Category Archives: Claims Management

Four Reasons To Stay The Course With Captives

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As the overall insurance market remains in a “soft” environment with rates generally decreasing, particularly in the workers compensation market, many captive participants might be questioning if now is the time to exit their captives and explore more traditional insurance options. While this is an understandable response, one of the main reasons for creating your own or joining a group captive is a long-term commitment to a strategy of retaining risk in order to reduce costs over time.

Many companies historically turned to captives when insurance rates were high because they offered:

  • better control over claims handling and loss control efforts,
  • insulation from the cyclical swings and uncertainties of the commercial insurance marketplace, and
  • lower operating costs than conventional insurance models.

Additionally, there is a far greater return on loss-prevention and claim-mitigation investments. Though rates are currently dropping, here are four reasons why most business owners would still benefit from remaining with their captives.

1. The Privileges Of Membership
Those companies that qualify are afforded benefits, including the possibility of reduced premiums and recouped savings over time. Keep in mind, one of the biggest drivers of value in being part of a captive means being insulated from future negative fluctuations in the market. Try not to lose sight of this, especially when rates drop and seem enticing.

2. No “Take Backs”
Leaving a captive can be costly, and reentry is not guaranteed. Companies considering the idea of leapfrogging from their captives while rates are low and then jumping back in when the rates increase may face hefty repercussions. This is particularly true for companies that are members of group captives, when it’s possible that other members of the captive may not accept them back, particularly if they were saddled with absorbing the exiting member’s share of losses.

3. Preparing For That Rainy Day
If you jump ship from your captive, you will most likely have lingering financial obligations if losses deteriorate for the whole group, and you could be on the hook for an assessment. By remaining a captive member, even if you are paying more in premium, you are adding money to cover a possible deficiency from prior years. If actual losses turn out to be better than projected, you can recoup—via dividends or reduced future premiums—a greater percentage of those savings than you could from traditional insurers.

4. Control Your Destiny
The market forces that are creating lower rates right now—such as decreasing medical costs or legislative changes that result in lower workers compensation costs—are also positively affecting captives. By staying with your captive, you can enjoy the upside of improvements in claims as your own losses go down, resulting in lower future costs and the possibility of recouping additional profits.

Overall, captives provide more control than traditional insurers through greater return on loss-prevention and claim-mitigation investments and through access to higher savings. Cheaper market rates can create an understandable knee-jerk reaction that may cause you to consider leaving your captive but remember your initial motives for joining. Captives are great alternatives to traditional insurer solutions, and staying the course will most likely work in your favor.

2017 Workplace Fatality Statistics Released

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According to the Bureau of Labor Statistics’ (BLS) Census of Fatal Occupational Injuries in 2017, a total of 5,147 fatal work injuries were recorded in the United States. And while this data marks 43 fewer casualties than in 2016, employers should note that it is still an increase of more than 300 in both 2014 and 2015.

The continued high rate was fueled by the frequency of transportation incidents (2,077) and 887 fatal falls, which marked their highest level in the 26-year history of the census.

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Another key finding involved overdoses of drugs and alcohol while at work.

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Unintentional overdoses due to nonmedical substances while at work increased 25% from 217 in 2016 to 272 in 2017. The BLS noted that this was the fifth straight year in which unintentional workplace overdose deaths have increased by at least 25%.

The National Safety Council (NSC) released a statement in reaction to the BLS data, saying that it was “disheartened to see a small rise in unintentional, preventable worker fatalities.” The NSC’s statement continued:

“Once again, the data clearly show we are not doing enough to mitigate the risks of these everyday killers. At work, leadership should set the tone and engage all employees in safety, identifying hazards and measuring safety performance using leading indicators to ensure continuous improvement.”

Additionally, the BLS found:

  • Contact with objects and equipment incidents were down 9 percent (695 in 2017 from 761 in 2016) with caught in running equipment or machinery deaths down 26 percent (76 in 2017 from 103 in 2016).
  • Fatal occupational injuries involving confined spaces rose 15 percent to 166 in 2017 from 144 in 2016.
  • Crane-related workplace fatalities fell to their lowest level ever recorded in by the census, 33 deaths in 2017.

Clearly, the fatality rate of some occupations remains alarmingly high. Below are the 10 most dangerous jobs in America for 2017, according to the BLS and the fatal work injury rate (per 100,000 workers).

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Reducing Inspector Risks During Catastrophic Response

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The risks associated with disasters extend far beyond the initial destruction. For insurers, disaster damage assessment and claims processing can pose both significant financial risk as well as introduce personal risks for claims inspection teams. The safety of these teams is dependent upon a strong understanding of the situation on the ground. As a result, insurers need to take steps to maintain visibility of the situation, efficiently handle damage claims processing, and, above all, limit the risk exposure of claims and response teams on the ground.

Utilize credible catastrophe information
Having accurate geographic information to pinpoint potential asset damage before deploying inspection teams can aid faster claim resolution and provide more efficient claim processing. Looking to trusted resources that offer key data on approaching catastrophes can help teams better prepare for the situation at hand. The National Oceanic and Atmospheric Administration (NOAA) offers constant information and updates on pending and current weather conditions, storms and other catastrophes to allow organizations to stay up-to-date on the latest conditions. Likewise, the Federal Emergency Management Association (FEMA) can also offer deeper insight into disaster recovery efforts so that adjusters are prepared for the situations they walk into.

Knowledge is power when it comes to efficient claims processing and safe deployment of inspection agents. Data from credible resources allows adjusters to more safely maneuver through potentially hazardous conditions. But even the wealth of knowledge offered by NOAA and FEMA is often not enough to minimize an organization’s post-disaster risk profile.

