Account retention is critically important in today’s hyper-competitive insurance market. So when an agent spots trouble signs in a customer’s loss experience, that agent needs to move quickly to figure out what’s gone wrong to avoid an increase in premiums and possible defection by the client.

During a loss experience evaluation of a real estate development and management company specializing in high-quality, non-speculative community, neighborhood and regional retail projects, our firm noticed several large slip-and-fall claims that exceeded $100,000. When we requested more specific information, the insured could not provide any additional details.

Based on our experience this indicated three deficits:

  1. Lack of communication on the claims management strategy, process or perspective from the carrier or broker
  2. Limited engagement of the insured in the process. The insured was unaware of the positive impact its active involvement could produce on claims reserves and results.
  3. No aggressive defense of claims by the carrier or involvement by the broker to push for resolution.

Assessment

After gathering loss information and analyzing the results, our firm developed and executed a four-point strategy:

  1. We prepared a summary of losses in a manner that clearly revealed the insured’s average losses as compared to its premiums and exposure basis (square footage).
  2. We categorized losses by location so the insured understood where its frequency of claims were coming from.
  3. Using a dollar threshold, we identified "large losses" (severity).
  4. We opened lines of communication by pursuing the carrier’s claims representatives on all large losses, while asking the following simple questions:
  • · What are the facts and circumstances surrounding the claim?
  • · What is the rationale behind the reserves?
  • · What is the carrier's strategy for resolution?
  • · What is the expected time frame for resolution?
  • · What can the insured do to assist in the defense?
  • Are there any risk management recommendations?

Positive carrier response

The carrier's response to our initial inquiry confirmed our diagnosis:

  1. The claims person had not recently reviewed many of the claims.
  2. The logic in the reserving process required an overhaul. Our questions triggered a re-evaluation of the reserve logic, yielding $150,000 of reserve reductions over the 5-year loss picture.
  3. The carrier tendered many of the claims to the insured's subcontractors for resolution. These included landscaping firms, snow removal firms and janitorial service contractors. None of the tenders were previously accepted by the subcontractors' carriers. In our assessment, the contractual risk transfer program needed to be reviewed.

Once this information was obtained, the next steps for the agent are to:

  1. Analyze the rationale behind the reserves.
  2. Further question the logic behind the reserves.
  3. Analyze the defense strategies of the carrier and its claims counsel.
  4. Analyze the effectiveness and efficiency of the appointed outside law firms from the insured’s perspective.
  5. Suggest alternate strategies.
  6. Suggest re-assignment ("firing") of counsel where appropriate.
  7. Analyze the subcontract and certificate of insurance program from an insurance and risk transfer standpoint.
  8. Ultimately redesign the subcontract and certificate of insurance program to effectively transfer risk to others.

Results

These claims advocacy efforts settled many claims. This created a further reduction in the total loss picture by an additional $350,000 over the 5-year loss experience, yielding a total decrease in average losses of $100,000 over 5 years.

Over the next several years, many of the slip-and-fall losses were tendered to the insured’s subcontractors under the new process. The claims experience dropped dramatically. The underwriters targeted a 50 percent loss ratio to arrive at their pricing. With this improved loss picture, the policyholder’s average insurance costs were reduced by $50,000/year. Over 10 years, beyond the operational improvements, the insured will realize more than $500,000 in savings—and the insurance agent will have a very satisfied customer.

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