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By JOEL BERG, a freelance journalist and college professor.

Public adjuster Paul Migdal normally would have followed the claim all the way to the settlement table.

The claim was settled during a meeting between two high-level executives: the president of the insurance company and the president of the Taiwanese hotel chain whose property in Guam had been damaged by a typhoon, said Migdal, senior vice president of San Francisco-based The Greenspan Company/Adjusters International.

"We adjusters went as far as we could," said Migdal, who had been working on behalf of the hotel chain. "But the ultimate final settlement was face to face between the two principals."

Adjusters aren't the only professionals whose roles change when they step off U.S. soil. Risk managers also must adapt as they deal remotely with affairs they are used to handling more closely. They may need more help, giving third-party vendors an opening to provide international expertise that companies expanding abroad typically can't afford to build on their own.

Carriers, meanwhile, have been beefing up reporting systems so that they can deliver information seamlessly in the wake of a loss anywhere in the world.

"For many large global insurers, especially those that have grown by acquisition, there are quite often many competing claims systems," said Ian Campos, a vice president and global insurance practice leader with consulting firm Capgemini.

Indeed, Zurich in North America fields a number of systems, but the carrier strives to maintain consistency for customers through an approach dubbed One Zurich, said Steve Hatch, the Illinois-based carrier's chief claims officer. "We want their experience in other parts of the world to be the same as it would be as if it were in North America," Hatch said.

Accurate and timely information, of course, is a key tool for risk managers hoping to stay on top of claims and apply predictive analytics to control costs and prevent losses.

"U.S. companies are used to having a lot of data and a lot of information at their fingertips," said Dorien Smithson, executive vice president and leader of the strategic outcomes practice of New York-based Willis North America, part of Willis Group Holdings Inc.

Traditionally, companies have struggled with a more limited information flow coming from abroad. Differences in language, technology and procedure can complicate the process outside the United States. Regulations in some countries, for instance, limit the type of data that can be shared.

But it's a struggle for which companies are losing tolerance, Smithson said. "I think the expectation is that the carriers should be able to maximize technology for improvements on this, and I think the big global carriers are very focused on that."

Technology can only go so far, however. Complications can arise inside the companies that are filing claims overseas.

The power of a company's local managers often weigh on the claims process, said Michael Reeves, executive vice president of global markets for Atlanta-based Crawford & Company, an Atlanta-based provider of claims management solutions.

Local managers need enough flexibility to react quickly to a loss, but not so much that the global claims program is undermined by, for example, data being recorded inconsistently, Reeves said.

"Very often, the problem that we face is not so much the claim itself, or even capturing the data," Reeves said. "It's understanding the structure of the company and where the decision makers are."

At minimum, companies need to set clear expectations for who will be recording information and what that information will be, said Neil Harrison, group managing director of risk control, claims and engineering for Chicago-based Aon Global Risk Consulting. Risk managers accustomed to the data-rich U.S. environment may have to settle for gathering only information relevant to resolving the claim, Harrison said.

The claim is likely to move more quickly as a result, Harrison said. And, as an added benefit, the narrower demands will assuage tension between the home office and local managers.

To avoid miscues, risk managers need to establish procedures in advance, Harrison said. For example, companies can dictate that any reserve set-aside of more than $100,000, as well as any significant changes to the reserve amount, must be approved by the global risk manager. "It centralizes the decision-making process, but doesn't get in the way of what needs to take place on the ground," Harrison said.

Other internal speed bumps can show up for companies trying to gather data from multiple units. That's often the case for complex business interruption claims, many of which arose this spring after the earthquake in Japan March 11. These claims may involve units, such as finance, that are outside risk management.

"That's very much an area that we see that creates frustration at the insured level and then it slows down the process," Harrison said. The insurer, for instance, may receive information that is incomplete or later corrected.

"You very quickly drift from a situation where the insured and their adviser and the insurer are working together as partners to one where it becomes very much a supplier versus buyer issue, and then the proverbial finger pointing starts very quickly," Harrison said.

He recommended testing claims procedures before a loss to ensure they work smoothly, and that the test include insurers, brokers and any other parties that might be involved.

Even if risk managers quickly gather the information they need, they remain potentially thousands of miles away from the action. And it's likely they'll lack expert knowledge of the laws, customs and conditions in the foreign countries where claims arise.

As a result, most companies consider outsourcing some or all of the process for handling international claims.

"Navigating that global arena for a lot of risk managers is scary if they've never really worked with claims adjusters outside the United States," said Kirsten Early, an assistant vice president at Philadelphia-based ESIS Inc., the third-party administrator and risk services arm of The ACE Group.

And the costs of doing business in other countries can vary widely, making them hard to predict, Early said. "As an example, Scandinavia can be very expensive to adjust a claim if you're paying on a time-and-expense basis," she said. "It does make a difference."

TPAs usually have already negotiated rates with local adjusters and charge a per-claim fee, Early said, adding that companies appear to be seeking out ESIS in expectation that their international exposure will grow. "A lot of times you're dealing with language barriers, time zones," she said. "It helps to have the third-party administrator to put together a program for you to help you with these challenges and others."

Companies that want to assemble their own programs still may need local help, said Jim Kinzie, a senior manager and leader of the North American claims practice for consulting firm Deloitte.

Companies can set up a uniform system for reporting claims, Kinzie said. But they may rely on local agencies or third-party administrators to start the process after a loss.

"I don't think there's a way around that," said Kinzie, who previously managed international claims for USAA, an insurance provider serving military families. "It's naïve to think that you can extend your staff or your knowledge to know the world. It doesn't work."

The issue then becomes how to manage the outsourcing process effectively, said Elise M. Farnham, president of Atlanta-based Illumine Consulting and a former independent adjuster.

Often, risk managers hire a liaison or quality control person as a conduit between themselves and the in-country adjusters and other professionals working on their claims, Farnham said.

"A risk manager may see one loss a year in one country, where the outsourcing company, the liaison company, might see 50 claims or 100 claims in that country," she said.

Periodic reviews and audits will ensure in-country vendors are performing, said Marc Lanzkowsky, founder and principal of New York-based Lanzko Consulting Inc. and editor of The Claims SPOT, an industry blog.

"You don't just let it go and send it overseas and wait for the numbers to come back," Lanzkowksy said.

Nor should companies wait until they have a claim to figure out who will be doing what when, said Richard Pankhurst, a director in the insurance advisory practice of consulting firm PricewaterhouseCoopers.

"Probably one of the hardest things to do is to pull this whole mess together afterward," he said. "It's a very risky situation."

Costs can escalate dramatically as local vendors and contractors attempt to exploit the emergency. "You look unprepared," he said, "so vultures start swarming."

September 15, 2011

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