Emphasize image collection of disaster areas
When disaster hits, roads can become impassable, buildings can become structurally unsound, and areas can become impossible to access. The last thing an insurer wants to do is send its claims adjusters into a hazardous zone unprepared.

Preparation is key to effective claims inspection that minimizes time in the field and the risk of unforeseen, hazardous circumstances. To that end, satellite and drone imagery have become key technologies used by insurance companies to improve processes and protect claims adjusters.

The concept of satellite and drone imagery to assist in claims processes and reduce inspector risks is hardly a new concept. Novarica recently estimated that nearly 20% of P&C carriers are pursuing imaging solutions. In fact, PricewaterhouseCoopers forecasts that drones alone will have a $6.8 billion impact on the insurance industry in the coming years.

Satellite imagery provides wide-area, high-resolution analysis of damaged areas to help organizations understand the breadth of the damage, while drones can be deployed to specific sites to conduct detailed damage evaluations at a micro-level. Combining satellite and drone imagery can give teams a full view of the extent of catastrophic damage so they know exactly what to expect upon on-site inspection.

In some cases, detailed imagery and analytics can often provide enough information to prevent adjusters from ever having to set foot on a property, allowing them to accurately and efficiently process claims from the safety of a desk. In fact, Cognizant estimated that drone usage can make a claim adjuster’s workflow 40% to 50% more efficient, which can be especially important when managing the high number of claims that come in response to a catastrophe. This can also decrease claims management costs, help protect the well-being of employees and significantly reduce adjuster accidents.

The amount and strength of natural disasters in the U.S. will not decrease anytime soon. But the use of credible information resources and thorough imaging technology can help insurers reduce their financial and safety risks, so they can better help others address their own.

Q&A: Resiliency in India

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The 2018 Lloyd’s City Risk Index was analyzed during the RIMS Risk Forum India in Mumbai, and it notes a possible turning point for the subcontinent’s cities regarding resiliency. In short, Indian cities were rated as weak, but recent government and public investments and campaigns that focus on strengthening infrastructures and people may strengthen those assessments.

During a November 14 morning session, “Assessing the Impact of Natural and Man-made Threats on India’s Economy,” Shankar Garigiparthy, country manager and CEO of Lloyd’s India discussed how much economic output (GDP) cities in India could lose annually as a consequence of various types of rare risk events – such as the Kerala floods this past July – or from more frequently occurring events such as cyberattacks.

He discussed with Risk Management Monitor reasons why he is hopeful for a resiliency turnaround in India and how the combined wills of the government, media, public and business can strengthen the country’s infrastructures and ultimately, its risk ratings.

RMM: How do India’s cities rank in Lloyd’s City Risk Index?

SG: Lloyd’s City Risk Index was published three months ago and we researched 279 cities. We found that a vast majority of cities within the subcontinent of India have been rated as very weak from a resilience point of view. They are at high risk for flood, geopolitical security, market crash, just to name a few.

RMM: What steps are being taken to improve the collective resiliency?

SG: What we have seen in last three or four years is a significant level of investment from the government in terms of building infrastructure. It’s been in the form of roads, bridges, railways, ports, and airports, there has been a significant level of investment. And it seems there is more to come. In the budget, the government has announced more – which is encouraging to see from an infrastructure-building point of view.

However, where we still see a bit of lack is in the area of insurance penetration in the country. That’s where I think insurance companies can be a useful partner and tool to mitigate some of the level of these risks.

RMM: Could this be a chance for insurers to get in on the ground floor of India’s improvement projects?

SG: Yes.

RMM: What incidents have influenced the government to act?

SG: The Chennai floods [in 2015] and the floods in Kerala [in July]. That was a once-in-a-hundred-years occurrence. The entire state was flooded, which I think was the first of its kind. It was completely underwater.

Similarly, the Chennai floods marked another major event. Since then, monsoon has happened but the level of flooding has been managed pretty well.

In the session, we examined the Mumbai floods in 2005. And even last year, there was flooding here for a day, but within a day the water receded pretty quickly and was pumped out. The machinery kicked in and we were able to get out of it pretty well.

RMM: What led to that success?

SG: It was a combination of low tide and the government investing in the necessary pumping mechanisms to actually pump the water back into the sea, and unclog some of the stormwater drains as well. Steps are being taken, slowly but steadily.

RMM: What other institutions are taking measures to build resiliency?

SG: There are a few companies [which I won’t name] that are leading the way and it is encouraging to see that.

The media is also equally playing a fairly significant role as well. That’s also helping because public awareness is something that is critical. The media is raising awareness in terms of the importance of protecting your infrastructure and environment and the need for trees and planting.

RMM: Would you agree that the will to change and improve existing infrastructures is as important as the funding?

SG: I think it’s all there. The government has shown willingness to improve infrastructure. The people have demanded it, so there is a push and a pull coming from both sides. And we are seeing that development happen. Compared to where we were five or ten years ago and where we are now, there’s been a massive change.

There is still more that can be done. I’m not saying that we’re there yet. But it’s not an easy thing, as well.

Given India’s geography and how the political scenario is within the country, we will always be exposed to natural catastrophes. Flooding is going to be a constant phenomenon for us.

There is investment being done but it’s patchy. In some states there has been fantastic infrastructure investment and in others, less so. I think that has got to be addressed and that’s where the public [should be] demanding more actions there, where infrastructure investment has not been up to the mark.