We’ve seen hundreds of claims over the years and we’ve noticed that some settle quickly to the general satisfaction of the Assured whereas others drag on for years, costing time, money and reputations, souring relations with insurers.
The different claims experiences don’t arise through chance: there are a number of features that are shared by successful claims, just as the failed claims often feature the same problems. We think that there are some important lessons that can be learned from this experience which can help an Assured to emerge satisfied and sane from a claims process that might otherwise leave them disappointed, stressed and angry.
Below we suggest some strategies that over the years we have seen to deliver good results and we also mention a few tactics that are best avoided. The advice may not always work but we think it gives an Assured every chance of making the best of a potentially devastating situation.
1. Know your business
A fully informed risk manager will keep on top of the business and know the purpose and value of the assets covered. Underinsurance will lead to significantly reduced settlements. Business Interruption cover can be particularly difficult to keep track of, especially when interdependent sites, customers and suppliers have to be considered. Interdependencies can be something of a nightmare if they are not recorded. By mapping out supply and delivery chains, potential critical operations and locations are revealed and, if necessary, included in the cover.
2. Know your policy
It’s surprising how often the policy cover doesn’t meet the full range of the loss or the Assured is unaware of the extent of cover. Familiarity with the cover can save a lot of misunderstanding, missed opportunities and disappointment. Pay particular attention to matching primary wordings to reinsurance programmes so that there are no disparities or gaps in cover, particularly when the primary cover is within a captive.
3. Prepare your team
Treat a claim as you would any other project: involve as many parties as you need to cover all the aspects of the claim – engineers, production technicians, accountants, legal advisers and risk managers. Don’t forget to involve the loss adjusters and claims consultant. Each team member should have a clear idea of what is expected of him or her and an overview of how they fit into the process as a whole. They should be aware of key milestones and of the tasks that other members are completing.
Internally, make sure that all the team knows what it must do to build up the support for the claim. Externally, keep the loss adjuster up to date with developments so they, in turn, can tell insurers but review the information carefully so that you know the implications of passing it on. If the information is unclear or does not support the case you are making, clarify it or explain why an alternative interpretation should be taken. It is better to channel all communications – in and out – through one individual to ensure clarity and completeness. And anyone who might come into contact with the loss adjuster should be aware of the “official line”.
5. Be pessimistic
Instinctively many Assureds look on the best side of a loss, imagining that they can recover from it fairly easily. This can work against them as it can mean that their preparations are not all they could be or that the loss adjusters will miss the true extent of the loss, posting too low a reserve and not managing insurers’ expectations as they could. It’s always far easier to reduce a high reserve than to increase a low one. Be cautious in accepting positive assurances from production staff and even more guarded about passing them on to the loss adjuster.
6. Catch all the cost
You won’t get paid for anything that you haven’t told insurers about so make sure that you have a system in place that captures the costs as they are incurred. Many of today’s accounting systems allow insurance costs to be given a unique code that will enable them to be identified by later interrogation of the system – it is often possible to sub-divide the entries so as to group together certain types of expense under the appropriate policy cover, such as sue and labour, removal of debris or increase in cost of working expenditure. Time spent in planning the basis of accounting for the claim at the beginning of the exercise, or even before, is not wasted and produces a comprehensive and well organised cost report.
7. Clear presentation
Don’t dump a heap of unsorted figures or a box of invoices on the adjusters and hope they’ll sort it out for you. Even if they try (and it really isn’t their job) they’re not likely to do it with the same focus that you should and you’ll never know if the recovery was correct. Make detailed spreadsheets, dividing the costs under the policy sections, referenced to supporting documents. Explain what the entries refer to – “Generator to replace item lost in fire” is much more persuasive than “Sundry purchases”. It’s useful to agree with the loss adjuster the applicable policy sections and then list the costs under those headings as they are presented.
8. Own the process
Don’t let the claim be taken out of your hands. Set milestones for insurers as well as your own staff. Seek confirmation that the claim is covered and keep up the pace with requests for payments on accounts. Respond quickly to requests for information and expect similar responses in return: chase if they are not given promptly. Circulate minutes of every meeting that you have and keep chasing until you have a response to any questions you ask.
9.Know what you want
Be clear in what you expect from the claim process. Make a realistic assessment of those items which should be recoverable, those that might be and those which are probably not. Expect to recover 100% of a well supported and clearly covered claim rather than 50% of a speculative submission.
10. Learn the lessons
When a claim is settled, it’s tempting to sit back and bask in the warm glow of success or, less rewardingly, slink away quietly and lick your wounds. In either case it’s better to let the dust settle a little and then bring all the client-side claims team together and review the process, noting what went well and the less successful aspects. This can be followed up by revising the claims process, the composition of the response team or even the policy cover, the aim being to achieve better results next time.
These tips are not an exhaustive instruction book and they may leave some questions unresolved. Hopefully, they will provide a little guidance on the better claim practices and provoke some thought among claimants that will inspire them to adopt systems that will lead to better managed claims and less stress – possibly even an enhanced recovery.
We won’t have answered every possible question here – there is so much that can go wrong – but if you do have a question, please feel free to put it to us; we may have an answer.