Building an International Claims Strategy


international insurance claims strategy

Although claims from large losses due to natural catastrophes and other hazards around the globe declined significantly over the past two years, the ­devastating warehouse explosions that killed 173 people and injured nearly 800 in Tianjin, China, in August 2015 served as a reminder that risk managers must remain vigilant about the possibility of a loss anywhere in the world.

Besides having adequate insurance protection, businesses need well-developed and rehearsed plans and contingency measures to maintain critical operations in the event of a loss, or to resume them in a timely fashion.

In the aftermath of any loss event, a firm’s ability to recover often depends on how well the insurance claim is handled. As any risk professional whose company has sustained a significant property loss will attest, effective claims management does not begin after a loss event; it requires careful advance planning, including identifying claims resources that can be on the ground where needed when a loss occurs.

International losses add a layer of complexity to resolving a property claim. A variety of issues must be considered, including uncertainties brought on by distance; language and cultural barriers; potentially overlapping insurance coverage from local and international programs; difficulties obtaining accurate loss information; and timely, effective communication.

The Insurer’s Loss Adjustment Process

Whenever a catastrophe occurs, insurers send out internal and third-party claims teams to assess losses as quickly as practical. Based on the adjuster’s estimates, insurers establish appropriate loss reserves.

Once reserves are set, however, it becomes a difficult, lengthy and costly process for any affected business to convince an insurer that a loss is larger than the original estimate and that a higher payout is warranted. Thus, insureds have a clear financial interest in making sure the reserves are calculated accurately, based on best estimates.

With an effective global claims strategy, risk managers can ensure that they respond as quickly as possible to any loss event. This includes providing their own loss estimates and demonstrating to insurance company adjusters the full scope and value of the loss.

Managing and Meeting Expectations

In developing an international claims strategy, risk managers can start with their own expectations as well as those of their leadership team and local management to determine how claims might be handled and the anticipated outcomes. While these expectations may vary from one company to the next, many of them should be fairly straightforward.

For instance, at the top of the list, both leadership and local management expect complete and timely resolution of any claim. In addition, as stipulated in the insurance policies, insurers may be expected to provide advance payments for managing cash flow, retaining staff and maintaining critical operations as necessary while progress is made toward the claim’s successful resolution. Tracking these commitments and their issuance can be critical in the wake of a loss.

Another key to sound claims management is effective process control. Wherever a loss occurs, the claims team, including internal and external resources, needs to be able to control each step of the claim process through successful resolution.

Whenever and wherever a loss occurs, management will likely expect the affected subsidiary or business unit to maintain or resume critical operations in a timely manner. Accordingly, in the event of significant outages associated with regional disasters, the firm’s business interruption insurance, claims and recoveries should be appropriately structured and adequate to address any related financial consequences.

When all is said and done, the company will be expected to have sound strategies for maximizing recovery, which may include the use of pre-qualified external claims management resources. Reviews conducted after the claim is resolved should reveal a job done properly from start to finish.

At the same time, local management in all areas of the world should understand the value provided by insurance and be confident that resolution of any claim ideally will involve only a minimum amount of their time.

For their part, members of the risk management department and the internal claims management team will want to be satisfied with the capabilities of claims preparers and the advocates they have selected to support their companies throughout the claim pre-planning, preparation and resolution processes.

Unique Challenges of International Claims

The true test of a global insurance program is whether it will actually respond to a loss event as anticipated. Acting upon a well-constructed insurance program, effective claims management can ensure your recovery meets your expectations.

Outsourced claims providers can help you navigate a wide range of challenges associated with international property loss events. Your broker, local management, internal claims team and external claims resources should coordinate effectively to address uncertainty that can accompany losses occurring in distant areas that could be difficult to access.

However, they may encounter potential language and cultural barriers that can result in delays in preparing and processing a claim. That is all the more reason why the claims team must work effectively with local management. Significantly, they should be able to provide engineering, accounting and forensic services to make sure loss information is complete, accurate and presented professionally, as it must be acceptable to a wide range of insurance company claims executives and their adjusters.

