Workers' Comp Legal Corner

Legacy Closures: What to Expect From Outside Experts

The objective assessment of an outside expert can often help move even the most difficult legacy claims toward closure.
By: and | March 2, 2015 • 3 min read
WC Legal Corner

Managers already using outside attorneys and consultants to help with workers’ comp legacy claim closures and those considering retaining such assistance should understand what these experts bring to the table and how to use them effectively.

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Even if your internal team has deep knowledge of your current claims, the objective and non-emotional assessment of an outside expert often can help move even the most difficult cases toward closure. In addition, their base knowledge on how to structure the overall process can help avoid obstacles or delays and achieve optimal results.

Workers’ comp claims closure initiatives typically begin with a review of your claims inventory. Open claims should be sorted based on such factors as:

• age of claim;

• past and projected claim cost;

• complexity, including the existence of comorbidities, such as obesity and diabetes, as well as use of opioids in treatment; and

• jurisdiction

Work with your internal team or engage consultants to review your inventory (stratified by incurred), and evaluate past and current closure results. Based on experience, outside experts can provide insights to help you to establish clear objectives for reducing open claims and overall costs within defined time periods.

In working with outside consultants and attorneys, consider the following practices that have helped drive performance:

Share financial details

Claims consultants and attorneys can develop and implement strategies to meet your objectives.  However, by sharing financial information – albeit discretely – you help them establish priorities that are better aligned with those of your team.  For example, you may want to share such information with the lead attorney contact at each law firm you engage so they can assign specific cases to achieve optimal results.

Be strategic in your selection process  

Organizations with claims in multiple jurisdictions may be drawn to use a network of attorneys and consultants who offer local expertise. While this approach may have advantages in certain difficult jurisdictions, it generally poses management challenges. Many organizations with claims in multiple jurisdictions have reduced costs, improved and accelerated results by consolidating external resources and selecting law firms and other providers whose geographic footprint best matches their overall needs.

Check references

In cases where the performance of consultants and law firms on closure projects was underwhelming, the shortcomings often are traceable to consistent failures in the hiring process to fully vet the firms. So, taking the time to get references is well worth the effort.

Start with a pilot

Some organizations have been able to identify best practices and establish protocols for working effectively with outside providers by beginning any closure initiative with a pilot involving a few jurisdictions or a select number of complex claims.

Track progress

Many consultants bring technology and advanced claims-tracking capabilities that capture all relevant information and provide scheduled and actionable reporting.  This gives you the ability to constantly monitor results against objectives and make critical decisions along the way to maintain momentum and drive performance.

Maintain communication flow

Top-performing organizations have regular conference calls and phone discussions with all their providers.

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As you track performance, share results with all members of your team — including both internal and external resources. Stay on top of progress and obstacles on difficult claims and understand what strategies are being used to address them.Be specific in your instructions or inquiries and hold providers and attorneys accountable for responding promptly and keeping you fully informed of all significant developments.

Don’t overlook other advantages of outside help  

While not always anticipated at the outset of an engagement, other benefits from outside resources can include identification of opportunities to improve claim-legal processes, as well as to provide better legal panel guidance and enhance existing partnerships, all of which can translate to effective cost management and improved outcomes.

Outside consultants and attorneys offer extensive experience and specialized expertise that can help managers achieve and exceed their claim closure objectives. By selecting providers that best meet their needs, communicating effectively, tracking progress and sharing results, managers can receive the optimum benefits from these valuable relationships.

Steven Testan is founder and senior managing partner of Adelson, Testan, Brundo, Novell & Jimenez, a law firm focusing on workers' compensation defense and related matters. His email address is stevetestan@atblaw.net. Karen Stankevitz is director of consulting. Her email address is karenstankevitz@atblaw.net.
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Mergers & Acquisitions

And Back Again

Hank Greenberg, who made his first insurance deal in China in 1975, returns and buys a state-owned insurer.
By: | March 2, 2015 • 7 min read
03012015_08_China_Shanghai_PB

The first time Hank Greenberg visited China, in 1975, there were few cars on the streets and seemingly thousands of wobbly bicycles crowding the roads. The high-rises that now dominate the skylines of China’s major cities were non-existent.

That was the way Greenberg remembered China in his 2013 book, “The AIG Story,” co-written with Lawrence Cunningham, a George Washington University law professor.

