Changing Risks in a Changing World

The world continues to change at an accelerated pace, driven by the recent downturn of the global economy, new government regulations, and severe climate change to name a few. The world of claim management is no exception. For carriers who offer insurance products in specialized and niche markets, special attention must be paid to these changing world variables -- including new industry developments -- in order to prevent claim practices from becoming irrelevant.

Having spent 22 years in the insurance industry, I believe one thing is clear: the claim department is the deliverer of the product. When a customer has a loss, the claim department is the backbone of the company by delivering on the promise to restore that customer to their pre-loss conditions. By providing a streamlined and efficient process in which a valid claim can be paid, we can minimize the stress on a customer during their difficult times.

Yet beyond delivering on the promise to restore the customer, the claim department is a valuable resource that should be consulted when developing or modifying insurance products. As the "eyes and ears" of the operation, proximity allows us to identify issues, anticipate needs, and manage complexities, which in turn define the customer service experience. The ability to recommend product or policy changes elevates the value of how the company can best meet the needs of its customers.

To provide superior claim management service to customers in these rapidly changing times, a company must be able to examine each policy individually to properly valuate the potential risks and price a policy against it. While this is not exactly a ground-breaking recommendation, let's take it a step further. The claim department and product development department should be working hand-in-hand. To truly become a market leader and drive business growth, carriers must integrate the lessons learned in the claim department and apply them to improve products and policies. Following are some examples of how the claim department has played an important role in detecting problems, setting precedents, and finding solutions for customers.

Uniqueness of Products

For the most part, it is business as usual in the claim department. Everyday claims such as a vehicle being stolen or a leased/financed piece of equipment being damaged are processed as efficiently as possible and are settled. But every once in a while, claim issues arise that require expertise, flexibility and resourcefulness. In this intricate insurance environment, what are some of the claim issues affecting risk managers?

One issue is the specialized nature of the property insurance and risk management solutions offered in niche markets. These bring an added complexity for risk managers who handle claims. There is never one answer for how to valuate risks for diverse equipment, which can range from a simple office copier to a 200-ton industrial crane. As a result, claim adjusters need to cultivate a deep understanding of the products and services offered to successfully handle unique claims, reduce operational expenses, and minimize potential losses. In addition, a dedicated team with years of risk management expertise and the passion to stay abreast of trends in the industry can also greatly impact and shape the success of clients/customers.

To illustrate, consider a claimant who reported that one of their river barges had accidently gotten away from the tugboat and sank. The sunken barge was preventing water traffic from using a busy shipping channel, and the claimant company was being charged a daily fine. This was a very distinctive situation, and, as with any equipment, protecting the claimant's investment was the top priority. Unearthing a solution and finding the ultimate resolution required tapping into a number of resources, including company employees with similar experience, outside firms with vertical expertise in that particular field (e.g. an engineering firm), our in-house database of past claim issues, and public claim literature.

When a completely unprecedented scenario arises, this is the time when trained and experienced claim adjusters become a valuable asset. While this asset benefits the claimant, the product team can also gain insights. The process for solving the claim provides valuable experience from which the product team can review products or policy language in order to prepare for similar issues or problems that will arise in the future. It also helps them to understand the unique needs of customers in niche markets.

Increased Exposure to Cat Events

Another issue that calls for greater collaboration between the company and the claim department is the steady rise in frequency and severity of catastrophic events over the past decade. From the hurricanes in the Gulf of Mexico to the wildfires in California to the floods and tornadoes ripping across the Midwest, the prevalence of catastrophic events continues to increase. As a provider of insurance solutions, how do you evaluate unpredictable catastrophe exposures before you agree to take on the business? In the claim industry, that is the million-dollar question.

It is becoming increasingly important to maintain a diverse, nationwide portfolio of policies, as each region has its own particular risks. To properly account for these risks, one must ask the right underwriting questions. This allows for more effective underwriting with the appropriate pricing and coverage.

The claim department continues to be an indispensible resource in developing new or modifying existing underwriting questions. By reviewing prior claim experience and identifying trends and risks, an insurer can better develop products to address catastrophic events. Understanding the risk is important in meeting the needs of the market while maintaining profitability.

Technology Integration

Technology integration is another trend in claim management that requires increased communication between the claim and product departments. It is often believed that leading-edge technologies enabling faster, more accurate and cost-effective services can only help simplify business processes, rarely hindering them. In fact, there has been a tremendous shift to embrace electronic processes in the technology-driven society we live in. Just look at the number of people who carry PDAs or smart phones. There is incredible value in these developments, which is why many carriers are trying to implement them as quickly as possible. However, there are potential drawbacks.

While electronic processes may accelerate and abridge certain procedures, there will never be a replacement for people in the claim side of the business. It is human nature to ask questions, especially when it comes to personal matters such as lost or damaged property. As such, customers want and expect a live person to be at the end of the line when they pick up the phone to call about a claim issue.

Yet, finding successful ways to integrate technology into the claim management process to better serve the customer is critical. At a time when claim management is often viewed as a frustrating process for policyholders, upgraded or innovative technology solutions can be a way to ensure that clients/customers are able to gain access to the benefits of their policies when they need them most.

For example, bank-branded debit card programs for catastrophe victims who carry renters' insurance coverage provide faster access to settlement payments. With a debit card program, the insurance company can put much needed cash in the hands of catastrophe victims faster than if they had to wait for a paper check to arrive in the mail and then for their bank to release the funds. The use of electronic payment methods (i.e. debit cards) helps to expedite the claim process with the sole purpose of providing customers with the best possible service.

The More Things Change ...

As much as the world of claim management changes, there also are many things that will forever remain the same. The need to be an effective insurance carrier that provides superior customer service via fair, accurate, and efficient claim settlements will never change. The need to ask the right questions to guide the underwriting process will never change. And the need to listen to your professional instinct to identify red flags or areas of concern with a particular claim will also never change.

It is important to be cognizant of the financial times and to monitor the situation as closely as possible. Everyone is pressed for liquidity, and the potential for fraud or "moral exposures," is increasingly considered. Experience has taught that the most appropriate way to combat fraud is to stay steadfast to training and maintain best practices that can help the claim staff see the identifiers and indicators. There is no substitute for experience. However, keeping vigilant with best claim practices within the industry and internally establishing better practices for the company are also key.

In the end, customers want what they have paid for via their insurance policies -- the peace of mind to know that they are being protected by a responsive, dependable, and knowledgeable partner in the event that something goes terribly wrong. That will also never change.

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