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AIG is a leading international insurance organization serving customers in more than 100 countries.

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Preparing for and Navigating the Claims Process

Be clear on what your organization's policy does and does not cover before you need it.
By: | July 1, 2015 • 5 min read
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All of a sudden – it happens.  The huge explosion in the plant.  The executive scandal that leads the evening news.  The discovery that one of your company’s leading products has led to multiple consumer deaths due to a previously undiscovered fault in its design.  Your business and its reputation, along with your own, are on the line.  You had hoped this day would never come, but it’s time to file a major claim.

Is your company ready?  Do you know – for certain – how you would proceed, both internally with your own employees, and externally, with your insurance provider?  What data will you need to provide, and how quickly can you pull it together?  Do you know – and understand – the exacting wording of your policy?  Are you sure you are covered for this type of incident?  And even if you are a multinational with a global policy, how old is it, and is your coverage in concert with any recent changes in the laws of the country and local jurisdiction in which the incident occurred?

As should be clear from these few questions, if you organization is hit with a major event and you need to make a claim, just knowing that you are current with your premium payments is not enough.  Preparation before the event ever occurs, strong relationships with your insurance team, and a thorough understanding of what needs to happen throughout the claims process are all essential to reaching a satisfactory claim settlement quickly, so that a long business disruption and further damage are avoided.

Get Ready before Disaster Strikes

SponsoredContent_AIGThe Boy Scout motto, “Be prepared,” applies equally well to organizations that may suddenly be faced with the need to navigate the complexities of the claim process – especially for large claims following a major crisis.  Crises are by nature emotional events.  Taking the following steps ahead of time, before disaster strikes, will help avoid the sense of paralysis and tunnel vision that often follows in their wake.

Open up a dialogue with your insurer – today.

For risk managers and others who will be called upon to interface with your insurer in the event of a crisis, establishing open and honest lines of communication now will save trouble and time in the claims process.  Regular communication with your insurance team and keeping them up to date on recent developments in your organization, business and manufacturing processes, etc., will provide them with a better understanding of your risk profile and make it easier to explain what has happened, and why, in the event you ever have to file.  It will also help in the process of updating and refining the wording in existing policies to reflect important changes that may impact a future claim.

Conduct pre-loss workshops to stress-test your readiness to handle a major loss.

Firefighters conduct frequent drills to ensure their teams know what to do when confronted with different types of emergencies.  Commercial airline pilots do the same.  Your organization should be no different.  Thinking through potential loss scenarios and conducting workshops around them will help you identify where the gaps are – in personnel, reporting structures, contact lists, data maintenance, etc., before a real crisis occurs.  If at all possible, you should include your insurance team and broker (if you have one) in these workshops.  This will not only help cement important relationships, but it will also serve to further educate them about your organization and on what you will need from them in a crisis; and vice versa.  The value to your organization can be significant, because your risk management team will not be starting from zero when you have to make a claim.  Knowing what to do first, whom to call at your insurer, what data they will need to begin the claims process, etc. – all of this will save time and help get you on the road to a settlement much more quickly.

Know what your policy covers, before you need it.

SponsoredContent_AIGThis advice may sound obvious, but experience has shown that all too often, companies are not aware, in detail, of what their policies cover and don’t cover.  As Noona Barlow, AIG head of financial lines claims Europe has noted, particularly in the case of small to mid-size organizations, “it is amazing how often directors and risk managers don’t actually know what their policy covers them for.”   This can have dire consequences.  In the case of D & O insurance, for example, even a “global” policy many not cover all situations, because in some countries, companies are not allowed to indemnify their directors.  Obviously, these kinds of facts are important to know before rather than after an incident occurs.  So it is important to have an insurer with both a broad and deep understanding of local laws and regulations wherever you have exposure, in addition to an understanding of the technical details of working through the claims process.

Make sure your data management policies are in order.

Successful risk management depends on having consistent, high-quality data on all of your risk-sensitive operations (manufacturing, procurement, shipping, etc.), so that you can quantify where the greatest risks sit in the organization and take steps to reduce them.  Good data, complemented by strong analytics, will also help you to identify potential problems before they occur.  It will also help you to maximize the effectiveness of your insurance purchasing decisions.  Frequent, detailed conversations with your insurer will help you to identify any areas where additional data might be needed in the event of a crisis.

No one ever wants to find themselves in the midst of a crisis.  But if and when such an event does strike, if you have taken the steps above you will be much better positioned to work through the claims process – and reach an effective resolution – as quickly and as smoothly as possible.

For more information, please visit the AIG Knowledge and Insights Center.

This article was produced by AIG and not the Risk & Insurance® editorial team.



AIG is a leading international insurance organization serving customers in more than 100 countries.
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Sponsored Content by AIG

Global Program Premium Allocation: Why It Matters More Than You Think

Addressing the key challenges of global premium allocation is critical for all parties.
By: | October 1, 2014 • 5 min read

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Ten years after starting her medium-sized Greek yogurt manufacturing and distribution business in Chicago, Nancy is looking to open new facilities in Frankfurt, Germany and Seoul, South Korea. She has determined the company needs to have separate insurance policies for each location. Enter “premium allocation,” the process through which insurance premiums, fees and other charges are properly allocated among participants and geographies.