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Following the opening of Communist China in 1972 by President Richard Nixon and his Secretary of State Henry Kissinger, Greenberg — then CEO of AIG — sought and cemented during that 1975 visit a reinsurance agreement between AIG and the state-owned People’s Insurance Co. of China.

Greenberg was infamously pushed out of AIG in 2005, after four decades spent building it into a company with assets in the hundreds of billions.

Over the years though, Greenberg’s love of China, particularly Shanghai, never ebbed.

“I have very warm feelings for Shanghai,” Greenberg told Risk & Insurance® during an interview in his Park Avenue office.

After all, the C.V. Starr Co. was founded by Greenberg’s mentor Cornelius Vander Starr in Shanghai in 1919.

“China is not without its problems, obviously. But it’s the second largest economy in the world. Think about that. The second largest economy in the world in a very brief period of time,” Greenberg said.

Last year, Greenberg’s Starr bought a former state-owned insurance company, announcing that it had acquired 93 percent of the Dazhong Insurance Co.

“It wasn’t a walk in the park. It took a lot of negotiation and a lot of time.” — Hank Greenberg, CEO and Chairman, Starr Companies

Starr purchased approximately 20 percent of the company in 2011 before increasing its stake to 93 percent in March 2014, according to published reports.

“Even though we had management, we didn’t have freedom of management — big difference — and so I spoke with the people in Shanghai and over time we were able to convince them that the company would do better over any period of time if we had not only operating control but financial control,” Greenberg said.

The purchase was not without its struggles, according to Starr’s chairman.

“It wasn’t a walk in the park. It took a lot of negotiation and a lot of time,” said Greenberg. But Greenberg believes that over time, the investment will be well worth it.

Falling Barriers

With a population of 1.4 billion, China is viewed by many industries, property/casualty insurers included, as a country with enormous potential.

Recent regulatory changes, in particular the decision three years ago by Chinese regulators to allow foreign insurers to underwrite mandatory third-party auto liability, are viewed positively by Western insurance and business executives.

And those observers think more good news is on the way. “In and of itself it is a very critical step and it is clear that the intent is to broaden that further,” said Mark Wheeler, London-based CEO of Ironshore International, of that milestone third-party auto liability change.

“It was a major positive development for foreign insurers,” said Dave Snyder, vice president of international policy for the industry trade group the Property Casualty Insurance Association of America.

“We are very encouraged by high-level statements and are anxious, as always, to see them implemented.” — Dave Snyder, vice president of international policy for the Property Casualty Insurance Association of America.

Snyder said the trade group, which represents more than 1,000 insurers, continues to be encouraged by statements from Chinese government officials that they intend to open the country further to foreign insurance carriers.

“I’m reluctant to use terms like positive or negative. It is what it is,” Snyder said.

“But we are very encouraged by high-level statements and are anxious, as always, to see them implemented,” Snyder said.

“We believe there is an environment of honesty, if you will, between the governments and the private sector and the private sector and governments. That has improved significantly over time with benefits for both China and the U.S.,” Snyder said.

“It would also be fair to say that the market isn’t opening as quickly as we would expect,” Ironshore’s Wheeler said.

“A good example of that would be the much-heralded Shanghai Free Trade Zone,” he said.

Mark Wheeler CEO Ironshore International

Mark Wheeler
CEO
Ironshore International

“There was a lot of press coverage around that 12 months ago, but there is little evidence to see that it has driven much traction,” Wheeler said.

Starr and Ironshore work in partnership in some lines and sectors. Ironshore CEO Kevin Kelley is an AIG alumnus who retains great respect for his mentor Hank Greenberg.

Kelley told Risk & Insurance® in 2013 there was “no doubt in his mind” that if Greenberg stayed as CEO that AIG would have remained whole during the crisis of 2008.

The Starr Aviation Agency Inc. is the underwriter for Ironshore’s aviation products, and the two carriers have joined forces in the Iron-Starr Excess Agency, a managing general underwriting agency that underwrites financial lines and specialty casualty with both carriers providing capacity.

Wheeler said it looks like the Starr Group has skirted some barriers to entry with the Dazhong acquisition.

“An acquisition like the one they made makes every sense to me in that context. Just because of the barriers to entry, having something that is already laid out on the ground, with distribution lines and speed to market,” Wheeler said.

Regulatory and cultural barriers in China are falling, but there are complexities for property/casualty insurers to consider there, as there would be in any economy.

