Q. What about the best use of technology in a business interruption claim?

A. The book provides policyholders with guidance to enable them to use technology to present data in a manner that tells a holistic story of loss from summary to detail. Custom accounting reports and their corresponding supporting data for review by the insurers are typically ineffective without a summary of the entire claim that tells the story of the loss to the organization. The organization should use spreadsheet tools to assimilate the large quantity of supporting data into a set of claim schedules that build up, almost pyramid-like, into summary schedules by primary claim categories that insurers and their representatives can review easily. These spreadsheets can be prepared by the policyholder or by a qualified claims accounting professional, but they should provide a step-by-step explanation of the claim being made, from the executive summary to the lowest level of detail. Effective use of technology and claim schedules can expedite review of the claim by insurer and help to keep the claims process for the modern corporation on track.

Q. Tell us more about the “paperless claim.”

A. We now have the use of Web-based tools to store documents “in the cloud” or by some other electronic means. For example, invoices and substantive reports can be converted to either a DVD format or a Web-based site that can be securely accessed by both the client and the adjuster. Also, advanced data analytics tools can combine large sources of data into one database or identify anomalies and patterns using advanced algorithms. In simple terms, technology offers many ways to sort through and analyze data to identify more meaningful relationships and trends. This is especially important in the area of understanding sales trends and relationships between variable cost and production data. Finally, maintaining all relevant files on a laptop increases efficiency.

Despite these potential problems, technology and data in the modern corporation can have significant advantages in the claims process. Data management—the manner in which information is gathered, analyzed, and shared—is one of the first protocol steps in the insurance claims process. Gone are the days of overwhelming volumes of paper invoices and hard-copy summaries of financial statements. Electronic data allows information to be shared easily with insurers for their review, expediting the adjustment of the loss. Claims adjusters and their experts no longer need to manage individual cases by traveling to companies, gathering information, interviewing personnel, and remaining on-site to ask questions as they arise. Instead, today's claims adjuster can work multiple loss files in a remote location while accessing vast volumes of information forwarded from claimants to adjusters via email and online secured working environments such as eRooms. Each of these techniques allows the organization to efficiently update insurance claim data and share relevant information with insurer representatives.

However, technology alone is not the answer. To drive the claims process and settle the claim reasonably, those insureds must do more than provide the documents requested by insurers and their accountants. They must commit the resources necessary to gather, interpret, and explain the documentation relevant to the claim. Modern accounting and information systems have the ability to store and produce an avalanche of data, and providing mountains of information without the proper context can lead to a prolonged period before settlement can be reached.

Q. Does the book provide a mechanism to navigate through all of the company's data pertaining to a given claim? 

A. Yes, we have continued discussion about the data gathering and claim documentation process by aligning the Cross Reference Industry Standard Process for Data Mining, also known as “CRISP-DM,” and wrapping these standards around the claims process. 

Each of these processes is described in detail in the book.  Taking the time to fully educate all parties on the insured's business model can be helpful in determining exactly what documents are truly required to demonstrate the loss. Many companies may assume that an adjuster and (his or her) experts already know their company's business. This is often far from the truth and it may be the first time the adjustment team is faced with the business issues around your loss. If the adjustment team better understands how the insured makes money and incurs losses, then they will be more apt to ask the right questions and seek the relevant information to review. This knowledge also will help them audit the claim and present sufficient evidence to accurately support the loss to the carriers and underwriters. The insurance claim CRISP-DM provides that roadmap. For more information about this method, go to www.CRISP-DM.org.

Q.  What are some other big issues with succeeding with a business interruption claim? 

A. The three big issues are: 1) Coverage: how can the policyholder respond?; 2) How should the BI claim be calculated?; and 3) Timing: how long is the business interruption period? Sometimes all three of these issues overlap.  In my own experience, I have witnessed people on both sides of the equation agree that disputes over the BI time period are often the most controversial. These disagreements often result in the largest dollar differences between the loss amounts derived by the insurer and insured. Why is this so? One reason may be that this issue of how much time should be used to measure the BI loss overlaps so many others. The applicable time period is often, as a matter of policy wording, measured by the time needed to rebuild a damaged facility.

Timing is a function of scope of loss. It is affected by the extent of damage, the ability to make repairs, safety concerns, regulatory issues, and loss prevention concerns. It includes the amount of time required to clean up a loss site from a fire or insured event and rebuild or restore operations to normal, and it can be subjective, thus engendering disputes between the insured and its insurers on the critical path toward complete restoration of operations. Such disputes can greatly influence the accounting issues as well. That is, although production may be back, the accountants may disagree as to whether such production is at the pre-loss level.

Time-related disputes often fuel (or are fueled by) issues relating to coverage or policy wording and engineering and quantification. The rebuilding of the World Trade Center complex is a perfect example of the convergence of these issues. With codes changes, and the build out of the lower West side of Manhattan since the completion of the Trade Center in 1972, the pure logistics and code requirements to maneuver equipment and deal with the subterranean subway issues may not have been items that either the policyholder or insurers envisioned when writing the policy. 

Q.  What are some of the challenges and benefits of working on a book like this?

A. The biggest challenge is the combination of dealing with your normal job and then working on the book. The great part is in working with other professionals both co-authors and contributing authors and seeing their innovative ideas about how to address certain topics. Also, other professionals challenge your thinking. I especially like how the three new chapters turned out that were led by Allen Melton, one of my co-authors and partners in our insurance claims practice.

Q. What advice do you have for today's young claims professionals?

A. Get as much experience as you can about a diverse type of claims and industries. Always read the policy and background on the company before you walk into your first meeting. I have always enjoyed the breadth of experiences of learning about different industries and working with different people. Every time you think you have seen it all, a totally new situation comes into your lap. I was involved with the appraisal recently on a $3 billion claim, and one of the final open claims from the World Trade Center. I was exposed to issues relating to the rebuilding of a train station, valuing art work, calculating the re-work of detailed engineering drawings, and getting into the engineering of how the World Trade Center was actually designed and constructed in the 1960s and completed in the early 1970s.

*Disclaimer: The views expressed herein are those of the authors and do not necessarily reflect the views of Ernst & Young LLP.*