Reinsurers are starting to assert themselves in the claims process, demanding increased control and earlier involvement. And they’re using the loss adjuster to do it, David Banks writes. We ask how cedants can fight back.
Buyers, beware: you’ve got a new battle on your hands. Reinsurers are getting tough on claims – and they’ve got a secret weapon in their fight to gain control: loss adjusters.
Loss adjusters have taken an increasingly important role in the claims process, and are now an essential component in big-ticket international reinsurance claims. Speak to any international loss adjuster and you gain not only a lesson in the complex world of claims, but also an unexpectedly powerful insight into the changing cedant-reinsurer relationship at the coal face of the industry.
So what is the main change in the crucial claims arena? It’s simple – reinsurers are beginning to throw their weight around. In 2009, reinsurers on large international business, particularly the facultative market, have taken a noticeably tougher line on claims. They are speaking earlier to the loss adjuster, becoming involved in claims at a grass roots level and are more frequently demanding the right to appoint the adjuster before a reinsurance contract is signed.
Axis ClaimsPro’s executive director Europe, Alistair Jacob, says: “There was a time where there would nearly always be a claims co-operation clause on a contract where the cedant had reasonable control and could appoint their own adjusters and run the claim, so long as the reinsurer did not object. What you are starting to see is that reinsurers are substituting that with a claims control clause.”
Crawford & Company’s executive vice president for global markets, Mike Reeves, believes reinsurers have got more hands-on because of their greater exposure to risks and growing experience in emerging markets. “Reinsurers do seem to get involved far quicker. That is particularly true in certain sectors, such as construction, engineering and energy, and in certain territories.”
The use of technology in adjusting and in the insurance world, particularly in conferencing, messaging and electronic document manipulation and transfer, has allowed reinsurers to play a role earlier in a claim and in the adjusting process. Axis ClaimsPro’s executive director Latin America, Norman Mitchell, says: “Reinsurers, who usually have their own modelling, understand their exposures a lot quicker and a lot better.”
Reinsurers’ claims teams have become more technically adept, often recruiting claims personnel with a legal background, Jacob says. GAB Robins’ head of global markets, James Rayner, adds: “We have seen reinsurers become more active on larger cases and they are looking to influence the terms and expertise brought to the claims.”
Reinsurers are also keen to impose their own ideas on risk management. They are coming under pressure from rating agencies and investors to have a firm grip on claims and exposures. And, of course, there’s the question of money: reinsurers that have a say in the adjusting, and can speed up the claim, tend to settle for less. As Jacob observes: “The financial world is very closely regulated and claims departments are no exception.”
Stand your ground
So as reinsurers bring in the heavy guns on claims, how can cedants fight back?
Well, first up, they can retain more risk. But low-retaining cedants can use various other measures to maintain their say in the process. They can prove their claims capability and strong adjusting relationships to their reinsurer in order to reassure them.
Reeves, who is leading a company project to assess the growing role of adjusters in reinsurance, says pre-planning by cedants is growing in importance. “On a major project, the insurer and adjuster should put a detailed claims programme together at the outset to ensure key claims individuals are appointed and that everyone knows the responsibilities of the various stakeholders.”
Rayner says: “If we know the claims people and their responsibilities beforehand, the claims process is more straightforward, so cedants have a vested interest in making sure roles are carefully set down in a contract before a claim arises.”
Cedants can go one step further than this by having pre-existing claims and loss adjusting agreements. For example, specialist lines underwriting agency CFC announced a strategic partnership agreement with Crawford & Company, including a claims administration interface for its brokers and their clients. Cedants can also promise speedy delivery of reports or, when that’s not possible, regular updates.
But it doesn’t always have to be war. Hannover Re says it often welcomes greater insurer input, even when it has low retention. A spokesman says: “A low primary retention is not always indicative of a direct contact to the loss adjuster. This depends on the cedant’s ability and qualification to handle a claim.”
Equally, some cedants actually welcome reinsurer input. Kiln’s head of claims, Ashley Lawrence, says: “The cedants have said: let’s get the reinsurers much closer to the action so that issues that might lead to problems in collecting a reinsurance payment can be flagged at a much earlier stage.”
This kind of ceasefire is obviously welcome to all sides. Buyers, it might be time to start waving the white flag. GR