“Whilst the opportunities are significant, there are a number of key challenges to overcome, including complex regulatory hurdles, disparity in value, fit with local partners and the need to operate flexibly in a rapidly evolving market,” wrote Joan Wong, a transaction services partner with KPMG China in an April 2014 report by KPMG on the Chinese insurance market.

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For his part, Greenberg said he doesn’t see the regulatory hurdles in China as much more complex than those a carrier faces in the U.S., where a carrier needs the separate approval of regulators in 50 states.

“I don’t know if it’s any more difficult than the regulatory environment in the United States,” Greenberg said. “I don’t think so. I think they have their regulations like every country does.”

Combining Cultures

Greenberg said that since the March announcement, the process of combining the professional cultures of Starr and the Dazhong Insurance Co. is coming along, but will take some time.

“It has gone pretty well,” he said. “It’s not going to happen overnight,” he added.

Greenberg said he is devoting a lot of resources to training local hires as well as bringing in talent with experience working in the United States, London and elsewhere.

Hank Greenberg CEO and Chairman Starr Companies

Hank Greenberg
CEO and Chairman
Starr Companies

According to Alex Yip, CEO of Lockton Cos. for Greater China, the issues of regulatory compliance and integrating work cultures are of paramount importance for insurance companies that want to do business in China.

“It is, understandably, a challenge for a U.S.-based company to integrate its business with a local Chinese entity,” Yip said.

“The day-to-day differences are enormous, and include history, culture, corporate mentality, value propositions and ways of doing business, to name just a few common challenges,” Yip said.

“It is often underestimated just how different we can be from one another,” Yip said.

What’s also often underestimated, according to the analysts at KPMG, are the expectations of Chinese consumers.

According to KPMG, Chinese consumers are highly likely to use social media and other channels to communicate their expectations of and experience with service providers to their fellow consumers.

For the banking, general and life insurance sectors, around 70 percent of Chinese respondents to a KPMG survey recommended their banks and insurers to others. That’s compared to between 21 to 53 percent of those surveyed in other countries.

Although industry advocates hope for a day when foreign carriers can sell a variety of coverages to Chinese consumers and businesses online, Greenberg said there will always be the need for sophisticated underwriters and brokers in highly CAT-exposed China.

“It will never be adaptable to large, complicated risks,” Greenberg said of the online selling channel.

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“That will still be done through the brokers and companies that have the sophistication to write those kinds of risks,” he said.

“But there is an awful lot of business that can be produced online and through social media.”

There are barriers to entry in China and insurance penetration there is in its beginning stages.

But according to Greenberg, once that country of 1.4 billion becomes more of a consumer economy, it will take off, and the insurance business right along with it.

“Once China becomes less dependent on exports and more dependent on the domestic economy, it’s going to soar,” Greenberg said.

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at dreynolds@lrp.com.
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Sponsored: Aspen Insurance

A Modern Claims Philosophy: Proactive and Integrated

Aspen Insurance views the expertise and data of their claims professionals as a valuable asset.
By: | March 2, 2015 • 4 min read
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According to some experts, “The best claim is the one that never happens.”

But is that even remotely realistic?

Experienced risk professionals know that in the real world, claims and losses are inevitable. After all, it’s called Risk Management, not Risk Avoidance.

And while no one likes losses, there are rich lessons to be gleaned from the claims management process. Through careful tracking and analysis of losses, risk professionals spot gaps in their risk control programs and identify new or emerging risks.

Aspen Insurance embraces this philosophy by viewing the data and expertise of their claims operation as a valuable asset. Unlike more traditional carriers, Aspen Insurance integrates their claims professionals into all of their client work – from the initial risk assessment and underwriting process through ongoing risk management consulting and loss control.

This proactive and integrated approach results in meaningful reductions to the frequency and severity of client losses. But when the inevitable does happen, Aspen Insurance claims professionals utilize their established understanding of client risks and operations to produce some truly amazing solutions.

“I worked at several of the most well known and respected insurance companies in my many years as a claims executive. But few of them utilize an approach that is as innovative as Aspen Insurance,” said Stephen Perrella, senior vice president, casualty claims, at Aspen Insurance.

