The JLT Life Science 2016 Conference was our ninth. Held at the Savill Court Hotel & Spa near Windsor, it gave risk managers and chief executives in the industry as well as insurers an experts-eye view into a variety of key topics. The session on claims management brought up some key issues for the industry. This is what caught my eye.
Good communication is what it’s all about. The key to successful claims management is stakeholder engagement – ensuring that all parties are fully involved in delivering the outcome. Nobody likes surprises and the way to avoid them is greater control.
One of our speakers told of a claim for a new power plant in Asia. The failure of one unit led to uncertainty around insuring a second unit. Was it a design defect? Or poor workmanship? Was there insured damage that would trigger the business interruption cover? The policy-holders wanted certainty but that isn’t possible until the insurer has gone through the investigation process.
In quantifying a claim, the burden of proof lies with the policy-holder. But it is possible to iron out peculiarities relating to a claim by agreeing parameters in advance. Calculating business interruption claims is, by its nature, subjective, because of the need to calculate what might happen before an event occurs. It comes down to the quality of the evidence provided and documenting the evidence properly pays big dividends too.
With the right sort of co-operation in this area the insurance industry can often be extremely innovative in the way it settles claims. A speaker cited a company that was within days of agreeing the sale of a business when a fire in the property next door upset the deal. By valuing the business at USD 1 the insurers facilitated the sale by paying the sellers the diminution in value they had suffered – a result which worked for all parties.
Good settlements depend on good preparation. Businesses need a claim plan and that involves nominating a team and deciding who does what. Losses need to be quantified by knowing where data is stored and how to capture it. But above all it is essential to “stress test” a policy by looking carefully at limits, deductibles, and the policy language.
The reporting process is a key factor. Prompt notification models allow businesses to assess the likely business impacts. That means that it is vital, for example, to understand the way the supply chain works to avoid unnecessary surprises. By working out in advance what will happen when a loss occurs you ensure that the claim is settled in a much shorter period, and you remain in control of the risk.
Product liability risks call for the same disciplines as business interruption. A strategy on disclosure is essential to avoid insurers being forced to act in a vacuum. So again it is important to have conversations in advance.
You can also learn an awful lot about how you manage a claim by rehearsing scenarios internally. Claims will come unexpectedly. But with a plan in place to communicate with the insurer – through conference calls and keeping everyone in the loop – you will reduce downside risk and ultimately achieve a better outcome.
The latest thinking on claims, along with other key topics for the industry, appear in the recently published reports from the JLT Life Science Conference 2016. To request a copy please email Adrian Donald on firstname.lastname@example.org.