Responding to major losses in an increasingly complex world

Expert in this field

The loss environment in the last several years has been relatively benign – but there have still been a number of major losses to test the responses of insurers, brokers and loss adjusters. Dealing with expensive and complex casualties is the very opposite of a faceless, process-driven approach. The commercial angle to any major loss is a significant and delicate issue, with the policyholder and their insurer often having a differing understanding of the policy wordings or desired outcomes.

Adjusting such a loss demands technical excellence, but this alone is not enough. Expertise is only effective if it is delivered promptly, to the exact point of need, and supported by the appropriate technology and specialist expertise.

Using new technology
Technology such as iPads, video and drone technology is changing the way that loss adjusters work. The ability of drones to film inaccessible or unsafe areas after natural or man-made catastrophes is unique. As well as getting invaluable intelligence about what is going on the ground, the footage and images can be shared with the client, as well as surveyors and other building specialists. 360 degree views can be available on demand, and have the potential to deliver savings on professional time and travel costs, as well as providing a ‘live’ file report on the claim, which would take hours to put into a document.

Recently the use of drone technology has come into its own. In August, following the massive explosions in the Chinese port of Tianjin, which caused widespread damage, the Chinese authorities restricted access to the site due to fears of follow-up explosions and chemical contagion. Clients with goods due to be shipped from the port were anxious to know the extent of the damage, and insurers wanted to begin loss assessments.  Drones were used to give a bird’s eye view of the blast zone, allowing the extent of the damage to be plotted on maps, and helped to provide initial loss assessments to clients before access to the site was permitted.  The scale of the assistance required could also be established, which enabled resources from across Asia to be mobilised into China, so remedial and loss estimate work could begin as soon as site access was permitted.

The flooding associated with Storms Desmond, Eva and Frank (the three major flooding events recorded in December 2015), while catastrophic for those affected, was significantly less than that of the record-breaking flood events of the summer of 2007. Nevertheless the proximity of the storms and their geographic concentration made for some particular challenges from a loss adjusting perspective – and smart use of technology was often the answer.

These floods were the first major widespread surge event in the UK for a several years, which meant that it was the first time adjusters were sent into field fully equipped with the latest technology. The first advantage of this was speed, with technological advances making for a more rapid response from the insurance industry in dealing with the claims surge. For example, Cunningham Lindsey adjusters were equipped with iPads so that they were able to submit video footage so that insurers can better understand the exposure, arrive at a decision faster and make initial payments more swiftly. Insurers can now come back with a decision in hours, whereas previously it might have taken days. In a world where reputation rest on prompt claims payment, this technology is a tremendous enabler.

Drones were also deployed significantly for the first time in the response to the UK floods, flying over the affected area to build up a picture of not just of a claim but of the general environment. It was a helpful aid in determining the extent of floodwaters, and builds a more accurate picture of the event than relying on third party footage from television news, which will often fail to show the whole picture.

Drones also provide a view of the exposures before they can be reached on foot and help to determine how many people need to be deployed in a certain area, and in Cumbria, the drone footage helped identify three flooding hotspots: Carlisle, Cockermouth/Keswick and Kendal down to the South Lakes. The video footage from drones can be used in a number of ways by the adjuster. It can be helpful in preventing fraud – for example, in cases where a claimant says their car was parked outside when footage shows it wasn’t. It also helps with business interruption, and conveying to an insurer the seriousness of the situation when there is a wide area damage scenario.

This smart use of technology helps us to keep the customer at the centre of what we do.  It doesn’t replace face to face contact however – our experience in Cumbria demonstrated that there are many vulnerable clients who welcome the reassurance of human contact. But the shape of loss adjusting is altering with new technologies – and the industry mantra needs to around being quicker, more cost effective and delivering an altogether better experience for the customer.

Getting under the skin of a claim
With businesses now operating on an increasingly global stage, with subsidiaries, customers and suppliers in multiple countries, the result is often loss scenarios that had not been contemplated when the policy was being negotiated and written. For example, high degrees of interdependency can create significant upstream or downstream losses that were not anticipated at policy inception, and which can only be accurately quantified by experienced forensic accounting experts.

The forensic accountants provide economic loss quantification, financial analysis and valuation services to really get under the skin of a claim. In one recent claim a minority shareholder in a group of property development companies and joint ventures became aware that, during the 13- year period that the development group had existed, he may not have been properly appraised of the dealings in the group and the entitlements due to him. Once these concerns were raised with his fellow shareholders, the client was prevented from accessing the various company records for all of the businesses within the group.  Legal action was then commenced in order to regain access to these records, and help to uncover the truth.

By having specialist forensic accountants research the report and accounts, tax returns and all the company information and notes,  significant issues relating to the conduct of the businesses and the treatment of the minority shareholder’s interests were unearthed, which resulted in a settlement to the shareholder in excess of $22 million.

It is not that traditional loss adjusting is no longer required, but rather that extra expertise is required. A combination of the two leads to better outcomes for insureds and insurers alike. It is a myth that the insured wants to maximise the claim, while the insurer wants to reduce it as far as possible. In our experience, all parties are looking for the right answer, for a fair settlement. By being proactive and sensitive to the overall claim life cycle, forensic accountants can help to achieve this.

Getting results
Dealing with major and complex loss, and arriving at the right solution requires a potent combination of a high level of technical skill and industry specific knowledge, client co-operation and pre-loss planning, as well as access to the appropriate advice at critical times, supported by the latest technology – put simply; the right skill, at the right time, in the right place.