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Claims Conversation

The leaders of the Big Four national independent adjusting firms discuss the most pressing issues around loss activity

Independent adjusting firms across Canada had their hands full in 2011, dealing with major issues including multi-million-dollar catastrophes and severe weather events, the effects of the new SABS legislation in Ontario auto, consolidation, and a turbulent economy. Each of these issues had an effect on their business, just as they did with insurers and brokers.

Spencer Shusterman, senior vice president, claims at Aegis, a Lloyd’s syndicate, said one of the biggest concerns in their business is the increase in suspicious claims, which he asserts is generally due to economic stress.

“We have seen a rise in the number of suspicious fires and claims on vacant, unoccupied or otherwise shutdown properties,” he says. “A weak economy in the commercial sector may contribute to the number of vacant and/or unoccupied properties in the marketplace. We are finding that it has become increasingly difficult to establish the necessary site visits and monitoring required to avoid coverage problems.”

Meanwhile, the increase in consolidations of adjusting firms has resulted in an increase in adjusting costs, according to Bob Grouchy, assistant vice president and head of claims Canada at Allianz.

“We are seeing more offerings from adjusters to provide all the needs of insurers and clients creating both a positive and negative effect on the industry,” says Grouchy. “There is a seamless approach to claims handling, which is good, but it also drives up the cost of handling the adjustment. This consolidation leads to more program-type handling of claims and can lead to situations where necessary expertise is not available to handle more complex losses.”

Technology has created its own challenges in loss activity, as online service delivery becomes the norm, says Darren Goldman, claims manager, QBE Services Inc.

“The implementation of online claims systems, notwithstanding the requirement for a significant capital investment, are being seen as a cost efficient and effective way to better deal with claims globally and ensure an even better claims service locally,” he says. “The management information potential is obviously huge and there seems to be a trend for many of the larger global insurers to move to online claims services.”

In order to better understand the trends and challenges in loss activity and claims handling, Canadian Insurance Top Broker decided to investigate how independent adjusting firms fared over the last year, and what they predicted was in store for 2012. We held a “virtual roundtable” with senior-level executives at national independent adjusting firms. The roundtable participants were:

  • John Sharoun, CEO, Crawford Canada
  • Michael Holden, president & CEO, Granite Claims Solutions (GCS)
  • Rob Seal, president, claims services, Cunningham Lindsey
  • Bob Fitzgerald, president, ClaimsPro

A common prediction among these leaders is there is no relief yet on the horizon from many of the main issues, such as severe weather, consolidation and lack of skilled adjusters. In order to cope and more effectively serve customers and manage claims, it will require strategic partnerships between all major players, including adjusters, insurers and brokers.

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What have been the most significant trends in loss activity that your company observed over the last year?

John Sharoun: Catastrophe activity, including pocket storms. Weather events individually and collectively have had a significant impact on loss activity over the course of 2011, whether it’s the Slave Lake wildfires or heavy weather events in the west, Quebec or the Atlantic provinces. These events drive frequency and severity and require rapid response and a very high degree of customer touch. They are the essence of what claims people do—delivering the policy promise at the time most needed by the policyholder.

Michael Holden: Another significant trend we observed was the legislative changes in Ontario, which impacted automobile claims.

Rob Seal: The new SABS legislation made a significant impact on the number of Accident Benefit (AB) claims reported. When the legislation was first introduced in September 2010, we continued to receive a steady flow of AB claims right up until the second quarter of [2011] when the handling of pre-legislation AB claims was wrapping up. It was at that time that the lack of new AB claims became evident. We had anticipated seeing an increase in new Bodily Injury (BI) claims as a result of the new legislation but we have yet to see this happen. We also took note of the message insurers and brokers sent adjusters in regard to policyholder loyalty. Our customers expect transparency and evidence of our ability to meet their service expectations, such as contact times, reporting and cycle times. Meeting service benchmarks is critical and ultimately translates into controlled claims costs and policyholder satisfaction.

Further to the SABS legislation in Ontario, how has it affected your business?

Bob Fitzgerald: Initially we saw our clients turn to ClaimsPro to solve their needs prior to the September 2010 change. Through 2011 we saw many insurers continue to outsource significant portions of their AB activity, whiles others looked to internalize.

