Navigating claims in international programs - part 1: global claims for global risks

_{We’ve been investigating claims best practice for international programs, gathering insights from across our network of partners and our own team. These include claims handlers, brokers, loss adjusters and coverage lawyers. This series of articles covers practical information and useful tips on how you can address the issues that may arise in the reporting, handling, and settlement of cross border claims. Read the next article in the series.}

There's no one model for an international business. From manufacturing to financial services, the way organisations with operations in multiple countries are run is complex and nuanced. What does unite them, however, is that they are uniquely exposed to a wide range of risks, from climate change to factory fires, which they must manage and mitigate across borders.

As multinationals take advantage of opportunities to develop business in different parts of the world, excitement about the commercial opportunity must be balanced with the recognition of the potential risks and issues involved.

"Companies decide to invest in countries, but the risks can change quite dramatically and unexpectedly," explains William Wilson, Head of Major Loss (Ireland) at McLarens. "So much happens that you can't foresee. If you take the 2011 Thai floods for example - the affected area which had never been considered a significant flood risk became a 40-mile-long lake for up to two months."

In response to this, international programs have become a key solution to help businesses navigate and manage this risk, providing consistent coverage and allowing for central risk management, backed by strong local policies.

International programs require a strong claims management process to manage risks on a global scale.

"Customers want to know what to expect in the claims process, and they want to know it ahead of time," says our Head International Programs Americas, William Porter, "we're proactive with customers, making sure they know who their claims contacts are, the process, how reporting should work, and how adjustments will work. That was the driving idea behind our Claims Champions. Appointing people locally who know International Programs and know the region, giving customers a local point of contact for claims."

Ian Hasson, Director Financial Risks, Europe Middle East & Africa at Sedgwick International, uses the example of a manufacturing plant to explain the complexity of claims across borders and business units.

"I was handling a loss for a manufacturing plant. There was an incident, and production was halted for a period of time. The loss site produced certain product lines for this global company and as a result of the loss the client was unable to fulfill orders in multiple territories. Instead of being able to fulfill 100% of each order using their own products, they were only able to fulfill 75% because the manufacturing facility that would cover 25% of the product sold had been taken out of production.

"So, in that case you're not then just looking at the accounts and the results of the business in one location, but there's a need to request information from multiple territories. That creates challenges in terms of gathering information in a consistent way, making sure the right information is provided as well as leading to delays in receiving requested information. Then you've got the added complexity of trying to understand what the situation would have been in each of these territories had orders been capable of being fulfilled."

Customers can prepare in advance for claims situations. Setting up processes to ensure that the key information required to present and quantify a claim is collected and collated in a consistent way, and by checking that the correct information is presented to insurers.

From our conversations with partners, we identified 10 main themes and takeaways for risk managers to get to grips with while working with their broker and insurer.

We’ll be offering insights and tips on each of these subjects in subsequent pieces in this series.

    1. Manage the innate complexity of international programs; and simplifying where possible. 

With global organisations complexity will always be an issue. Specifically, the complexity of the international insurance market; the number of insurers and reinsurers likely to be involved in international programs in various capacities; the issues that can arise with follow markets on claims.  

    2. Navigate the challenges presented by logistics, culture, and language in international business

Local customs, philosophies and languages can all impact your claims handling. Making sure you have the right balance of global and local specialists means you can cover all the bases and overcome the challenges of operating worldwide.

    3. Understand different legal systems and jurisdictions involved worldwide

What is the applicable law and competent jurisdiction? This is the key question at the outset of a claim. It's only with that confirmation of the applicable law and competent jurisdiction that the parties know what to expect during the claims handling process.

    4. Understand the structure of your International Program

From local policies to DIC/DIL to fronting, make sure you understand how your program is structured. This will impact how your claim is managed. 

    5. Manage and streamline the process for claims information

Keeping information streamlined helps the claims process run effectively, with one person leading the management and delivery of information.  

    6. Operate in a way that is as far as possible globally consistent

Understand your insurer’s, broker’s and adjuster’s global networks. Do they have the necessary resource and expertise locally? Can they operate consistently across regions and territories?   

    7. Achieving quick and effective communication and information exchange

Communication is key to effective claims management, from central insurers, local insurers, local adjusters, and central adjusters. Communication within your business is also essential. Claims portals are a good platform for dealing with high volume, attritional losses, and for keeping track of a claims portfolio.

    8. Getting the processes right; stress testing; building process resilience

Pre-incident planning, running loss scenarios and stress testing can all build resilience.

    9. Get ahead of financial and cash flow issues

Establishing claims handling protocols and pre-nomination of loss adjusters can enable an immediate post-loss to focus on the claims response. This allows decisions to be made sooner, facilitating loss mitigation and ultimately reducing the claim lifecycle.

    10. Decision making – plan who should be involved and know who has the necessary authority to make decisions

Having a small, tight decision-making group, made up of senior people with the authority to make decisions on behalf of their organisations and the ability and commitment to implement those decisions is key to best practice.

Read more articles in this series

Part 2: Legal systems and jurisdictions
Part 3: Managing claims across cultural and geographical barriers
Part 4: Keeping your business running, financials and cash flow
Part 5: 5 tips for best practice for managing global claims

 A special thanks to some of the experts in our network who shared their insights for this piece:

William Wilson, Head of Major Loss (Ireland) at McLarens.
Ian Hasson, Director Financial Risks, Europe Middle East & Africa at Sedgwick International.

Readers should form their own opinion on the topics described and not rely on the information provided in this article. Though collected with due care, Swiss Re does not accept any responsibility for completeness and accuracy of the information provided.