Each complex claim is unique, but insureds can make the process easier through proactive risk mitigation.
Fast Action Helps Complex
experts urge fast
action to mitigate
loss and substantiate
By Gregory DL Morris
Despite the popular television commercials featuring bizarre instances of property damage, risk management professionals say that the real troublesome complex claims arise out of multiple, overlapping events, not from odd single occurrences. In one situation, for example, an already complex acquisition was
thrown into a state of confusion when a major hurricane damaged some of the
assets, and the underwriters who had quoted on the buyer’s placement backed out.
In other instances, there were succeeding claims from multiple hurricanes that
swept the U.S. Gulf Coast and Caribbean. And then there were the homes left
damaged but standing after the wildfires in southern California only to be swept
away by mudslides.
“Just in the past few months we have had four major hurricanes, a volcano,
an earthquake, wildfires, and just recently mudslides,” said Charles Martin, chief
claims officer for Marsh. “At the height of that, I was spending two hours a day,
every day, writing updates for senior management on claims volume and severity.”
Martin and his colleagues at other brokerages said there are best practices
for handling complex claims — beyond the obvious points of keeping accurate
records and open communication. But that “standard” procedure for complex
claims is essentially an oxymoron. “Every one takes different turns. It’s not like you
can say that something similar will happen tomorrow.”
BENEFITS OF OVERLAP ANALYSIS AND COMMUNICATION
Brokers’ best efforts to ensure that their clients are thoroughly covered may
even be counter-productive. “The most complex claims tend to be those with
overlapping coverage,” said Jill Dalton, managing director of property claims,
preparation, advocacy and valuation at Aon.
“When there are multiple policies that can respond — boiler, property, marine,
It is important for brokers to manage communications with insureds before
cyber, political, local versus international, multiple carriers, even multiple silos
within the brokerage and the owner — untangling all that is the most complex.”
Gap analysis is a common practice for brokers, especially when bringing in a
new client or revising a program. But Dalton’s caution suggests that the reciprocal,
overlap analysis may also be wise. If overlaps are deemed to be desirable, then the
differentiation among them should be clear.
a loss, and Dalton added that it is best if multiple levels within the client can be
involved. “Too often we see where coverage is not clear to everyone at a client.
The risk manager, the plant manager, the executives all may have different
“That is a great opportunity to brief them on how the whole program
understandings. In particular we see complications around waiting periods,
percentage deductibles, retentions and multiple locations.”
Ideally there would be a time for the broker to speak to multiple levels at the
insured. “Some clients invite us to meet with all their division heads or plant
manager,” said Dalton.
works. But not every company culture is open to that. Or there are geographic
or language barriers.” In those cases it falls to the risk managers to try to
communicate the essentials of the program across their organization.
Still, life is what happens when risk
managers are making plans. “We have
seen cases where owners have had
losses from multiple hurricanes,” added
Dalton. “There was an earthquake
in Mexico, and the wildfires across
California. Multiple losses create
complex claims and stretch the internal
resources of even the best organized
owner. Gathering information and
It helps you, and helps
the claim, if you are doing
everything you can to get back
on your feet. Build speed into
—Charles Martin, chief claims officer, Marsh
• Complex claims arise out of
multiple, overlapping events.
• Coverage overlaps can be
desirable, but the differentiation
among them should be clear.
• Insureds have an obligation to