Large Corporate Risks - Claims: Network issues

The reaction to Cunningham Lindsey's launch of an international claims hub which aims to bring a new market standard for global claims handling among mid-to-large corporate and multinational companies seems muted, perhaps because other adjusters claim to be already doing something similar.

"Crawford has been doing this for years, because 'globals' need a single access point," observes Clive Nicholls, vice president of global markets at rival firm Crawford & Company, "and insurers and brokers have an interface with their global customers."

But Robin Darby, head of the Manchester office of independent broker Heath Lambert, welcomes the move: "This is a positive step, and is probably seeking to formalise a process already in place for many multinational clients."

The objective is to provide a single, geographical contact point for businesses to report claims, regardless of insurance class or origin of claim, and Mr Darby comments: "There are strong benefits to having a nominated adjuster on a large account and part of that programme would be a central focus for claims reporting and feedback. The alternative is that notifications can be lost in the general process."

Answering the assertion that centralising first notification of loss is not unusual, Jonathan Clark, director of corporate and technical risks at Cunningham Lindsey, responds: "It is difficult to say something is new, but as more companies trade overseas we have to support them." He adds: "When programmes are complex, people don't want lots of directories and clients want things to happen."

Uniform approach

Fellow loss adjuster MYI has been doing this for some time with its real estate accounts, which are global in nature but require a uniform approach to claims handling. Graham Smart, executive director, comments: "There has been a shift towards a pan-European harmonised approach to unified cover, and economies of scale, with the master policy sitting above locally issued policies.

"The desire is to treat this as a programme, so MYI will handle claims in a structured way across the territory of the cover, get the claim in centrally and ensure it is within the protocol." The firm has a claims notification facility in London, he adds, but clients can access a bespoke portal, which will automate transmission of the claim details to interested parties simultaneously.

Mike Mathias, director of banking, financial services and insurance practice at Tata Consultancy Services, notes lots of product providers are already centralising claims: "Many insurers have already established captive or outsourced operations for their claims handling."

But it appears it is horses for courses, and Stuart Willoughby, claims director at Markel International, says this is not a service his company would use, because it has its own network of adjusters in the territories in which it operates. "If there is a loss, the local adjuster would be expected to work with the client and Markel's claim associate to find a solution."

He offers an example of a recent case where a concert had to be cancelled because of a fire at the first venue, and the local adjuster, in collaboration with the client and Markel claim associate, found an alternative. This is one reason local adjusters are used, to help the client as well as adjusting the claim, but for companies without a comprehensive network of adjusters on the ground he can see the attractions of a centralised approach.

Mr Clark says a call to its UK hub means the most appropriate team for the type of claim is deployed on a local level, while the necessary co-ordination is handled from one central office, and he perceives the team in London as working with and supporting the account manager.

"Sometimes people think a hub does it all, but it makes sure documents are there, and while the London team might work with colleagues abroad, if it is clear the matter should be dealt with in France, for example, then control would go there."

Allianz's claims operations manager Amanda Hancock is "a fan of centralisation", although she comments that some risks are more suited to it than others. She cites casualty as a class less suited to this style of claims handling, and reports that, although Allianz has changed its claims-handling structure from a geographical to a 'class of business' basis in the past three years, it recently created a specialist casualty team so the client gets a dedicated person, who understands their business. The aim of handlers is, therefore, to build long-term relationships with customers, akin to an account executive.

Mr Nicholls agrees that liability claims do not lend themselves as well to central handling as others: "It's about strategic management, and the more complex the loss, the less likely it is to be suited to a centralised approach."

Lee Staunton, a director at Argent Liability Adjusters, part of the Parabis Group, backs this up: "While centralising reporting of global insurance claims for large corporate and multi-national companies might be beneficial in the management of low-value, high-volume claims — such as motor fleet policies, corporate travel risks and low-value property damage — these models might not be so advantageous in the handling of liability claims."

Corporate global loss adjusters, therefore, seem to be between a rock and a hard place because, while — in most instances — centralisation of claims notification appears to be a blindingly obvious thing to do, and is certainly easier for data capture, they have to please insurers, brokers, risk managers and captives.

Hence Crawford, for one, does not require FNOL to be central, reports Mr Nicholls. And if the client wants to do it locally it can, although there has to be central management of information. "We need to give the risk manager access to global information even if they want to instruct locally." It is not how the data goes in, he insists, but how the data is coming out and showing trends that matters.

Benefits of centralisation

Another consideration is where the risks have been written, and one of the benefits of centralisation, according to Mr Smart, is its proximity to the underwriting base, in this case the London market. "This facilitates underwriters and brokers having real access to the person controlling claims, but there is a balance between this, maintaining relationships and giving autonomy to the local markets."