Michael Holden: GCS experienced a wide variety of requests from insurers and clients with respect to interpretation of the Minor Injury Guideline (MIG). With case law yet to be developed with regard to interpretational issues, our claims professionals have adapted to our clients’ specific needs to ensure that appropriate documented determinations are both sound and demonstrated actions of good faith. It has become apparent that while AB claims are being adjusted within the contexts of the MIG, what is at risk is the BI component of a claim. We recognized this at the onset and have been proactive in our approach to investigate all aspects of these claims in order to be well prepared when tort claims are presented. This shift in adjustment process has required our adjusting force to be adaptable and focused on the future anticipation of claim presentations.

Rob Seal: At first the influx of AB claims continued into mid-2011, but was quickly followed with a significant drop in AB claims. We have not seen the increase in BI claims as of yet, but we expect that we will in the months ahead and are preparing for it. We are training our AB adjusters on how to properly investigate TORT claims to ensure we have the right skill set to handle new BI losses.

John Sharoun: It takes time to realize the full impact of these changes and I believe as we enter the second quarter of 2012 things may start to become clearer.

What do you predict will be a significant claims trend in the next year?

Bob Fitzgerald: The challenges within the Ontario auto product will likely continue. It will be important for the Ontario Anti-Fraud Task Force to bring forward meaningful recommendations that will allow for quick government action to stem the long term cost pressures.

John Sharoun: While weather events used to be unpredictable, it seems weather and related catastrophes are becoming routine events.  Event pre-planning, loss mitigation strategies and rapid response will remain key industry discussion points.

Michael Holden: For 2012, we expect to see even greater demands on resources as a result of extreme weather patterns. GCS is focusing on managing these resources.

Rob Seal: I think we will continue to see a trend towards the use of innovative processes and technology, which allows us to provide greater transparency and more in-depth and customized loss reporting. This in turn provides our customers with better risk management tools. It also allows us to automate certain front- and back-end services, like the ability to offer non-reporting, which are both time and cost efficient. We’ve also seen the industry be more selective in how they work with us. While some customers are looking for full one-stop claims solutions, others are looking to select only specific offerings.

What were some of your company’s main victories in 2011?

John Sharoun: Our customer service and quality scores improved significantly in 2011 through the joint efforts of our management team and the strength of our front line employees. It’s really our employees who have created the victory.

Michael Holden: We experienced tremendous organic growth, largely due to the success of our Quality Initiative Program (QIP). The program allowed the company to provide clients with measurable results through the ongoing evaluation of key performance indicators to ensure the service we provide is meeting and exceeding our clients’ goals and objectives. For example, we have a new name [formerly McLarens Canada] and a new global alliance partner, VRS Adjusters, which provides us with a presence in more than 70 countries.

Rob Seal: One important step for us was the significant investment made in what we call the next level of business intelligence. This sophisticated database and business intelligence software will allow both internal and external users to see real time Key Performance Indicators (KPI) and Service Level Agreements (SLA) between the client and vendor. While many companies employ scorecards and dashboard management information, our solution is a completely interactive and integrated program that allows for instantaneous results with zero training necessary.

Bob Fitzgerald: ClaimsPro has new client-driven applications to our technology platform iAdjust. System integration and the resultant management information capabilities were very well received. In addition, we continue to add to our adjuster skill set via acquisitions. During the year, we were able to significantly scale up our team in the west and central regions of Canada with the acquisition of Brouwer Claims Canada.

Speaking of acquisitions, M&A activity is heating up in all areas of the industry (insurers, brokers and adjusters). How do these different forms of consolidation affect your business?

Rob Seal: As companies merge and grow, so too does their claims exposures, especially in high concentration areas like the Greater Toronto Area (GTA). These new consolidated companies need to partner with several large national independent adjusting (IA) firms in order to meet their claims needs. This becomes increasingly important should they experience high volumes such as a CAT. Not one IA firm can handle all that volume, so the need to increase their panel of national adjusting service providers grows.

Bob Fitzgerald: Market consolidation provides access to additional skill sets, technology and potentially new business lines and services to offer to clients.  We have a proven track record of successfully integrating firms we have acquired. This success has afforded us increased access to capital that in turn has allowed us to further enhance our technology and program development. Our parent’s (SCM Insurance Services) acquisition strategy has a two-pronged approach: not only are we looking to consolidate current business verticals, but we’re also introducing new insurance services into the mix.

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Copyright 2012 Rogers Publishing Ltd. This article first appeared in the January 2012 edition of Canadian Insurance Top Broker magazine.

Transcontinental Media G.P.