Large claims do not have to be so painful

The McTavish Report, Corporate Risk & Insurance: The Case for Placement Reform, highlighted that dealing with a large claim can be painful. "While I don't agree with the report's view that this is anything new, I wouldn't argue with the fact it can be difficult. However, with the right approach and resources, businesses can get a good result," says Candy Holland, Managing Director of Echelon Claims Consultants.

The report found that the number of claims disputes has increased - particularly those made by medium-sized firms. Holland says these insights reflect her experience and that as insurers are appointing more experts to carry out more investigations, this can lead to delays, challenges to coverage and protracted negotiations. She says the solution lies in three steps, which need to be taken before a claim arises.

First, the policy should be stress-tested: "Look at potential loss scenarios and walk through a hypothetical claim. Map that against the cover the policy provides, and make sure you establish whether it will respond as you expect," she says.

Second, the business needs a claims plan. Holland explains: "Organisations should have a clear understanding of who deals with each aspect of a claim, what resources they have, how communications will work and how necessary information will be captured. All this needs to be prepared in advance rather than at the point of claim."

Finally, a claims protocol should be agreed with insurers, clearly setting out the practicalities of how a claim will be dealt with. This should include the use of experts (by both insurer and policyholder), payment timescales, how policy provisions will apply, data provision and so on.

Holland also comments: "Businesses will need to consider whether they bring in additional resources in the preplanning stage and also whether they will require them in the event of a claim."

This article was originally published in the July 2011 edition of Whiteboard, a quarterly client publication that provides news, opinion and articles addressing insurance and risk management issues as well as broader topics that are currently affecting UK corporate companies.