recent JLT Salzburg Forum that planning and preparation was key, and that the “fail to plan, plan to fail” type adage is central to some of the lessons that he had witnessed in recent years.

As for the challenges, he identified culture, both societal and corporate, lack of catastrophe planning, policy coverage issues, reinsurer expectations, and political interference. On the latter point, he said that while there may be macro-debates taking place about ‘superstorm versus hurricane’ or debates over building codes and reinstatement values, it can be frustrating for risk managers that claims cannot be settled while these debates are on-going.

Who’s responsible?

He raised the issue of who was responsible for dealing with claims – the local resource, the indigenous adjusters, or global adjusters. He believed the way forward was for insurers to negotiate capacity pre-event, deciding which adjusters, which nominated individuals, would be working for them. “It gives us certainty of use, it allows us to plan to get those adjusters ready at a cultural and technical level,” he said.

Coming from the perspective of a company that represents insureds, Candy Holland, managing director, Echelon Claims Consultants, told the JLT Forum, “Risk managers are often asked by their board after a major incident: ‘When, and how much, will we be paid?’ The reality is that this is an incredibly difficult, or well-nigh impossible, question to answer on day one. The claims process can be quite slow and cumbersome, and that is what we are trying to reduce,” she said.

On claims preparation, she said that the important issue is to look very carefully how the claim is presented and explain it clearly to the adjuster and the other experts, and to the insurer. She highlighted some of the issues that Echelon regularly has to deal with, such as insured versus uninsured losses, wide area damage, policy limits, gaps in coverage, indemnity periods, denial of access, supply chain co-operation, and evidence and information.

“Nearly every claim that we have dealt with, whether it is for Hurricane Sandy, or Thailand, or a man-made loss, has in some way, shape or form, raised at least one or more of these issues on that claim. At the end of the day, the claim has been settled, but not necessarily at the level expected or desired by the policyholder,” she explained.

Be prepared

As far as the claims process is concerned, her advice is simple: be prepared. “Stress test your policy, create a large-loss or incident plan, and agree a claim protocol with your insurer. Stress testing is about trying to map your exposures, evaluating the impact on the business, and looking for gaps in the coverage.