A new claims strategy will keep the market at the forefront of claims payment.
Lloyd’s reputation for paying valid claims is one of the cornerstones on which the market was built. From the San Francisco earthquake of 1906 to the tragedy of 9/11 and more recently, hurricanes Ivan, Charley, Jeanne, Frances, Katrina and Rita, Lloyd’s claims track record is at the forefront of the industry globally.
However, Lloyd’s is not content to rely on its history in this area; in the fast-moving world of insurance you are only as good as your last payout. The market is undertaking a number of initiatives – in the form of a Claims Strategy – to ensure that it further strengthens its reputation for claims payment.
The aim of the Claims Strategy is to move claims from a back-office service to the top of Lloyd’s insurers’ agendas as a front-end, value-added function. Lloyd’s has consulted with the market, as well as the LMA and the LMBC, during 2005 and developed some key initiatives to improve claims. Simon Catt, head of claims for St Paul Travelers Syndicate Management, says it is critical that these initiatives succeed: “Lloyd’s has identified claims as an area it can improve on and which is critical to the policyholders.”
Where it all begins, life at the claims front line
Chris Lunda, an international marine claims consultant at VeriClaim Inc, Lloyd’s Agents in Atlanta, Chicago, Detroit, Los Angeles, New York, San Francisco, St Croix and Guadalajara, was among the first loss adjusters on the scene after Hurricane Katrina.
He says he was faced with obstacles never before seen in his career.
“The enormity of the situation was the first hurdle. Federal disaster declarations blanketed 90,000 square miles (233,000 km2) of the US, an area almost as large as the UK. The second difficulty involved communications, which had become virtually non-existent. Cell phones were shipped in from other states, as local phones were useless; surviving wireless hot spots for email transmission were identified and discussions with government officials began. Access was problem number three. Martial law was now in effect in New Orleans.
“In all restricted areas we carried special government passes to clear military checkpoints on our way to survey. The city was a maze. Downed trees, homes which had come to rest in the middle of the street, power lines strewn about like spaghetti, all making the task at hand that much more difficult.
In the early days after the water subsided, we were armed, as the security situation in New Orleans was tenuous at best. Hour-long boat rides were the order of the day to access some survey sites. In other instances we landed on dry stretches of highway in small aircraft to carry out our assignments.”
As from 1 July 2005, a framework of claims management principles of good practice, along with targeted minimum standards was established. As part of a phased approach, further minimum standards will be introduced during the next three years. These clarify for Lloyd’s businesses the claims-related goals to be addressed in their business plans. However, to avoid homogenisation, these standards are merely a framework to help businesses put the right procedures in place, and it is up to each firm to meet the standards in their own way.
Catt says St Paul are big supporters of the standards initiative, which create a better and more understandable market.
The standards focus on claims reserving, the selection and management of external experts, and the requirement for performance measurement. This should make clear who is doing what in the claims agreement process, defining processes and procedures to enable valid claims to be paid quickly. It also ensures that the most experienced claims handlers work on the most complex and high value claims.
Another initiative is the creation of an effective ‘claims agreement for followers’ process. In the Lloyd’s market, there are only two agreement parties for brokers to deal with for most claims: the lead underwriter and Xchanging Claims Services (XCS). In order to further improve the process, Lloyd’s has established a new contract with XCS, which came into effect in July 2005. As a result, XCS is hiring claims experts into senior roles, providing extensive training for employees, and investing in new systems which will provide much better information.
Kent Chaplin, Lloyd’s head of Claims Strategy said: “A lot has changed and will continue to change to improve the handling of valid claims. We all recognise the importance of ensuring Lloyd’s continues its outstanding record for paying valid claims.”
