What do risk managers of US multinationals require from their loss adjusters? Can loss adjusters add value to the risk management process? Alice Roberts has the answers.
US multinationals have the highest productivity in the world, so it is not surprising that US risk management is in the forefront of innovation. The ever increasing drive for productivity in the Fortune 500 has raised the profile of the risk manager; if risk management is not seen to be making a difference, then the risk management department becomes an obvious place to look for further cost reductions. This situation poses new challenges for all service providers, including adjusters, who are working more closely with risk managers as the Fortune 500 increases retentions and the use of captives. Just as risk managers are expected to prove that they can add value to the organization, so adjusters must show how they are adding value to the risk management process.
It is apparent that risk management teams in the Fortune 500 companies are now dealing with three key types of change:
* Rapid change within their organizations.
* Changes in their own roles in the organization.
* The increasing need to prove how they add value.
Risk management is dealing with rapid organizational change
Fortune 500 risk management teams are dealing with rapid geographic and product line expansion. Clearly, going into new territories and selling new products or services creates new exposures. But rapid expansion or change can also create other less obvious problems. If expansion is by acquisition or merger there is a new corporate culture to negotiate. In dealing with operations in developing countries risk management may find it necessary to discard whole sets of assumptions about what is acceptable before any progress can be made. Decision-making, working conditions, timelines, expectations and the nature of communication itself are different in every country. These differences are sources of potential misunderstanding and conflict and can derail a loss prevention effort or the resolution of a large claim right from the start.
The risk manager has a new role and needs a wide range of new skills
A theme of RIMS this year will be changes in the risk manager's role. The message will be that the risk manager is expected to make a tangible difference, and to be able to communicate the difference in financial terms. As companies have run out of scope to improve processes individually they have turned to re-engineering the entire value chain in an effort to gain productivity. A key element of re-engineering is holistic thinking. It is no longer enough to look at the organization's risk as a series of isolated problems. Creative ways of analyzing risk must be found, in order to reveal chains and patterns that can be broken or changed to reduce loss and produce bottom line results.
To do this effectively the risk manager needs a wide range of skills; the ability to assimilate key features of new businesses and products, to understand interdependencies between business units, processes and markets, and above all to communicate laterally and vertically within the organization.
Risk managers must prove that they add value
Maryellen Peters of Presidium Inc., a leading provider of integrated disability management services, comments that a key concern of the risk managers she talks to is their responsibility for measuring the outcomes of their initiatives. This is driven by the need to prove that risk management can add value to the organization. Boards of Fortune 500 companies no longer take any functional area for granted; if results cannot be measured, it is likely that they will not be counted. In addition to measurement, risk managers have to consider how to present their results in a digestible format. Like everyone else, they have to sell their service, and they need the tools to enable them to sell effectively to top management.
The large adjusting firms have expanded in response to the expansion of the Fortune 500 companies
In recent years the US adjusting firms have rapidly expanded their geographical and technical reach, to reflect multinationals' expanded areas of operation. According to many in the industry, such expansion does not necessarily produce positive results. As manager of international property claims for Zurich-American Insurance Group in New York, Bob Goercke works with adjusters on large claims for many of the Fortune 500 companies. In his view, the personal attributes of the adjuster are paramount. Adjusters must be flexible in their approach and possess the candor necessary to interact effectively with the various parties involved. Perhaps most importantly of all, according to Mr Goercke, they must be able to recognize and communicate their own limitations, so that the right skills can be brought in to complete the team working on the problem.
But can they maintain client responsiveness?
These types of skills are essential if adjusting firms are to help risk managers deal with the uncertainties they face in their rapidly changing organizations. Technical knowledge and dots on the map are useless if the adjusting firm cannot fill the role of ambassador, acting in concert with the risk manager's goals and personal style when dealing with newly acquired or far flung operations units. However, it has proved very difficult for the large US adjusting concerns to inculcate and retain these softer skills. In the last few years many key personnel have left the major adjusting companies in the US to create smaller independent firms. The firms they helped build had been transformed, often by acquisition, into large corporations typically driven by revenue generated from the volume sectors of the US claims market. In this environment many professionals found it increasingly difficult to maintain the level of client responsiveness needed if the firm is to fully support the risk management goals of Fortune 500 clients and their service providers.
The adjuster should support the risk management team . . .
In this context, responsiveness means interacting with risk management, the broker and insurers to learn about the organization and the specific problems that need to be overcome. Paul Buckley, risk manager of Lucent Technologies, is a proponent of team risk management. His holistic approach to Lucent's international construction program includes all parties in the design stage of the risk management solution. The team, comprising Lucent Risk Management, and the brokers and adjusters, plans all aspects of the program, taking into account specific local conditions at the planning stage. Mr Buckley expects the loss adjusting firm to input to this design, bringing their international experiences to bear not only on claims matters, but also on loss control, underwriting considerations and the overall design of the program. This process in itself is an analytical exercise; by going through a series of "what if" scenarios, the team identifies problem areas that would otherwise go unnoticed.
In these days of outsourcing, risk managers expect adjusters to contribute key skills and competencies to the risk management team. These will include support in understanding new markets and processes, and help in designing the communications process within the organization, and between the organization and various service providers at all levels.
And help measure outcomes
Anita Schoenfeld, a risk management consultant at Tillinghast-Towers Perrin in Dallas says that the risk managers she talks to are much more computer literate that ever before, and so demand more from their systems. She explains that they are looking for consolidation of data throughout an organization. In another example of the holistic approach Ms Schoenfeld comments that it is no longer enough to look at loss of productivity in isolation as a workers' compensation problem, or a medical benefits issue. Risk managers expect their service providers to be at the cutting edge, providing fully integrated solutions to the problems caused by employee disability. According to Ms Schoenfeld, these solutions must include methods of measuring across the whole organization, and be flexible enough to accommodate such changes as mergers and acquisitions if meaningful information is to be produced. She says that risk managers want information in a form that allows them to manipulate the data on the desk top, and carry out sophisticated analysis, such as the ability to experiment with "what-if" scenario building. The risk manager has the unenviable task of trying to achieve all of this cost effectively.
These are challenging requirements, and it would be foolish to suggest that they can be easily met. Nevertheless, risk managers do expect their claims service providers to be able to participate creatively in solving these problems.
Where there is a large volume of data to be captured it is often best to utilize an off-the-shelf RMIS system. However it is rarely cost effective to develop an organization-wide RMIS system. Instead, low volume claims data can be captured more cheaply and effectively using a variety of methods. Where it makes sense to integrate data, this can then be done using key data from the various systems in use in the organization.
Adjusters need to do more
All too often, the loss adjusting firms offer the same old solutions to risk managers, their brokers and insurers. In effect the message is "this is our network, you have probably tried our service, you know our systems, take it or leave it". Risk managers cannot afford to accept this attitude. Adjusters can and should add value, and help the risk manager make a difference.
Alice Roberts is co-founder of Ellis & Buckle (Americas) Inc., based in Atlanta GA. The firm specializes in designing and managing claims programs for multinationals. She has lived and worked in Europe, Asia and the US, and currently manages claims programs for several Fortune 500 companies. Tel: (1) 770 828 0098, Fax: (1) 770 828 0819, email: email@example.com