Daniel Torpey relates leadership lessons from a historical figure and an executive facing disaster in discussing the complexities of large insurance claims and the importance of good leadership to effect smooth settlement.
What kind of leader does it take to help direct your company through the claims process? This article takes leadership lessons from a chapter of history. Here is the story of Sir Ernest Shackleton and how his great leadership skills of his famous Antarctic adventure can be used during the claims process. Also discussed are the complexities of dealing with a large insurance claim, stressing the important role that good leadership plays to effect a smooth settlement. To conclude, a real life example of how an executive who applied the Shackleton approach to a business interruption and property damage claim.
Complex Claims Require Complex Planning
Many businesses in New York are now dealing with the arduous process of complex claim resolution. Currently, many of the larger claims still remain open, and issues ranging from the scope of property damage to how to apply certain business interruption endorsements remain unresolved. In "World Trade Center Terrorist Business Interruption: Claims Will Challenge Policyholders," IRMI.com February 2002, noted the challenging issues that face corporations in handling ground zero claims such as: multiple occurrence issues, valuation of valuable papers/computer files, civil authority, ingress/egress, idle periods, contingent business interruption, extended indemnity periods, permanent relocation, and asbestos cleanup.
Financial service companies that routinely close multi-million dollar deals overnight now must deal with open claim items and issues 11 months after the event. The depth of this cold and lonely process is enough to frustrate any claims team. It will take great enthusiasm, character, and leadership to help companies maintain focus and work through claim resolution without entering a litigation forum.
Thriving under pressure is what separates leaders from followers. Picture yourself as a leader of an expedition across Antarctica at the turn of the 20th Century. It's you, a state-of-the-art Nordic ice breaking vessel, 25 men, 25 dogs, and rations for 180 days. You must find a way to lead these men through the next 15 months at 30 degrees below zero, locked in the ice, isolated, and with overwhelming odds against your survival. Any rational person would say it couldn't be done. But that is just what Sir Ernest Shackleton faced and overcame so long ago. All his men survived and never doubted his leadership or their ability to survive.
This great feat has been recognized the world over as one of the most amazing examples in leadership. There are a lot of lessons to be learned from Ernest Shackleton that will help you if, and when, you are faced with your own daunting challenge.
Shackleton: A Great Leader
The tale of Sir Shackleton's voyage aboard his ship the Endurance, is a most inspiring and exciting tale during a time when man dared to explore one of the last and most remote places on Earth.
He has been called "The greatest leader that ever came on God's earth, bar none," yet he never led a group larger than 27, he failed to reach nearly every goal he ever set, and, until recently, he had been little remembered after his death. But once you learn the story of Sir Ernest Shackleton and his remarkable Antarctic expedition of 1914-1916 you'll come to agree with the effusive praise of those under his command. He is a model of great leadership and, in particular, a master of guidance in crisis.
Source: Shackleton's Way, by Margot Morrel and Stephanie Capparell
During those tough and cold months, he held his crew together, inspired them and motivated them. He made sure they understood their objective and what role each must play to attain their goal. Here is another accounting.
Ernest Shackleton's 1914 voyage to the Antarctic. Just one day's sail from the continent, the ship Endurance became trapped in sea ice. Frozen fast for 10 months, the ship was crushed and destroyed by ice pressure, and the crew was forced to abandon ship. After camping on the ice for 5 months, Shackleton made two open boat journeys, one of which—a treacherous 800-mile ocean crossing to South Georgia Island—is now considered one of the greatest boat journeys in history. Trekking across the mountains of South Georgia, Shackleton reached the island's remote whaling station, organized a rescue team, and saved all of the men he had left behind.
Source: The American Museum of Natural History website
The Power of Great Teams and Leaders
Sir Shackleton was undeniably a great leader. However, a leader is only as good as his or her team. Here are some of his tips on forming groups for tough tasks. Consider these concepts when developing your own claims team.
Shackleton's Way of Forming Groups for the Toughest Tasks
Consider smaller group meetings where more focused and productive conversations can take place in an effort to resolve claim issues as they develop. The best way to handle the biggest tasks is often to divide the staff into teams. Create units that are self-sufficient, but understand they won't all be equal. It is more important that the teams are balanced when considering the big picture.
