Four useful ways to efficiently determine BI losses after catastrophes
Insurers can help insureds return to work quickly and reduce financial losses by using these methods to manage business interruption claims.
The only thing unpredictable about the summer season is not if there will be wildfires, tornadoes, hurricanes and severe storms, but when and how many there will be. Unfortunately, 2020 was another record-breaking year for natural disasters in the U.S., in part due to wildfires in the West and hurricane activity in the South and East, which meant insurers were busier than ever. The National Oceanic and Atmospheric Administration (NOAA) is predicting that the upcoming hurricane season could be another busy one.
To help prepare for the inevitable influx of business interruption (BI) claims this summer, here are some methods insurers can incorporate into their routine to manage BI losses more efficiently so policyholders can return to work more quickly and lessen their financial damages.
1. Bring in the right financial professionals early
One way to bring greater efficiency into the claims process is to bring the appropriate financial specialists, such as a forensic accountant, in early. Forensic accountants are considered to be the investigators of the financial world and provide an independent, holistic view and measurement of the insured’s loss. The forensic accountant will examine the policyholder’s organization by researching and analyzing their financial and business operations data, as well as external market factors, before objectively determining the value of the loss.
When engaged in the early stages of the claims process, forensic accountants can also aid in identifying and quantifying losses should the period of restoration go beyond initial estimates. This is particularly important to the adjustment team if the loss mitigation team needs to include certain expediting or costs, such as additional equipment or manpower, to potentially offset the loss of business income exposure. The claims review will examine how feasible these efforts are compared to additional loss of business that could be sustained if expediting measures aren’t put in place.
Following a catastrophe, it is not unusual that a policyholder may have lost, or lost access to, critical business data. The forensic accountant can work with the policyholder to identify, find and sometimes even work to rebuild the financial record of the company.
2. Set clear expectations with policyholders
Directly tied to having your financial specialists in place early is the importance of setting clear expectations with the policyholder. This includes understanding the policy coverage, outlining the overall claims process, timeline, and identifying what documentation will be required to support the claim. The financial specialist assigned to the loss can work directly with the policyholder to discuss the types of financial information necessary to get a complete and accurate picture of the business and its losses.
Most likely, it is the policyholder’s first time experiencing such a catastrophic loss, and they will be anxious to know when they should expect to see funds that can help get them back to working order. It is critical that the policyholder understands the terms of the policy coverage, the documentation that will be needed, as well as how the claims process works. Policyholders who use cloud storage or remote storage may have an easier time accessing documents than those who do not. Insurers will need to make sure those less tech-savvy policyholders realize that delays in submitting required documentation could extend the process.
3. Provide timely and transparent updates
After a natural disaster, insurers may be inundated by claims, leaving little time to connect with policyholders. It is necessary, though, to establish transparent lines of communication in order to build trust and foster a relationship between the insurer, the policyholder and any specialists brought in to assist on the claims review. No one likes a surprise when waiting for a crucial financial settlement. Keeping the policyholder up to date on the status of where they are in the process will limit frustration and confusion. Building goodwill through communication is also beneficial should any part of the process be delayed.
Often times the period of restoration, or loss period, may last months versus weeks or days. With claims that involve long loss periods, there is generally a series of periodic interim reporting that occurs. It is imperative that the insurer establishes the frequency of required reporting from the forensic accountant and to the policyholder. This can occur monthly, quarterly or however often is required. Establishing reporting expectations will help eliminate frustrations from the policyholder in obtaining financial recoveries that are due from the insurer and greatly assist with cash-flow implications.
4. Consider implementing new technology
After decades of doing things the same way, technology developments and customer demand are pushing the insurance market to innovate. There is an opportunity to modernize the commercial claims experience with the introduction of technology-enabled processes, such as client-facing claims platforms. When implemented correctly, this type of technology can enhance the relationship between insurer and insured by providing greater efficiency and transparency in the claims process. The use of technology-enabled claims platforms can lower claims management costs, create more accurate estimates, keep both parties better informed throughout the process, and, ultimately, resolve claims more quickly.
New digital business interruption claims platforms available in the market, like Baker Tilly’s Quantum, are providing on-demand access for all parties. For the insurer, automating the filing process means they can handle larger volumes of claims more quickly without increasing mistakes. For the policyholder, it means they still have personalized service, but also the benefit of being able to access real-time updates about their claim at any time.
When disaster hits, having the right team in place, setting expectations and communicating are all essential elements to more efficiently managing the claims process and building successful client relationships.
This article is printed here with permission from Baker Tilly.
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