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The Preparation and Execution of a Big Claim
Jeff Esper
At RWH Myers, we often describe what we do as “claim preparation,” which refers to the tangible part of what we do, but there is so much more to our craft. When you have a "big claim," like the many companies that were impacted by recent hurricanes and wildfires, insurance placements are expected to respond. But just because you have a policy doesn't mean your claim will be prepared properly, quantified accurately and paid quickly. It depends on the preparation and execution of your claim team.
Bill Belichick, the Head Coach of the New England Patriots, has won more super bowls than any other coach. Whether you’re a fan or not, you have to appreciate the results of his leadership. His famous mantra is "do your job!" It is simple yet profound, and it's relevant to success in any team endeavor. Belichick preaches it over and over because he knows that winning is dependent upon each player doing their job, the right way. Nothing more. Nothing less.
A claim team should function much the same way, but the preparation can begin even before an occurrence. Having a skilled team with defined jobs and being well prepared to execute, plays a vital part in winning a big claim. Let’s explore the many jobs there are to do during the claim process and consider how preparation and execution may influence the final outcome.
- Communication - At the center of all communication should be a risk management professional who understands the insurance policy, the personnel and the goals of the organization. It is important that the flow of information and communication is managed at all times. Nothing should be shared or said without this person knowing about it.
- Coverage Interpretation - Brokers and attorneys are available to interpret coverage and should be leveraged to assist risk management in resolving any coverage disputes. Policy interpretation is necessary to determine how coverage applies and how deductibles are to be calculated for each cause of loss. It doesn’t matter how well a claim is prepared until all coverage issues are resolved.
- Information Gathering - There will be many requests for information and someone inside the organization should be assigned to produce all necessary information to adequately document the loss. This will be a daunting task due to the shear volume of data that will be necessary to prove the loss, but the burden will be lessened under the direction of an expert claim preparer.
- Strategy - By definition, strategy means “a plan of action or policy designed to achieve a major or overall aim.” The plan of action defines "who" will do "what" and in what time frame. Having experienced claim specialists on the team to set the standards of performance and to anticipate obstacles will keep the claim moving forward toward the goal.
- Technical - For property losses, there may be conflicting opinions about the extent of damage, such as whether something can be repaired or needs replaced. Policyholders should have technical experts on the team to evaluate the property or equipment in question and to work towards an agreeable solution.
- Quantification - Measuring the impact on earnings is a business interruption accounting exercise that encompasses an understanding of the company's business, it's operations and time element insurance. Calculations will be audited by a forensic accountant that works for the insurer. To achieve a level playing field, an independent forensic accountant is well-suited to quantify the loss on behalf of the insured.
- Documentation – It’s the policyholder’s duty to make their claim to their insurers. The claim package should consist of summaries, listings, source documents, invoices, costs and calculations. All claims will be met with adjustment scrutiny. A well prepared and properly supported claim will deter opposition and settle faster.
The amount recovered from insurers will be determined by how well everyone does their job. If there is any confusion on your claim team about what to do, who should do it and when it should be done, it will influence the outcome. With the right team, all doing their job, you’ll have the best chance to win the big claim and enjoy a fast and fair recovery.
If you incorporate this concept into your claim approach, the next time you are in a big claim, the outcome may not involve confetti, but you will be recognized for a job well done!
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Happy Holidays from RWH Myers & Company
Making a business interruption claim is more than just an accounting exercise. It requires a good strategy, a thoughtful process and perhaps most of all, patience. These lessons come from experience and the team at RWH Myers has earned it from decades of preparing BI claims. Though this topic is of the philosophical nature, it is just as important as the details behind a business interruption calculation. So let’s dive in and see what you really need to make a BI claim. Strategy Every loss is different. You can’t apply the same game plan and the same approach to every claim. You have to assess the situation and all its parts to devise a specific workable strategy. Experience will help ensure your strategy is appropriate for the situation, but the claim will take on a life of its own. The initial loss assessment is derived from the loss information such as what happened, the timeline of events, the impact to operations and how long it will take to get back to normal. As forensic accountants, we will look at the entirety of the situation and dissect it from every angle to figure out the full scope of loss and then determine the best approach to measuring and supporting the claim. We will also anticipate how the claim will be adjusted and plan for arguments against the claim. Taking the time to develop a proper strategy will pay off at every stage of the claim process. Process Once you understand the situation and have designed an effective strategy, you can lay out a process to get to the desired result. The process starts off with identifying and assembling the team to execute the plan. The claim will require data from various sources and input from key internal experts to provide insights as to the impact on operations, both upstream and downstream. The process also includes managing claim adjustment, from setting the timeline to handling requests for information. During the process, your claim preparer will work to keep all phases of the claim moving forward whether with data gathering or insurer feedback. Claims tend to start out with a high level of attention, but it is common to lose momentum. Simply put, a well-defined process will keep the claim moving, limiting distractions and roadblocks. Patience Patience doesn’t equate to conceding to a lengthy and arduous process. It’s just the opposite. By definition, it means, “quietly and steadily persevering or being diligent, especially in detail or exactness.” It is important to understand that certain parts of the claim take time to develop, and that time is critical to ensuring a thorough and well thought out claim presentation. For example, taking your time in the beginning of the process to lay out the foundational elements of the claim will avoid obstacles that may delay claim settlement and the amount recovered. It’s best to set expectations early and commit to the process. Again, practicing patience will expedite the claim process and improve the outcome. You can rely on the experience of your forensic accounting team to lead that effort. So, you see, it’s not all about the numbers. There is more to the intangibles than you may have thought. Every claim has its own unique challenges. You should be prepared for anything and everything. Again, preparing a claim is just as much strategy, process, and patience as it is the technical elements of claim preparation.
Property damage insurance claims are among the most infrequent for corporate policyholders, but this year Louisiana has suffered through a record number of Hurricanes. When catastrophe strikes, recovering insured losses essential to rebuild and resume operations. Effected policyholders will need expert help to evaluate, organize and document their claim to present to insurers. Forensic accountants that devote their practice to preparing claims for policyholders have every day experience just as adjusters and auditors do, so it is certainly to your advantage to hire a firm of experts to represent your interests throughout the property damage and time element claim process. Though the specific insurance claims and the policyholders may change, the vital steps to recovery remain the same. One thing both sides agree on is that the claim process goes smoother when the policyholder is well prepared for demands of a claim from start to finish. The partners at RWH Myers prepared a detailed guide to assist policyholders in preparation for claim recovery. It is designed to serve as a resource and a framework for the claim process and includes the following sections: Establish Appropriate Accounting Methodology: Provides guidance and an organizational framework for post-loss activities, establishing specific accounts to capture the loss. Property Damage Expense Categories: Explains the types of expenses that may be included in each category of coverage and the documentation required for these costs. Claim Preparation Objectives and Overview: Identifies objectives for the claim preparation process, and provides a conceptual framework for achieving them. What is Covered: Examines the direct and indirect exposures to loss that are typically encountered, and provides guidelines for determining whether specific types of property damage losses are covered under the policy. Claim Preparation Procedures: Suggests timetables for the submission of inventory, property damage, and discusses the format and content of standard claim submissions. Audit and Settlement Guidelines: Discusses the procedures undertaken by the insurers adjusters and experts, and provides an overview of the settlement process. Click here to download the full guide.
Questions?
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Phone: 412-498-2802
Email: ChrisHess@rwhMyers.com
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