Strategic Risk best Risk Financing Product award 2008

BT needed confidence that their BI programme would deliver in a catastrophic loss (£250 - £500 million).

The loss was expected to have a trans-national impact on revenues and lay BT open to intense competition for its business. However, neither the insurance market nor BT's own resources appeared equal to dealing with the complexities of settling a massive claim involving BTs captive and multiple re-insurers and all their experts.

This was further complicated by the scale of BT's operation. Huge volumes of traffic, based almost entirely on electronic records, created a massive validation challenge, with as many as 40 - 50 different revenue streams per loss and proxy data, assumptions and axioms to be used and agreed.

The likely outcome of a loss was years of negotiation and potential litigation resulting in significant cost to all parties and reputational damage to the insurance market.

A model market solution
BT's brokers, Jardine Lloyd Thompson (JLT) and Echelon Claims Consultants worked as a team with BT and its captive to bring together loss adjusters, forensic accountants and re-insurer's underwriting and claims teams to establish a new proactive approach.

Claim quantification methodologies (CQMs) were developed to define the data sources, assumptions, axioms and calculation methodologies which will be used in the claim settlement process. Once signed CQMs are binding on all parties

After further negotiations, two groundbreaking measures were introduced:

• the market agreed to deal through one adjusting and one forensic representative, with authority to act for the entire re-insurance panel
• the two experts were given delegated authority to work with BT and sign off the CQMs in advance of a loss arising.

The new framework enables all parties to understand the complexities of BT's BI exposure and retain and build knowledge once an analysis is complete. It is anticipated that, in the event of a claim, this could reduce the settlement process by much as two-to-three years.

Please contact us to see how Claims Protocols can respond to your business needs.