Claims - From The Complex To The Catastrophic
This article first appeared in Captive Review’s Global Programmes Report in November 2018.
"We were serving our customers the day after the hurricane and our entire claims team was back on Thursday after Maria struck." -Gustavo Sarabia, head of AIG property claims for Latin America and the Caribbean
We are in the midst of the Atlantic hurricane season, just over 12 months since a trio of powerful hurricanes -- Harvey, Irma and Maria - impacted the US and Caribbean in quick succession. The storms were a test not only for the businesses and communities affected, but also for the wider insurance industry due to the extensive damage caused in the space of just a few weeks. Total economic costs are estimated at $220bn, of which $80bn was covered by insurance.
A number of AIG's multinational clients have business interests in the region, including those in the marine, energy, aviation, hospitality and manufacturing sectors. As they anxiously awaited updates in the aftermath of the storms, it was clear this would prove to be one of the biggest challenges yet for AIG's claims division.
The aim was to minimise the impact of business interruption, preserve brand and reputation and work closely with all parties involved to get clients’ facilities and operations back up and running as quickly as possible. Identifying the impact to multinational clients in the affected region was paramount, as AIG looked to make early interim payments in accordance with its Property Claim Promise.*
The high volume of claims impacting both local and multinational clients, as well as difficulty gaining access to damaged sites, were among the challenges that needed to be overcome. Local claims teams were able to draw on AIG's global claims resources and expertise to meet the increased demand, and the availability of new technology was critical to success. Drone footage and satellite imagery were utilised to carry out initial damage assessments of flooded sites in Texas, with the information shared back to clients.
Remarkably, AIG's local claims adjusters in Puerto Rico were poised and ready, even though many of their own homes were badly damaged and without power. They were able to proactively identify potential losses and inform brokers and multinational clients, in many cases before loss notifications had even been received.
Gustavo Sarabia, the Puerto Rico-based head of AIG property claims for Latin America and the Caribbean, is proud of his team’s active response, and the way in which they worked with their global claims colleagues to ensure standards were met and maintained throughout. "We were serving our customers the day after the hurricane," he recalls. "We had jeeps and radios, we were fully prepared and our entire claims team was back on Thursday after Wednesday's hurricane."
Common challenges and pitfalls
The significant growth of multinational insurance programmes in recent years reflects the increasing sophistication of multinational companies’ approach to operational risk management and risk transfer. The growth is also indicative of financial controllers’ and risk managers’ understanding of the benefits that controlled master programmes can bring.
Only a handful of insurance carriers are able to properly structure multinational programmes that truly respond to clients’ local needs. This is primarily due to the need for a global reach, and the expertise needed to help clients navigate complex local regulatory and compliance requirements. Key among the demands of multinational insurance buyers is the need for contract certainty at inception and a claims process that delivers a seamless and globally-consistent client experience wherever in the world a loss occurs.
These two demands are interlinked. “Should a loss occur on the day of inception of a multinational programme and a local underlying policy has not been issued in the relevant country, it could lead to coverage uncertainty and unnecessary and lengthy delays in the claims process, including claim registration, coverage determination and in some cases claim payment,” says Anastasia Moody, regional multinational claims manager for Asia Pacific, AIG.
"Where allowable, our claims examiners will not delay in commencing investigations into these claims if they know a local policy is to be issued," she adds. “But it’s unnecessary stress for the client, broker and claims examiner if a claim comes in and the local policy hasn’t been issued."
In 2016, AIG rolled out a globally consistent end-to-end process across the full breadth of general insurance products that are delivered around the world. This new approach promotes the shifting of all of the key activities from after the inception date to well in advance of inception. Since launching the process, the number of policies issued before the inception date has more than doubled and a growing number of multinational clients have benefited from receiving all local policies prior to inception, ensuring full contract certainty.
Failure to have a local policy issued by inception can also be seriously detrimental in those countries where 'cash before cover' regulations apply, or backdating of policies is not allowed, explains Justin Andrews, regional multinational claims manager for EMEA, AIG. "In these instances, there will be no local coverage for the loss if premium hasn’t been paid or the local policy hasn't been issued when the loss occurs. Attention will then turn to whether the master policy can cover the loss and if covered, whether insurance proceeds are able to be paid to the local insured or parent company."
