Ingredients for Success: Best Practices for Claims Administrations Working with their Insurers and Reinsurers

With social inflation and nuclear verdicts on the rise, it is critically important for all stakeholders to work together. Risk management programs thrive when local governments and intergovernmental risk pools work effectively with their insurers and reinsurers.

In this session at PRIMA 2024, a panel of experts considers the top “pain points” in these relationships, including notice, reporting ongoing claim developments, liability and exposure assessment, and management of complex or large exposure claims. They also touch on the current litigation climate and provide specific strategies to help mitigate exposure. They share perspectives from both the governments/pool and those by insurers/reinsurers based on real-world examples of challenges in handling claims and managing exposure.

Speakers included:

• Ken Canning – Director – Multi-Line Programs, Vermont School Board Insurance Trust
• Marcus Henthorn –  Managing Director, Risk Program Administrators (RPA), Americas Specialty Division of Gallagher
• Jessica Stewart – Senior Claim Executive, Genesis

Broker, Claim/Pool Administrator Staff, and Reinsurer Roles

Your broker is the catalyst for efficient claim resolution with extensive risk management expertise. They are an advocate for fair claims settlement and can provide guidance on compliance and best practices, as a strategic partner in loss prevention.

Your claim / pool administrator staff play a front-line role, as they are involved in the initial claim investigation and reporting the claim to the reinsurer. They also understands contractual obligations, hold expertise in venue and local counsel selection, provide regular updates, set reserves, and are the ultimate decision maker.

Your reinsurer is responsible for fostering open communication with the insured, pool / claim administrator, and the claims staff. They act as a financial backstop for the public entities, and are a large loss and catastrophe expertise.

Common Barriers and Challenges

Sometimes issues arise as claims become more complex. These challenges are common to the industry, and can include:

1. Timely first news of loss communications and claims reporting – For best outcomes, claims have to be reported to all parties in an appropriate matter. Nothing should be a surprise.
2. Frequent demands for data and info – Most claims information comes from the insured and on high severity claims, there should be a surplus of details to provide. Claims administrators are responsible for communicating with defense counsel to obtain strategy, budgets, case facts, so there are a lot of communication challenges.
3. Competing macro vs. micro perspective – Reinsurers see more of the macro, like broad scope litigation and nationwide claims trends. They rely on micro perspectives from their claims teams, who may understand statewide perspective versus what is happening nationally.
4. Expertise on the right claim (legal resources: staff vs. panel counsel) – These resources should be familiar with jurisdictional differences and how plaintiffs are presenting their cases (reptile theory, social inflation) and how to prepare from a defense perspective.
5. Finding the best claims resolution – All stakeholders should be working together to map out what could happen from each perspective, including an internal analysis and pros and cons on mediation versus settling, remembering to take into account any new information.
6. Mutual responsibility – Somebody has to be holding the bag. It requires a lot of negotiation and an understanding you are not always going to come out the winner.
7. Precedent setting, signal to plaintiff bar, deep pocket – It is hard to determine the right cases to try, but that has to be analyzed. Jurors are unpredictable, and are currently issuing high verdicts. Overpaying claims will hurt everyone in the long run and set the bar too high.
8. Loss run integrity – Loss runs should reflect what kinds of claims the team may see, reserving standards with accuracy and comprehensiveness. Are there claims that have not been reported that should be? Data integrity starts with the right coding, so ensure that claims admininstrators understand the bigger picture that coding plays into.
9. Broker having to play intermediary – Be a trusted intermediary, not just a “forward button.” Force the insured to get involved with meetings with carrier. Sometimes the carrier just needs to hear it from a third-party perspective.
10. Balancing communication – Trust has to be established between all parties to set communication standards from the start of the relationship.

Balancing Communication Needs

Be open and transparent. Build a partnership of trust with empathy and shared responsibility. Check in on the injured, make sure they get to their doctor’s appointments. Empathy does not take a lot of time.

Examine the facts at hand. Are there issues or witnesses that may generate anger? Without admitting fault, ensure that empathy is there. Include crisis counselors and public relations experts so that the public entity responds appropriately to news outlets.

Special venue considerations. What exposure does my member have in this situation?  You have to know how strongly to defend when necessary. Will they make a good witness or will the jury not find them agreeable? Lean on your defense counsel to craft your strategy.

Partnering for Optimal Outcomes and Finding Resolutions

All parties should be working on a continued relationship of trust. Everyone should stay current on emerging trends, so they are the first to understand what possible challenges may arise in a claim. This also includes knowledge of jurisdictional nuances and focus group data. Everyone should be managing defense counsel and member expectations to remain on the same page.

Thinking ahead, discuss ideas for mitigating exposure. Is there anyway to prepare for it, before it becomes a claim? Partnering for the best outcome is key to a successful relationship.