While there will be differences in how your claim providers operate in specific countries, they all need to adhere to a uniform set of global standards established by the risk management team. Whether you use a single claims provider for all your international operations or develop a network of independent resources, your claims management process should be effective and consistent in all areas where your company operates and might experience a loss. Your finance, risk management, brokerage and claims teams must be prepared to recognize, assess and manage the impact of complicating factors, such as local currency devaluations and economic volatility, on the adequacy of your insurance coverages. Regardless of any extenuating circumstances, effective communication remains one of the keys to a successful claims management process.

Another important consideration involves managing insurer relationships. While the claims process and settlement negotiations can be arduous and even confrontational, it is often important to place the resolution of any individual claim within the context of an ongoing relationship with an insurer. This is especially true in countries where local insurance company participation in any insurance program is required by law.

Eliminating Surprises

On a pre-loss basis, an effective international or global claims strategy that encompasses thorough reviews of all relevant insurance programs in place should help to eliminate issues arising from unanticipated coverage shortfalls, denials, exclusions and restrictions. Post-loss, you will need a strong claims team to execute an established, collaborative process involving a full complement of resources required to assemble a complete claim.

Both pre- and post-loss, effective local support is essential. Identify and work with key members of your local leadership, finance and operations teams before any loss and define their roles and obligations in a potential loss event so they can participate actively in the recovery effort.

In addition, the local executives need to be involved in any crisis preparedness, business continuity planning and disaster response activities for any potential events affecting their operations. As part of your pre-loss planning, make sure your local executives are acquainted with key individuals of these outsourced claim service providers.

Choosing the Right Partners

A key element of an international claims strategy involves evaluating the capabilities of claim consultants and other external providers that may be needed to assist in the event of a loss.

While the ability to deliver all the services required for your firm to manage loss events locally is paramount, there are other significant considerations for evaluating the capabilities of external resources. For example, wherever a loss occurs, your external claims resources should be able to coordinate all aspects of the claim. A single point of contact at your provider enhances the ability of your internal team to monitor the claim’s progress and inform others in your organization of key developments or issues.

Experience is another key to choosing the best providers—especially given all the challenges associated with managing international losses. Choose external resources with a strong reputation for successfully managing difficult claims in areas of the world where you operate, including an understanding of local accounting, finance and insurance regulations, as well as the local insurance carriers. They should also be familiar with any unique aspects of your industry sector.

Another priority is to look for providers that adhere to globally recognized methodologies. Make sure that all resources used for your international claims services can consistently deliver results on every property claim, wherever it occurs.

In this context, you will want to establish a consistent process that can be followed by all of your external claims management resources. Ideally, the providers will be able to help you track the progress of the claim against industry benchmarks for similar losses around the world.

In the aftermath of any loss event, go over each step of the claim preparation and recovery process and identify ways to improve results should a similar loss occur elsewhere. Your external claims provider’s ability to offer perspective on each step in the process is valuable not only to your improvement efforts but to help reduce the costs associated with the claims management process.

Despite the efforts of businesses that operate in various parts of the world to manage exposures and prevent losses, there will invariably be instances where losses occur. An effective claims management process is critical to a company’s financial recovery and even the sustainability of its local operations. By establishing an international claims strategy, risk managers can help their firms address loss events wherever they operate and, in the process, lower their total cost of risk.

Carlos R. Moran

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About the Author

Carlos R. Moran is director of Aon Global Risk Consulting.

John Dempsey

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About the Author

John D. Dempsey is managing director of Aon Global Risk Consulting.


1 Comment

  • I could not agree more! As an adjuster on multi-national accounts and claims, I have first hand experience of the value having a Claims Handling Procedure (CHP) affords all stakeholders in the process. I have also had entirely different experiences when no such procedures exist and internal processes for larger organisations are not established.

    To me I suppose this is all obvious, text-book stuff, but hope it will be absorbed by all insurance risk managers, CFOs and, importantly, operations.

    Good article.



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