Peter Chart, head of the corporate account practice at VRS Vericlaim, observes that strong centralised account management is one of several essential components to successful international account management, and many policyholders seek one point of contact to pass claims to —just as insurers seek one contact point to discuss claims issues with, and brokers love centralised control.

His company's corporate account practice team in London "is at the core of managing and controlling our UK and multi-national accounts", but he adds centralisation "should not be a crutch to prop up failings in international capabilities".

He cautions against "central desk-topping of claims, better dealt with in the localities".

Mr Clark insists Cunningham's offering is not a 'one-size-fits-all' approach, and states if a client would rather deal with a local, it can. "Certain clients want a purely local relationship on a multi-territory basis and only one number to call." To some clients, therefore, centralisation could be putting another link in the chain.

Mr Staunton notes that deciding whether to accept liability is often subjective, and factors determining it are often locally influenced. He comments that most corporate and global businesses are not contracting directly with the public, but dealing through local suppliers, each of which will have been involved in the agreement of contractual terms, many subject to determination in the local jurisdiction.

He believes this makes it essential the claims handler understands the legislation and legal processes in those jurisdictions to ensure liability issues are properly managed within relevant timescales, as limitation periods vary. Large corporate liability insurances are often subject to significant policy excesses, so the decision to accept liability and commit the policyholder to payment of the deductible must be agreed with regional account managers, against whose budgets these payments are made.

Such policyholders are often involved in significant numbers of claims in a single policy period. This makes it essential decisions are made with the agreement of the policyholder to ensure that, in the event of any aggregate limit of excess being exceeded, the policyholder does not have grounds to assert that liability has been accepted without their agreement or that the incident has not been properly investigated.

Another aspect noted by Mr Staunton is that claims handlers find themselves dealing with some of the policyholder's largest customers, so account must also be taken of commercial sensitivities. "While a UK handler would understand the commercial sensitivities of a large claim originating from a retailer, such as Tesco or one of their customers, would they have the same understanding of the relationship if they were dealing with Karstadt of Germany?" he asks.

These are perhaps some of the reasons why risk managers welcome this trend, although not at the expense of local expertise or autonomy. Andrew Hanton, head of group insurable risk at Dixons Retail, describes Cunningham's offering as "bang on the money, if they can make it work".

A single geographical contact point, provided it is of high calibre, is a very good thing, he says, adding: "It allows the adjusting company to control and edit reports while ensuring standards are met and maintained. It should also provide the capability to link up and make sense of the needs of the international client across the piece, adding value over and above servicing losses."

Noting that local adjusters usually have valuable knowledge and goodwill in their own countries, he says moving to more centralised control should not compromise service by impinging unnecessarily on individual adjusters' operational autonomy in their country or region.

Risk managers have observed an increasing level of complexity around global programme compliance issues, observes John Hurrell, chief executive of the Association of Insurance and Risk Managers, citing the example of cover discrepancies between centrally placed global programmes and locally issued wordings.

He explains: "To comply with local regulations, it is important to have close co-operation between loss adjusters, underwriters and brokers at both the local level and at the centre. In practice, this means loss adjusters have had to develop centres of expertise on global programmes in the major international centres as well as having people on the ground at the scene of major losses."

Local engagement

Mr Chart says his firm routinely operates global and pan-European corporate programmes where the local-to-local engagement is just as important, "and just as we spend time tailor-making our product to the requirements of the broker, risk manager and insurer before claims come in, we actively encourage strong local territory control before claims arise".

Often on multi-national programmes, policies are written by local insurers, and reports are issued by the local adjusters directly to the local insurer. "In these scenarios the London-based team retains an important role in assisting the local offices to ensure their reports accord with agreed procedures, and that claims under local policies are not declined when there is cover in place under the master policy," which aggravates risk managers.

Loss prevention is also important, and Mr Clark says centralisation allows the hub to gather knowledge from similar claims around the network and apply it immediately to new losses, which is vital for organisations that are unable to get a detailed picture of their losses across multiple locations. "Dealing with one international location as opposed to individual countries helps companies manage their claims programme more effectively," he says.

Over and above effective reporting and adjusting of individual claims, Mr Hanton says risk managers want adjusters to be joined-up, help prevent new losses, manage new crises and understand and inform them why losses are occurring. This means creating and maintaining local client-office and adjuster relationships, gathering on-the-ground intelligence and offering effective advice for local management, while ensuring accurate and succinct reports are returned to the risk manager as quickly as possible.

"The overriding requirement," he, therefore, concludes, "is for the adjusting company to be able to link up and make sense of the specific needs of the international client, and bad practice may include adjusting each loss in isolation."