Delivering claims best practice, every time
Another issue that can arise when handling a claim under a multinational programme is where a local policy does not provide full coverage for a loss. When this happens, the local claims handler will work with a claims handler in the office where the master policy was issued to review and determine coverage under the master policy.
Claims handlers from each office will collaborate and exchange information until a resolution is reached. To ensure consistent messaging, they will also agree which handler has the responsibility of communicating with the client during the life of the claim.
The objective is to provide a consistent and efficient standard of service so that the client’s expectations are met, regardless of when or where the loss has occurred. In so doing, AIG's claims handlers help preserve the client’s brand and reputation, mitigate losses and enable business facilities to resume normal operations as quickly as possible.
Technology plays a key role in ensuring claims information is captured on claims systems and shared, adhering to bespoke claims handling procedures, where applicable, and made available to AIG’s global claims network of over 7,000 claims staff worldwide.
"Country to country, there can be nuances from a regulatory perspective with respect to claims handling that might vary," says Alan Petitt, regional multinational claims manager for the Americas, AIG. "But from a macro perspective, the best practices we have in place for claims handled under a multinational programme should be followed on a global and consistent basis."
In cases where a significant or catastrophic loss occurs and local claims resources are stretched, AIG will find a solution to best serve the client. One claim involved a destructive gas explosion in South America that caused the structural collapse of a condominium complex and resulted in numerous injuries. Other buildings nearby were damaged and there were associated business interruption losses.
While AIG had no local claims presence in the immediate area, a team of loss adjusters, investigators and legal counsel was quickly amassed to the area to process claims arising from the loss. Within days, an early strategy was developed with the client and its broker to fast-track the settlement of claims. In total, over 600 claims were received and 95% were settled in a timely manner without litigation. Moreover, the client was able to continue its operations in the community with minimal disruption.
In an increasingly global and interconnected world, the past decade has seen a steady shift towards multinational insurance programmes and this is expected to continue. For large global corporate insurance buyers, the benefits of a controlled master programme are clear. They maximise global insurance capacity and reduce complexity, while maintaining centralised control over risk management and risk transfer practices.
Multinational insurance programmes also allow claims to be handled in an efficient and compliant manner, wherever in the world a loss occurs. From the examples of last year's significant hurricane losses to individual complex claims, such as the South American gas explosion, it is clear that people are at the heart of delivering high standards of service when it comes to processing claims for multinational clients.
It is often said that claims are the "shop window" by which the industry is judged. By delivering seamless, high quality claims service for multinational clients, AIG aims to continue to support the growth in demand for multinational programmes and the more consistent approach to insurance coverage and claims handling they provide.
AIG’s Property Claim Promise
When a loss occurs, AIG will confirm cover as soon as possible and pay 50% of the estimated property damage and extra expenses to help maximise business continuity. We will advance this payment once coverage has been confirmed and the estimate for damage has been agreed.
Anastasia Moody is regional multinational claims manager – Asia Pacific. After eight years of working as a lawyer in private practice, she accepted her first insurance claims role in 2006. Since then, she has held varous senior claims handling roles in London, Australia and across Asia Pacific. She joined AIG in 2011 and has been in her current role for the past 18 months.
Alan Petitt is regional multinational claims manager for the Americas. He provides guidance and support to claim personnel on the unique features, requirements, and procedures of multinational and global fronted programmes, including assistance with network partner claim related matters. His responsibilities include assistance in the resolution of multinational claim related issues, development and implementation of multinational claim related strategies, regular distribution and enforcement of multinational claims best practices.
Justin Andrews is regional multinational claims manager for EMEA. He has extensive claims experience across all lines of business and multiple territories having worked in the industry for over 25 years. In recent roles, he has been client facing, which involves identifying customer needs and developing bespoke claims solutions for multinational client. He joined AIG two years ago and the role involves developing the multinational claims value proposition.