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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.

New in Workers Comp: “Lifestyle Risk” and the Dangers of Telecommuting

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NEW ORLEANS—While controlling workers compensation costs often focuses on mitigating the risk of slip-and-falls or ensuring employees have proper safety gear, some notable exposures exist in employees’ everyday personal lifestyle choices. In the Thought Leader Theater at RIMS 2015, Fred Hubbs, a partner in the lawfirm Hall Booth Smith, P.C., discussed how different trends—from the obesity epidemic to telecommuting—can increase risk exposure in the workplace.

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As the workers comp system is based on principles of no fault and no personal responsibility and there are broad state definitions of what is medically necessary or what an employer is responsible for, employers are often vulnerable to what Hubbs calls “lifestyle risk.” Obesity, smoking, non-compliance with treatment for diabetes, and telecommuting can all put employees at risk, and either contribute to a compensable event or complicate the recovery process.

Obesity, which affects approximately 37% of Americans and is expected to his 50% by 2030, is a well-documented factor in workers comp, with obese workers filing twice as many claims that tend to be up to seven times more expensive and see these workers missing thirteen more days a year, while indemnity benefits paid can be five times higher. And some states have ordered employers to pay for weight loss that is medically necessary to facilitate recovery.

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Smokers are also drastically more likely to be injured at work, and smoking while on the job can lead to specific accidents in the workplace that are compensable. In fact, courts have ruled that, if smoking is only a slight deviation from job duties, an accident that occurs while a worker is on a smoke break is compensable. In at least two states, employers are also now required to pay for smoking cessation programs if doctors deem it necessary to help with recovery from surgery.

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For diabetic employees, a refusal to comply with treatment can expose employers, whether because of the increased risk of seizure, making a minor injury worse, or delaying recovery. Some treatments for injuries sustained on the job can also aggravate pre-existing diabetes, which can be a compensable event.

For all of these issues, Hubbs recommended that employers get more proactive to help employees be healthier, reduce workers comp costs, and even benefit from some incentives from new healthcare laws. Stop-smoking campaigns and weight-loss or activity-boosting initiatives can all aid in these efforts, and these employee-sponsored wellness programs are promoted under new healthcare laws, which may offer direct incentive to businesses that introduce them. Ensuring that employees are complying with doctors’ orders regarding these required efforts is also important, and may be actionable if employees are refusing. There are laws that require employees to comply if they are receiving workers comp benefits, Hubbs said, and employers should seriously examine their legal ability to stop compensation if an employee refuses to submit to a reasonable examination or treatment.

Finally, Hubbs cautioned that many employers should be more cognizant of the risks of telecommuting. While working remotely is certainly nothing new, it is continuing to grow, especially after President Obama signed the Telework Enhancement Act requiring government agencies to establish policies for working outside the office. These arrangements can severely complicate workers comp questions, however, as the lines blur surrounding whether an accident that occurs in the home is compensable and whether an employee is on or off the clock at any given time. To mitigate some of these risks, he recommended that employers:

  • Visit the “jobsite” to evaluate where employees will be working
  • Email or otherwise communicate when an employee is on or off the clock
  • Create a written and signed agreement that designates hours and breaks, designates rooms in the house as “office” space, specify what duties are included in the telework, designate “personal comfort” areas, and attach panel of physicians in states where appropriate

Insurers See Worldwide Drop in Customer Satisfaction

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Non-life insurers in most of the world saw improved underwriting ratios last year, thanks to a significant drop in claims expenses and rising premium volume aided by growth in emerging markets. According to Capgemini’s 2015 World Insurance Report, however, insurers were not nearly as successful with their customers.

Globally, positive customer experiences decreased significantly in 2014, indicating that steps taken by insurers are not matching rising customer expectations, the consultancy reported. The fall was pervasive worldwide, but North America witnessed the largest drop of 8.3 percentage points, followed by Latin America with 5.3 points.

According to the report, “The agent channel delivered positive experience levels that were almost double those of digital channels, suggesting that digital channels are dragging down global customer experience levels. Customer expectations of digital channels such as mobile and social media are rising rapidly along with their usage and importance. However, more than 40% of customers cited positive experiences through the agency channel, while less than 30% of customers had positive experiences through digital channels such as mobile and social media.”

Claims servicing is also problematic in terms of customer experience, seeing the lowest percentage of happy customers.

Among all customers, Gen Y currently presents the biggest decrease in satisfaction. The drop in positive experience levels was much steeper for this age group than any other, and this trend is seen across all regions, especially in the developed markets. In North America, the drop in experience levels for Gen Y customers was approximately 10 percentage points steeper than other age segments, while in developed Asia-Pacific the difference was around five percentage points, Capgemini reported.

Check out more of the study’s key findings in the infographic below:

2015 world insurance report infographic

 

10 Tips for Getting Claims Paid

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(The following is a guest post written by Robert M. Horkovich, managing partner and shareholder in the New York office of Anderson Kill & Olick, P.C.)

Getting claims paid can be difficult and often, the larger the claim, the more difficult the process can be. In many cases, it seems like there is an invisible “seven-digit” exclusion written into all insurance policies. If the claim is $1 million or more, there is greater resistance to payment, in part because insurance companies often refer larger claims for review by counsel. This often leaves the policyholder fighting for payment of claims that should not be disputed.

Set out below are 10 tips for getting claims paid. Although there is no guarantee that if all the steps are followed, the claim will be paid, following these steps may help minimize the resistance.

1. Give Notice Early, Broadly and Often
Some first party insurance policies require the policyholder to give notice of a claim within a fixed period, sometimes as short as a week. Therefore, when a claim arises, give notice as soon as possible under as many insurance policies as may be applicable.  And supplement that notice when information about the claim becomes more available and developed.

