In IRMI Update 237, Jack Gibson asked readers about their insurers' claims service quality. He also included some interesting data from a survey of 683 corporate risk managers assessing the claims performance of their insurers. This got me thinking about claims service and its importance in our industry.
To me, claims administration is as important in the management of risk as is insurance policy coverage terms and conditions. Price, in my mind, is nothing more than a function of cost versus the individual philosophy of the client as respects their ability to sustain risk in juxtaposition to the cost of implementing additional risk for potential savings.
In my years prior to retirement at Alexander & Alexander, I cannot think of one client whose risk that I placed in conjunction with those in support where claims administration did not play a major role in the negotiations for coverage, as well as the ultimate decision by the insured as to which insurer to select. Other than a potential lack of cover, the one action in the management of risk that can destroy a risk management program is poor claims administration.
Ensure Proper Claims Service before Policy Issuance
What makes poor claims service so incredibly foolish is how simple it physically is to solve. Basically, claims service begins with the submission by the insured's representative to underwriters. I might remind IRMI readers that, on prior occasions, I have stated, that it is an imperative that your client review your submission for both accuracy as to knowledge of risk, as well as their overall corporate philosophy relating to claims management and engineering, and their expectations in this regard.
Depending on the risk, during the period of negotiations with underwriters, it is also imperative that a clear line be established predicated on risk, past performance, and ultimately the expectation of the insured as to exactly those positions that will be utilized in the event of loss. Now, it can be said that this position is not in the realm of normal negotiation. Not so! It is, and it is imperative.
In prior articles, I have espoused the position that any submission to underwriters must incorporate a professional and clear understanding of all of the facets of risk. It is the obligation of the representative to know as much, if not more, about the insured's risk as the insured does. Without that knowledge, you simply cannot have a legitimate discussion relative to loss adjustment, containment, and ultimately settlement. Nor in fact, can you relate the philosophical position of your client.
Consider the insured's needs from both a product and engineering standpoint. Conduct a risk assessment and outline the insurer's contractual liability obligations. Hold conferences between the insured and insurer regarding potential risks, how the policy will or will not cover them, and be sure the expectations are clearly delineated between insured and insurer.
Doing so prior to policy issuance makes claims administration a snap.
All too often, I have heard the horror tales of poor claims administration which has doomed what might otherwise have been a perfectly negotiated program. We live in a world of information and reaction to information—it is an integral part of professionalism within our community. Let no one believe otherwise.
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