Claims and captives: getting it right matters
A large part of a captive’s expenses will be claims related, so committing the time to find the right partner is certainly a good investment...
A large part of a captive’s expenses will be claims related, so committing the time to find the right partner is certainly a good investment. The greater the ability of that partner to meet a programme’s business needs with regard to claims, the more successful that partnership will be.
Before beginning a search, it is a good idea to have a clear and thorough list of those needs to share with potential providers. You might have noticed that I did not use the word “complete” to describe that list, and with good reason. A high-quality claim provider will work closely with clients to gain a more in-depth understanding of their business objectives with regard to claims and in the course of doing so, is likely to surface needs and opportunities that had not previously been considered. Having been down this road before, experienced providers know where the rough spots are and can easily navigate around them to ensure that claims operate smoothly and efficiently.
There are many factors to consider when determining the claim capabilities needed to ensure a programme’s success. These include:
The complexity of the programme:
The parties involved in the claim handling process:
Service standards:
Choosing the right claim partner
Once the list is finalised, it is time to begin evaluating claim providers. There are many factors to be considered. The first is whether the provider takes the time to truly understand the client’s needs and demonstrates its expertise by refining and expanding the client’s list to ensure that it is both complete and well-matched to all of the claim-related business objectives of the captive programme.
Next, consider whether the provider has the capacity to offer an efficient, proven, and coordinated programme of claim and loss reporting procedures, as well as cash flow services. Also, look for a solid claim partner that focuses on mitigating damages, employs a robust fraud detection process, controls expenses during the life of the claim, and has the resources to evaluate recovery after conclusion of the loss.
People, processes and technology play a critical role in the quality of service a business can deliver to its clients. Let us focus on these factors in terms of claim providers.
Claims specialists
Having a team of highly qualified and technical claim professionals who are subject matter experts in each line of business is an invaluable asset to a captive programme. Consider whether claims will be handled by experienced specialists in local jurisdictions, who deal with losses in a specific line of business and are supported by global subject matter claim professionals when warranted. When intricate global claim issues requiring immediate attention come up, it is important to know that claim professionals with in-depth expertise are ready to address them.
Best practices
The right claim partner will make claim service a priority. It will deliver exceptional service, typically via clear, detailed and documented protocols and procedures for loss reporting, reserving, and settlements. One way to accomplish this is through the use of best practices.
Written best practices provide operational controls that are shared and implemented throughout an insurer’s global claim network. Using best practices to address claim management, claim controls, and core operational issues facilitates managing any programme. It is particularly important for complex global programmes, which typically have large claim volumes and intricate claim issues across several jurisdictions.
Special claim handling instructions
Special claim handling instructions are also an option. A strategic partner should be skilled at drafting these instructions and efficiently distributing them to its global claim network. These instructions can include reporting requirements and detailed guidelines that ensure consistency, no matter where in the world a claim is being handled.
For example, a client may request that the claim handler include instructions such as: loss notification when reserves and/or settlements reach a certain threshold amount, frequency and format of reports, the use of a specific loss adjuster, attorney or other expert, and/or a list of dedicated claim contacts.
Special handling instructions are an addition and do not take the place of other agreements or policy language. But, they are a key element for ensuring that the claim provider meets the client’s expectations regarding claims handling requirements. At every renewal, these instructions should be reassessed in order to determine if there are opportunities for improvements.
Technology
While the core function of claim management has not changed, operations have advanced, especially with the availability of new technology to manage data. Having a claim provider with access to state-of-the-art claims systems is yet another important factor when choosing a partner. Claim data may be obtained through the use of external systems that can provide detailed and up-to-date claim information that is critical to managing business.
Clients and their insurance carriers should be able to easily view consolidated claim information worldwide, monitor all activity, run various loss reports and access financial information in various currencies. At AIG, our IntelliRisk system allows clients 24/7 access to up-to-date claims information and trends.
IntelliRisk provides clients with tools to proactively monitor their claim activity and run ad hoc reports. Such systems allow for efficient claims handling and streamline loss processes throughout the globe.
Cash management
When it comes to cash management, efficiency depends on a strong collaboration with the claim provider. Managing the funds in an escrow or similar funding structure against claim payments requires a dedicated, experienced team and an efficient end-to-end process.
This matter becomes more complex in global programmes where cash calls require reimbursement for a loss. Working with a claim partner to review loss payments and other financials can benefit a client in sorting through cash flow issues and reimbursement requests.
Streamlined processes
Claims need to be identified as early as possible in the loss notification process. Once these claims are identified globally, the right claim partner will be able to streamline loss reporting.
A centralised multinational claim department optimises procedures, deliverables, roles and responsibilities to simplify and streamline loss processes throughout the globe.
A collaborative relationship should exist where the provider’s multinational claims department can readily access specialised assistance from the provider’s team of global fronting experts and claim professionals that have an in-depth knowledge about the structures and unique features of captive programmes. This team can be an invaluable resource, as it will be highly skilled at facilitating the resolution of any claim issues that might arise.
Claim service agreements
If the services of a third-party administrator or other outside claim partner are required, the insurance carrier should vet these vendors so that everyone is satisfied that the programme is in compliance with all applicable regulatory requirements. When the partnership between the captive and an outside claim team is being documented, an agreement should include the goals, expectations and objectives to be met during the claim service, as well as outline any applicable specific measurable results.
Other controls
Other controls that the right claim partner will employ include, but are not limited to, in-house and panel counsel with a proven track record and insurance professionals that specialise in litigation management. Effective litigation management will help to keep legal costs in check. During the claim handling process, the claim professional should identify if any subrogation exists and determine whether pursuing that avenue is cost effective. If successful, any monies recouped inure to the captive’s benefit.
Claim providers should have an end-to-end process to ensure compliance with Medicare. Failure to comply with this US federally mandated requirement can result in fines and penalties being levied. Lastly, while it is critical to align with an insurer that focuses on providing prompt claim service, it is equally important that the insurer has a robust fraud detection process, so that only legitimate claims are paid.
Summary
Claim management is important to a captive account’s success, and choosing the right partner is critical to achieving that success. A globally integrated provider with experienced, skilled claim professionals and the ability to offer a globally coordinated, efficient programme of claim and loss reporting procedures, as well as cash flow services, benefit both captives and their parents.
Such a strategic relationship also allows for accurate and timely communication that is critical when providing claim and payment information and loss data. Choosing an insurer with the right claim organisation not only matters, but can have a direct impact on a captive account’s bottom line.