Risk managers sometimes fear giving notice, as they believe it may impact renewal. The loss should be identified anyway in the renewal application to prevent a misrepresentation/concealment defense.

Although almost all states require that the insurance companies demonstrate prejudice (or that the failure to give notice was a material breach) if they seek to deny coverage on grounds that the policyholder failed to provide timely notice, the better practice is to give notice early, broadly and often. This minimizes the chance that late notice will become a defense to coverage.

2. Assemble the Right Team
Your team should include people familiar with your loss and with your insurance coverage. In addition to people from risk management, consider who else might be needed to assist the risk manager: accounting firms, forensic accountants, actuaries, loss adjusters, insurance brokers, engineers, environmental consultants, insurance archaeologists, and maybe even policyholder coverage counsel.

3. Gather All Information

  • Gather and inventory your company’s insurance policies. Now (before you have to handle the loss) is a very good time to gather and inventory all of your company’s insurance policies. Index them. Your insurance broker may help.  Having this done before you have to handle the loss will make providing quick and broad notice easier.
  • Gather all information regarding the loss. Notify all company departments that have documents that may be pertinent to the loss to preserve those documents. Suspend document destruction procedures applicable to those documents. Scan them. If hard copies of company records have to be destroyed, have someone review the documents before destruction so they can certify no pertinent records were destroyed. The duty to cooperate means keeping and turning over pertinent documents. Again, prejudice rules generally apply, but doing it right may help eliminate the argument.
  • Remember reinsurance. You may think that your insurance company’s request for information is unreasonable, but try to remember that your insurance company may be trying to satisfy the information demands of its own reinsurance company. Try to accommodate reasonable requests. If the requests for information are unreasonable, write to your insurance company and ask what it really needs to confirm coverage.

4. Document Everything
Document all communications with your insurance company including all requests for information, all conversations, what the insurance company is doing and what you are doing. Always have the last word – even if it is to say that you disagree. Why? If the claim is denied, you will need this written record as evidence.

5. Avoid Open-Ended Standstill Agreements
Your insurance company may say it needs time to investigate the loss and wants a standstill agreement to preserve everyone’s legal position. Avoid these if possible. You give up leverage to force your insurance company to conduct a timely investigation.

If you have to enter into a standstill agreement – and they sometimes are necessary to minimize legal costs – set a clearly defined and realistic deadline. Anything later just gives the insurance company additional “float,” as Warren Buffet calls the time lag between collecting premiums and paying claims. Do what you can to get your money quickly so that you can invest it and make profits rather than giving an added bonus to Warren Buffet. Don’t give your insurance company a license to stall.

6. Quantify the Loss
Identify and document amounts spent on the loss or the liabilities. Include defense costs for liability matters, in-house time and expenses if they can be recorded, and past, present and future loss amounts. Consider using those with expertise in identifying all types of losses that might be included. For future losses, consider using a forecaster or actuary. Such losses then can be reduced by a present value discount and included in your negotiations. Try to consider all possible contingencies.

7. Value the Insurance Asset
Look to the policy limits. Examine all potential forms of coverage and all potentially applicable coverage grants within all potentially applicable policies. Don’t forget endorsements. Look at the ultimate net loss clause and supplemental payments clauses in liability policies and consider what costs your company has incurred that fall within those coverage grants.

On the negative side, consider deductibles and self-insured retentions. Look at potentially applicable exclusions and exceptions to those exclusions. This will help you shape your company’s loss.

When valuing how much you may get back to cover your loss, consider the financial viability of your insurance companies. Taking a discount and getting paid now may have value if your insurance company has a clouded financial posture.

  • Legal/policy analysis. Look at the loss valuation and compare it to all the forms of coverage available. Apply the losses as best you can to maximize coverage. Consider forum sensitivity. Does it make any difference if your claim is pursued in one jurisdiction or another? Compare state provisions and precedents regarding late notice prejudice, application of the pollution exclusion, consent to settle exhaustion of underlying coverage, or other factors as applicable. Consider which jurisdictions would suit your claim best. Is there a mandatory arbitration provision in the policy? A choice of law provision? These must be taken into consideration.

8. Set The Target/Demand
Calculate each insurance company’s maximum potentially applicable coverage separately. While you cannot obtain a windfall or double recovery, there is no reason why you should not start by explaining to each insurance company what its exposure is.

9. Negotiate the Claim
What do you want to achieve? Cash now? A payment stream in the future? A coverage in place agreement confirming coverage for future events? Take these factors into consideration.

Negotiate with each insurance company separately. Generally, negotiations that bring all insurance companies together at the same time do not result in prompt settlements. The insurance companies generally get together to share theories of defense to coverage. That does not promote payment of the claim.

Do not press weak claims. Weak coverage claims tend to hurt, not help, claim payment.

Try to get the right people to claim settlement discussions. Ask the broker to help make sure that the appropriate claim representative is there. Make sure you have appropriate settlement authority.

Remember to mind your manners. By the time you have gotten to this point in the payment of your claim, you rightfully may be very frustrated and even angry. Try to put that anger aside for purposes of resolution of the claim. It is harder for the insurance company to pay if there is personal anger and animosity.

10. Be Careful in Documenting the Settlement
Focus on the scope of the release. Try to limit the release just to the claim being paid. If the insurance company asks for more (tying is an unfair claims practice under the NAIC Model Unfair Claims Practice Rules adopted in most states), then make sure you can quantify the value of the additional coverage you are giving up.

Make sure the payment is net of retrospective premiums adjustments or any other charge back. The last thing you want is a bill from the insurance company.

Be very careful of indemnification provisions. They easily can eat up the claim payment proceeds you are getting.

To help you through the whole process, be persistent. Don’t give up. Above all, that will allow you to maximize the value of your claim.