Experts say that the ideal premium allocation strategy is about balance. On one hand, it needs to appropriately reflect the risk being insured. On the other, it must satisfy the client’s objectives, as well as those of regulators, local subsidiaries, insurers and brokers., Ensuring that premium allocation is done appropriately and on a timely basis can make a multinational program run much smoother for everyone.

At first blush, premium allocation for a global insurance program is hardly buzzworthy. But as with our expanding hypothetical company, accurate, equitable premium allocation is a critical starting point. All parties have a vested interest in seeing that the allocation is done correctly and efficiently.

SponsoredContent_AIG“This rather prosaic topic affects everyone … brokers, clients and carriers. Many risk managers with global experience understand how critical it is to get the premium allocation right. But for those new to foreign markets, they may not understand the intricacies of why it matters.”

— Marty Scherzer, President of Global Risk Solutions, AIG

Basic goals of key players include:

  • Buyer – corporate office: Wants to ensure that the organization is adequately covered while engineering an optimal financial structure. The optimized structure is dependent on balancing local regulatory, tax and market conditions while providing for the appropriate premium to cover the risk.
  • Buyer – local offices: Needs to have justification that the internal allocations of the premium expense fairly represent the local office’s risk exposure.
  • Broker: The resources that are assigned to manage the program in a local country need to be appropriately compensated. Their compensation is often determined by the premium allocated to their country. A premium allocation that does not effectively correlate to the needs of the local office has the potential to under- or over-compensate these resources.
  • Insurer: Needs to satisfy regulators that oversee the insurer’s local insurance operations that the premiums are fair, reasonable and commensurate with the risks being covered.

According to Marty Scherzer, President of Global Risk Solutions at AIG, as globalization continues to drive U.S. companies of varying sizes to expand their markets beyond domestic borders, premium allocation “needs to be done appropriately and timely; delay or get it wrong and it could prove costly.”

“This rather prosaic topic affects everyone … brokers, clients and carriers,” Scherzer says. “Many risk managers with global experience understand how critical it is to get the premium allocation right. But for those new to foreign markets, they may not understand the intricacies of why it matters.”

SponsoredContent_AIGThere are four critical challenges that need to be balanced if an allocation is to satisfy all parties, he says:

Tax considerations

Across the globe, tax rates for insurance premiums vary widely. While a company will want to structure allocations to attain its financial objectives, the methodology employed needs to be reasonable and appropriate in the eyes of the carrier, broker, insured and regulator. Similarly, and in conjunction with tax and transfer pricing considerations, companies need to make sure that their premiums properly reflect the risk in each country. Even companies with the best intentions to allocate premiums appropriately are facing greater scrutiny. To properly address this issue, Scherzer recommends that companies maintain a well documented and justifiable rationale for their premium allocation in the event of a regulatory inquiry.

Prudent premiums

Insurance regulators worldwide seek to ensure that the carriers in their countries have both the capital and the ability to pay losses. Accordingly, they don’t want a premium being allocated to their country to be too low relative to the corresponding level of risk.

Data accuracy

Without accurate data, premium allocation can be difficult, at best. Choosing to allocate premium based on sales in a given country or in a given time period, for example, can work. But if you don’t have that data for every subsidiary in a given country, the allocation will not be accurate. The key to appropriately allocating premium is to gather the required data well in advance of the program’s inception and scrub it for accuracy.

Critical timing

When creating an optimal multinational insurance program, premium allocation needs to be done quickly, but accurately. Without careful attention and planning, the process can easily become derailed.

Scherzer compares it to getting a little bit off course at the beginning of a long journey. A small deviation at the outset will have a magnified effect later on, landing you even farther away from your intended destination.

Figuring it all out

AIG has created the award-winning Multinational Program Design Tool to help companies decide whether (and where) to place local policies. The tool uses information that covers more than 200 countries, and provides results after answers to a few basic questions.

SponsoredContent_AIG

This interactive tool — iPad and PC-ready — requires just 10-15 minutes to complete in one of four languages (English, Spanish, Chinese and Japanese). The tool evaluates user feedback on exposures, geographies, risk sensitivities, preferences and needs against AIG’s knowledge of local regulatory, business and market factors and trends to produce a detailed report that can be used in the next level of discussion with brokers and AIG on a global insurance strategy, including premium allocation.

“The hope is that decision-makers partner with their broker and carrier to get premium allocation done early, accurately and right the first time,” Scherzer says.

For more information about AIG and its award-winning application, visit aig.com/multinational.

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with AIG. The editorial staff of Risk & Insurance had no role in its preparation.