Hire top-notch consultants, check references and implement regular update or status meetings. Make sure you have some "Cracker Jack" groups that can handle the toughest challenges. They can also help others to ensure no team falls far behind.
Figure out who does what tasks well. Give the tedious assignments to the workhorses who don't complain. Let them know you are aware that you are giving them an outsized task and that you count on their good will and exceptional fortitude to get the job done.
Leave the details to the groups that know the subject matter, make them figure out certain problems on their own, make them report their findings to you. Empower the team leaders so they have the authority to handle their own group, but keep an eye on the details. Never let yourself be surprised by problems down the road.
Use logic to avoid emotional surprises and inform your insurer and management before you make changes to the claim. Don't be afraid to change your mind when you see your plan isn't working. You won't look indecisive if you show the logic of your changes.
Use the claim project to mentor staff. Give a show of confidence in those acting in your stead. It's important that your support staff maintain the same level of competency you set in your absence.
Praise in public, criticize in private. Never point out the weaknesses of individuals in front of others. Often, it's better to let everyone share in a remedy aimed at a few. Chances are, even the strongest will benefit from it.
Source: Concepts from Shackleton's Way, by Margot Morrel and Stephanie Capparell, page 177. Emphasis by this author.
Who's in Charge of Your Business Interruption Claim?
A claim provides a company with a unique opportunity to reinforce the importance of good risk assessment, risk evaluation, and management within a company. Just as Sir Shackleton had to provide goals for his men to accomplish, a claim leader needs to motivate the organization for the long, often drawn out claim process. This may mean going beyond the concept of "We need to collect the entire claim amount" to your corporate vision statement. Ask yourself how you can tie in your company's goals or vision, statement into a goal-setting exercise for the claim. Develop a claim philosophy.
The claim process can elevate a company's risk manager, controller, or outside expert to a variety of roles. Often the risk manager can lead the company through the claims process because he or she is the most knowledgeable person within the company's organization in dealing with the insurance program, handling the claim, and understanding the operational risk. With this knowledge comes the responsibility to muster the right troops around a complex claim to bring the company's best resources to bear on protecting any capital at risk and recovering any capital or revenue stream lost by the claim event. An effective leader recognizes the value of bringing in the right resources and is not threatened by outside experts.
Analyzing and resolving a complex business interruption claim requires extraordinary effort. For larger claims and especially claims relating to September 11, many companies have formed teams of the best outside experts, along with internal resources, to ensure and protect claim recovery. To achieve success, it is critical that all the parties involved understand property and business interruption insurance as well as the technical accounting issues that will arise. The only way this can be done properly is to ensure that the right resources are dedicated to the project—not only proper staffing but knowledgeable and seasoned professionals who understand what is involved in preparing a well-documented and logical claim. However, these steps will only get you so far. The most fundamental step is often overlooked. Companies must identify a leader who will guide them through the claim process to an effective and fair settlement.
To pick an effective leader, you may imagine yourself or your claim leader in the following roles.
The Politician is responsible for handling issues and communicating results to constituents in the other corporate departments such as accounting, operations, legal, and so on.
The Client is the key contact for the broker and the insurer, both of whom want to keep their client, happy, while executing the responsibilities of their companies.
The Employee has the duty is to inform the treasurer, controller, or chief financial officer of risk management issues.
The Boss motivates staff and any outside experts, such as accountants and engineers, hired to stay on top of the claim.
The Negotiator argues the claim on behalf of the party they represent.
The Technical Adviser is the most knowledgeable on risk, insurance, and claim issues.
The Task Master executes tasks directed by others.
The Commander leads the overall effort.
What role do you play during the claims process? Will you be the individual that will execute certain tasks and check them off a list, waiting and anticipating the next order from your boss? Or, will you be the person who leads the claims process as a commander who provides direction to the troops? Few of us are either one or the other; most people fall somewhere in-between.
Commander or Task Master?
The commander—i.e., the claim leader, whatever the title is within the organization—can lead through delegation, while maintaining control and supervision and focusing on core activities; the claim leader develops a vision of the ultimate outcome or claim resolution and focuses on the details needed to document and support the claim. This may sound like a paradox; yet if done right, it can be very rewarding both in terms of job satisfaction and importance to the organization.