SponsoredContent_Aspen“We do a lot of trending and data analysis to provide as much information as possible to our clients. Our analytics can help clients improve upon their own risk management procedures.”
— Stephen Perrella, Senior Vice President, Casualty Claims, Aspen Insurance

Utilizing claims expertise to improve underwriting

Acting as adviser and advocate, Aspen integrates the entire process under a coverage coordinator who ensures that the underwriters, claims and insureds agree on consistent, clear definitions and protocols. With claims professionals involved in the initial account review and the development of form language, Aspen’s underwriters have a full sense of risks so they can provide more specific and meaningful coverage, and identify risks and exclusions that the underwriter might not consider during a routine underwriting process.

“Most insurers don’t ever want to talk about claims and underwriting in the same sentence,” said Perrella. “That archaic view can potentially hurt the insurance company as well as their business partners.”
SponsoredContent_AspenSponsoredContent_AspenAspen Insurance considered a company working on a large bridge refurbishment project on the West Coast as a potential insured, posing the array of generally anticipated construction-related risks. During underwriting, its claims managers discovered there was a large oil storage facility underneath the bridge. If a worker didn’t properly tether his or her tools, or a piece of steel fell onto a tank and fractured it, the consequences would be severe. Shutting down a widely used waterway channel for an oil cleanup would be devastating. The business interruption claims alone would be astronomical.

“We narrowed the opportunity for possible claims that the underwriter was unaware existed at the outset,” said Perrella.

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Risk management improved

Claims professionals help Aspen Insurance’s clients with their risk management programs. When data analysis reveals high numbers of claims in a particular area, Aspen readily shares that information with the client. The Aspen team then works with the client to determine if there are better ways to handle certain processes.

“We do a lot of trending and data analysis to provide as much information as possible to our clients,” said Perrella. “Our analytics can help clients improve upon their own risk management procedures.”
SponsoredContent_Aspen
SponsoredContent_AspenFor a large restaurant-and-entertainment group with locations in New York and Las Vegas, Aspen’s consultative approach has been critical. After meeting with risk managers and using analytics to study trends in the client’s portfolio, Aspen learned that the sheer size and volume of customers at each location led to disparate profiles of patron injuries.

Specifically, the organization had a high number of glass-related incidents across its multiple venues. So Aspen’s claims and underwriting professionals helped the organization implement new reporting protocols and risk-prevention strategies that led to a significant drop in glass-related claims over the following two years. Where one location would experience a disproportionate level of security assault or slip & fall claims, the possible genesis for those claims was discussed with the insured and corrective steps explored in response. Aspen’s proactive management of the account and working relationship with its principals led the organization to make changes that not only lowered the company’s exposures, but also kept patrons safer.

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World-class claims management

Despite expert planning and careful prevention, losses and claims are inevitable. With Aspen’s claims department involved from the earliest stages of risk assessment, the department has developed world-class claims-processing capability.

“When a claim does arrive, everyone knows exactly how to operate,” said Perrella. “By understanding the perspectives of both the underwriters and the actuaries, our claims folks have grown to be better business people.

“We have dramatically reduced the potential for any problematic communication breakdown between our claims team, broker and the client,” said Perrella.
SponsoredContent_AspenSponsoredContent_AspenA fire ripped through an office building rendering it unusable by its seven tenants. An investigation revealed that an employee of the client intentionally set the fire. The client had not purchased business interruption insurance, and instead only had coverage for the physical damage to the building.

The Aspen claims team researched a way to assist the client in filing a third-party claim through secondary insurance that covered the business interruption portion of the loss. The attention, knowledge and creativity of the claims team saved the client from possible insurmountable losses.

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Modernize your carrier relationship

Aspen Insurance’s claims philosophy is a great example of how this carrier’s innovative perspective is redefining the underwriter-client relationship. Learn more about how Aspen Insurance can benefit your risk management program at http://www.aspen.co/insurance/.

Stephen Perrella, Senior Vice President, Casualty, can be reached at Stephen.perrella@aspen-insurance.com.

This article is provided for news and information purposes only and does not necessarily represent Aspen’s views and does constitute legal advice. This article reflects the opinion of the author at the time it was written taking into account market, regulatory and other conditions at the time of writing which may change over time. Aspen does not undertake a duty to update the article.

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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 Aspen Insurance. The editorial staff of Risk & Insurance had no role in its preparation.




Aspen Insurance is a business segment of Aspen Insurance Holdings Limited. It provides insurance for property, casualty, marine, energy and transportation, financial and professional lines, and programs business.
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