AIG is a leading international insurance organization serving customers in more than 100 countries.
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Sponsored Content by AIG

Global Program Premium Allocation: Why It Matters More Than You Think

Addressing the key challenges of global premium allocation is critical for all parties.
By: | June 2, 2014 • 5 min read

SponsoredContent_AIG
Ten years after starting her medium-sized Greek yogurt manufacturing and distribution business in Chicago, Nancy is looking to open new facilities in Frankfurt, Germany and Seoul, South Korea. She has determined the company needs to have separate insurance policies for each location. Enter “premium allocation,” the process through which insurance premiums, fees and other charges are properly allocated among participants and geographies.

Experts say that the ideal premium allocation strategy is about balance. On one hand, it needs to appropriately reflect the risk being insured. On the other, it must satisfy the client’s objectives, as well as those of regulators, local subsidiaries, insurers and brokers., Ensuring that premium allocation is done appropriately and on a timely basis can make a multinational program run much smoother for everyone.

At first blush, premium allocation for a global insurance program is hardly buzzworthy. But as with our expanding hypothetical company, accurate, equitable premium allocation is a critical starting point. All parties have a vested interest in seeing that the allocation is done correctly and efficiently.

SponsoredContent_AIG“This rather prosaic topic affects everyone … brokers, clients and carriers. Many risk managers with global experience understand how critical it is to get the premium allocation right. But for those new to foreign markets, they may not understand the intricacies of why it matters.”

— Marty Scherzer, President of Global Risk Solutions, AIG

Basic goals of key players include:

  • Buyer – corporate office: Wants to ensure that the organization is adequately covered while engineering an optimal financial structure. The optimized structure is dependent on balancing local regulatory, tax and market conditions while providing for the appropriate premium to cover the risk.
  • Buyer – local offices: Needs to have justification that the internal allocations of the premium expense fairly represent the local office’s risk exposure.
  • Broker: The resources that are assigned to manage the program in a local country need to be appropriately compensated. Their compensation is often determined by the premium allocated to their country. A premium allocation that does not effectively correlate to the needs of the local office has the potential to under- or over-compensate these resources.
  • Insurer: Needs to satisfy regulators that oversee the insurer’s local insurance operations that the premiums are fair, reasonable and commensurate with the risks being covered.

According to Marty Scherzer, President of Global Risk Solutions at AIG, as globalization continues to drive U.S. companies of varying sizes to expand their markets beyond domestic borders, premium allocation “needs to be done appropriately and timely; delay or get it wrong and it could prove costly.”

“This rather prosaic topic affects everyone … brokers, clients and carriers,” Scherzer says. “Many risk managers with global experience understand how critical it is to get the premium allocation right. But for those new to foreign markets, they may not understand the intricacies of why it matters.”

SponsoredContent_AIGThere are four critical challenges that need to be balanced if an allocation is to satisfy all parties, he says:

Tax considerations

Across the globe, tax rates for insurance premiums vary widely. While a company will want to structure allocations to attain its financial objectives, the methodology employed needs to be reasonable and appropriate in the eyes of the carrier, broker, insured and regulator. Similarly, and in conjunction with tax and transfer pricing considerations, companies need to make sure that their premiums properly reflect the risk in each country. Even companies with the best intentions to allocate premiums appropriately are facing greater scrutiny. To properly address this issue, Scherzer recommends that companies maintain a well documented and justifiable rationale for their premium allocation in the event of a regulatory inquiry.

Prudent premiums

Insurance regulators worldwide seek to ensure that the carriers in their countries have both the capital and the ability to pay losses. Accordingly, they don’t want a premium being allocated to their country to be too low relative to the corresponding level of risk.

Data accuracy

Without accurate data, premium allocation can be difficult, at best. Choosing to allocate premium based on sales in a given country or in a given time period, for example, can work. But if you don’t have that data for every subsidiary in a given country, the allocation will not be accurate. The key to appropriately allocating premium is to gather the required data well in advance of the program’s inception and scrub it for accuracy.

Critical timing

When creating an optimal multinational insurance program, premium allocation needs to be done quickly, but accurately. Without careful attention and planning, the process can easily become derailed.

Scherzer compares it to getting a little bit off course at the beginning of a long journey. A small deviation at the outset will have a magnified effect later on, landing you even farther away from your intended destination.

Figuring it all out

AIG has created the award-winning Multinational Program Design Tool to help companies decide whether (and where) to place local policies. The tool uses information that covers more than 200 countries, and provides results after answers to a few basic questions.

SponsoredContent_AIG

This interactive tool — iPad and PC-ready — requires just 10-15 minutes to complete in one of four languages (English, Spanish, Chinese and Japanese). The tool evaluates user feedback on exposures, geographies, risk sensitivities, preferences and needs against AIG’s knowledge of local regulatory, business and market factors and trends to produce a detailed report that can be used in the next level of discussion with brokers and AIG on a global insurance strategy, including premium allocation.

“The hope is that decision-makers partner with their broker and carrier to get premium allocation done early, accurately and right the first time,” Scherzer says.

For more information about AIG and its award-winning application, visit aig.com/multinational.

SponsoredContent
BrandStudioLogo

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with AIG. The editorial staff of Risk & Insurance had no role in its preparation.




AIG is a leading international insurance organization serving customers in more than 100 countries.
Share this article: