Outsourced Claims Administration and Run-Off

Outsourced Claims Administration and Run-Off

German Run-Off FORUM 2017

31st March 2017, Cologne

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Things we are going to cover today

• Crawford & Company

• Process

• Claims are claims…aren’t they?

• Claims and Regulatory Measures

• Real life examples of Run-off claims and issues faced

• Any Questions?

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Crawford & Company – who are we?

• Our History – Founded in 1941 - quoted on the NYSE since 1968

• Our Business – We provide claims management, Business Process Outsourcing (BPO) programs ,and consulting services to multinational insurance carriers, brokers, and local insurance firms

• Our Goal - To be the world’s leading provider of claims services as we focus on developing world-class technology and innovative solutions for our clients globally

• Today - Crawford employs more than 8,000 employees handling in excess of 1.6 million claims annually. Over 700 offices in more than 70 countries

• Run-off expertise

– since 2010 in Europe - currently handling 21 diverse portfolios in run-off

– c.60,000 legacy claims handled across Europe

– EUR 650m total incurred under management in the legacy arena

– Significant savings achieved against reserves for our clients

– Increasing demand for our expertise

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Crawford & Company – who are we?

Paul Ogni MBA, AIRM, BA

• Head of Legacy Services

• Country Manager – Italy

• Based in Milan, Italy.

• Worked in insurance claims since 1990

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Process – Supporting Due Diligence

• Objectives

• Brand protection

• Timescale

• Understand the portfolio/ mix

• Understand stakeholders

• Regulatory and compliance requirements

• Size the cost opportunity/financials/ reward

• Validate/ manage expectations

• Identify risks

• Team work

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Process – Operational Implementation

• Objectives

– How can we help each other to drive mutually beneficial results/ operational efficiencies?

• Risk mitigation

– What could go wrong? Reserves held? Reopening files? Adverse legal judgements?

• Optimise cost certainty

• Workflow

• Controls

• Communication – stakeholder management

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Process – Operational Implementation

• IT solutions (in house)

– Regular Bordereaux.

– Detailed management information.

– Interface with client systems to facilitate data transfers

• Cases in Litigation

– Get control of the litigation process.

– Understand any existing relationships with lawyers and other TP suppliers in order to align their activities as well.

– Work with Insurers’ legal Counsel to seek ways to accelerate closures.

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Typical measurement

1. Reserves held

2. Number of claims open

3. Number of claims closed

4. Number of claims outstanding

5. Claim payments made

6. Total incurred reserves

7. Timeline of reserve release

8. Reopened cases

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Claims are claims? Aren't they?

• Clear client philosophy

• Brand ambassadors

• Service focus

• SLA’s/ elapsed settlement times

• Technical competence/ claims expertise/ resourcing

• Cost control

• Quality control – peer review

• Documented processes

• Communication

• Innovation

• Account management – trend identification/ risk improvement/ statistical analysis

• Compliance, Audit, Data protection, Business continuity, keeping our clients safe

But some things vary………....

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• Volatility - claims may or may not occur

• Case by case assignment

• Resourcing - uncertainty

• Fees traditional – often price focussed

• Client engagement variable

• Claims not always a board room topic

• Greater certainty - claims volumes often known (ex IBNR)

• Portfolio management

• Resourcing - certainty

• Fees incentivised – generally value focussed

• Active client engagement

• Active Executive interest

Claims are claims? Aren't they?

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Traditional Run - Off

Claims and Regulatory Measures

• Swiss Solvency Test

– Does not apply to TPAs directly.

– Applies indirectly via Insurers.

• UK FCA found many Insurers to be weak on DD of outsource partners (2015)

• SST – insurance risk, market risk and credit risk.

– Insurance liabilities / tied assets

• TPA plays part in evaluating claims/liabilities/reserving

– Operational Risk not considered

• Eg. Claim fraud, client privacy issues

• Insurers should ensure that TPA has robust Compliance/Governance regime.

– Can be hard for smaller TPAs to achieve this to a satisfactory level.

– Seek to deepen relationship with TPA – align philosophies, profile risks etc.

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Run off Experience Europe

Client Type

No.of

Portfolios No. Open Claims Open Reserves Closed Claims Total Incurred Total claims

Original Insurer 17

2.863 € 145.000.000

30.029 € 350.000.000

32.892

Legacy Carrier 4

1.278 € 133.000.000

24.680 € 298.000.000

25.958

Totals: 21 4.141 € 278.000.000 54.709 € 648.000.000 58.850

• Casualty • Property • Med Mal • Motor • Occupational Injuries • Personal accident

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Real examples – Four Projects

• Project 1 = Pro-active approach with a role of Supervisor/Adjuster for the

Client;

• Project 2 = Pro-active approach with a role of Auditor for the Client;

• Project 3 = Very Pro-active approach with Client's collaboration only for

high value claims;

• Project 4 = Pro-active approach as Supervisor for the Client.

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Claims Closed with four different “Run Off” projects

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Claims Closed with four different “Run Off” projects

Insurer no. 1 Project July 2010 – October 2016

Claims received in 3 batches:

July 2010 1309

February 2012 480

September 2014 131

Project 1 = Pro- active approach with a role of Auditor for the Client

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Insurer 1 = Pro-active approach with a role of Auditor for the Client;

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Insurer 1 – Incurred Savings

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Insurer no. 2 Project April 2011 – December 2012

Project 2 = Very Pro-active approach with Client's involvement only for high value claims

Insurer 2 = Very Pro-active approach with Client involvement only for high value claims;

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Insurer 2 – Total Incurred

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Insurer no. 3 Project October 2010 – September 2014

Claims received in 2 batches:

October 2010 1015

August 2012 409

Project 3 = Pro- active approach as Supervisor for the Client

Insurer 3 = Pro-active approach working closely with Client’s internal claims team.

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Insurer 3 – Total Incurred

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Insurer no. 4 Project April 2015 – October 2016

Project 4 = Pro- active approach with a role of Supervisor/Coordinator for the Client

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Final Considerations…

• Full engagement and discussion betwen TPA and Insurer to ensure deep and clear understanding of objectives at project start.

• How can Insurer help us to help them?

• Align Objectives – performance related incentives.

• Brand protection of the original Insurer

• Regulatory and Compliance matters.

• IT Database

• Regular Bordereau in industry standard format

• Detailed management information.

• Interface with client systems to facilitate data transfers

• Cases in Litigation

• Get control of the litigation process.

• Seek ways to accelerate closures.

• Understand any existing relationships with lawyers and other TP suppliers in order to align their acivities as well.

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Any Questions?

Thank you

Paul Ogni

Crawford & Company

Head of Legacy Services

+39 333 130 4066

p.ogni@crawco.it

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