Leaders succeed because they dedicate teams of people to one project, treat all team members like clients, ensure results and think critically. But one trait that we have not mentioned is that good leaders have a heart. Sir Shackleton was known to have a huge heart; many say it was because he grew up with eight sisters. He was a fierce warrior yet very much in touch with his emotions.
Leadership requires courage. In fact, the word courage comes from the French word Coeur, meaning heart. A leader must have the heart to communicate his vision no matter how absurd it may sound to others, to risk defeat in the face of bitter odds, to put himself and his reputation on the line, and to reach out to others in order to take them on the journey. After all, a leader's courage is ultimately not for himself, but for all the people depending on him to lead.
Source: The Right to Lead; A Study in Character and Courage, John C. Maxwell, published by J. Countryman, page 34.
The Shackleton story illustrates the power of leadership and the importance of designating effective task masters. An integral part of any organization, task masters have the ability to focus on a task and execute goals with pristine precision. This is a talent held by only a few. An individual may be a task master due to his or her technical ability, years of work experience, or job description within an organization. An effective claims team often includes several task masters to help resolve or complete certain tasks.
Task masters differ from leaders, as they are usually focused on only one aspect of a project—not on the overall organization. Problems arise when the appointed task master is ill equipped for the assigned project. A task master who is unsure of the next move and becomes paranoid is one to be wary of. We call this person a "worried task master." Use the chart below to gauge yourself as a commander or task master.
Table 1. The Traits of Commanders and Task Masters
Worried Task Master
1. Managing Expectations
We need to meet with the chief financial officer to inform him about this claim and how we intend to handle it.
I hope they don't ask me to work on this claim.
2. Claim Accounting
Accounting says they need outside help with this claim. Let's find out what firms specialize in this area and have them meet the controller(s).
If accounting can't figure out the claim, we will simply send the hard documents to the insurer and have the adjusters figure it out.
Let's get our in-house counsel to review this coverage item.
Let's not get legal involved; they will try to take this thing over.
4. Scope of Damage
We need to recommend to the plant manager to engage an outside engineering firm to help with the scope of damage.
There's no need to visit the plant site—I have all the information here, besides, it's not something I'm really looking forward to.
We need to get our broker working on the advance payment.
Let's not rock the boat.
6. All of us are smarter than one of us
We need to meet with the top executives from other departments and find out how they can help with the claim.
More political meetings that could get this out of my control.
We can orchestrate a presentation of our department heads with the adjuster and their experts to inform them about our claim.
The adjuster sets-up meetings without you.
8. Productive Meetings
We need to request any analysis by the adjuster or their experts prior to any meeting in order for a more productive conversation.
Let's take notes as the adjuster's experts tell us why our claim analysis is wrong and theirs is correct.
Let's ask the adjuster to summarize their opinions on coverage in a letter to us.
We just left a meeting not knowing what is covered and what is not.
Now imagine pursuing a complex business interruption claim where the adjuster has already questioned both coverage and quantum of a claim that your management may believe is worth several million dollars. You face limited resources within your own company to actually investigate and prepare the claim. Where do you start?
The successful analysis of a business interruption claim will require an understanding of accounting, operational, and policy issues. Here are some key questions that will need to be addressed.
What is the most realistic method to project what sales would have been during the indemnity period?
How long is the estimated period of restoration?
To what extent can any portion of the claim be mitigated?
What documents will be used to validate the claim?
What margins would be experienced had no loss occurred?
Essentially, be prepared for an extremely document-intensive process that will require interactions with a variety of groups within a company. Orchestrating the right talent to tap the best information for an effective claim presentation will take the ability to motivate many people to a common goal. Here is where leadership plays a key role in the claim process.
The above areas can be reduced to three focal points during the claim.
Claim accounting—Developing a well-documented and comprehensive claim that is consistent and can be explained to a third party.
Claim management/process—Managing the overall communication process with the adjusters, your operations people, etc.
Policy interpretation—Reviewing and understanding the policy.
These three claim areas may require decisive leadership and technical expertise to complete and resolve the claim on a timely basis.
The events of September 11 are affecting risk managers everywhere. Don't be afraid to use these skills outside the claims process, such as developing a contingency management plan or renewing your insurance policy. Leadership can be used in many aspects of your work or personal life. To learn more about leadership, learn more about a person who you respect as a great leader. Below is a fairly recent example of how a good leader handled a serious business interruption claim.
An Example of Shackleton Leadership Skills in Practice
An example of Shackleton's Leadership skills are presented in Dennis N.T. Perkins's book, Leading at the Edge. Mr. Perkins tells the story of a commander and how he followed the Shackleton Leadership Skills during his trying time as the president of a company on the verge of collapse. The "commander" was Aaron Feuerstein, president of Malden Mills Industries, a textile company that manufactures Polarfleece and Polartec. In 1995 the sales for Polartec were more than $200 million and the demand for Malden Mills' product was continually increasing.
On a cold night in December 1995, three of Malden Mills' four plants erupted into fire, and the 40-mile-per-hour winds that night were threatening to engulf the fourth plant. That night Mr. Feuerstein was quoted as saying, "Whatever technical progress we had made was in those buildings, and whatever specialty processes we had developed were in those buildings." Presented with the question of how Malden Mills would be able to stay in business with the fire burning in three of the buildings and the fourth on the verge, Mr. Feuerstein responded with an unrelenting desire to save his business and the jobs of his 3,100 employees.
He realized that the only chance he had in saving his business relied on the ability to save the fourth building. If the fourth building were saved, it would provide a basis on which to rebuild the company. Mr. Feuerstein instructed his employees, "Do anything you need to do, just save that building." He later recalled, "They were in that building all night, and they saved it, and therefore the company, from certain destruction."
To stop the fire and overcome the many obstacles that remained during the long journey of rebuilding the company, Mr. Feuerstein had to implement many of the Shackleton Leadership Skills. He never lost sight of the ultimate goal: to save the company. He also focused his energy on the short-term objectives: saving the fourth building. By focusing on the short-term objectives, Mr. Feuerstein saved the building and was able to salvage a base on which to rebuild the business.
One of the next challenges encountered was to prevent his employees from becoming discouraged about the company's ability to recover. To meet this challenge, Mr. Feuerstein reinforced the team message constantly: "We are one—we live or die together." He demonstrated this by continuing to pay his employees despite their inability to return to work.
A third challenge was to overcome the risk of losing customers if Malden Mills was not fully operational in time to meet the winter demand. To satisfy the customers, Mr. Feuerstein had to instill optimism and self-confidence, but stay grounded in reality. He called his customers and assured them that he could be in production in 30 days. Through sheer willpower, and strengthened by the renewed confidence of Mr. Feuerstein, the production crew made the first test run of Polartec within 10 days of the fire. Although there were still tremendous challenges ahead, this symbolic event caused the workers to believe that they might achieve their goals.
By the end of December, Malden Mills was producing at 20 percent of normal output, even though the fire had destroyed 75 percent of Malden Mill's operations. By the end of February, Malden Mills was producing at 90 percent of pre-fire levels.
In the following months, Mr. Feuerstein encountered many more challenges. These ranged from the insurance companies' unwillingness to pay the claims that deprived Malden Mills of its need for cash, to the emergence of a number of new fleece manufacturers. Despite these setbacks, he refused to give up. Just over one year after the fire, an investigation cleared Malden Mills of any negligence, and the insurance companies slowly paid the remaining millions due to the company. By early 1997 Malden Mills began to reach pre-fire revenues.
Reflecting on the disastrous experience, Mr. Feuerstein stated, "You're out there all alone in the world, and in the last analysis you've got to do something. In those situations, I stand forward, and I do what needs to be done."
Understanding Shackleton's lesson is your first step to improving your leadership skills. Implementing "Shackleton's Way" will take time, but will reap rewards. There are likely to be bumps along the road that you will need to maneuver past and overcome. However, the rewards of employing leadership throughout the claims process are plentiful. You will create teams across your company that will work together, and you will enhance the claim information available by having greater accountability. Finally, you will have a sense of accomplishment and closure as you command the oversight of the many stages of recovery.
Be firm in your vision and understanding with your team. Remember the traits of Sir Ernest Shackleton. Challenge yourself and you will raise the bar for others and even surprise yourself. The key is to take an active role in the claims process and in leading your team. As another leader, George W. Bush, stated in a time of crisis: "We will define our times, we will not be defined by them."
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