For example, the global economic downturn has contributed to a recent surge in worldwide cargo theft. Other outcomes might be less dramatic than that, however. New economic realities have set the stage for an emerging lack of maintenance and an aging infrastructure, creating conditions ripe for a higher number of marine claims. Sharply tightened budgets at companies have led to operations shortcomings, including a failure to maintain safety procedures and controls, and a shift away from safety investments. Exacerbating these changes is the growing dearth of trained, experienced employees.
Add it all up and that spells increased marine and transportation coverage losses.
Yet there are strategies to combat these potentially costly claims. We spoke with Don Harrell, senior vice president, LIU Marine and Richard Falcinelli, vice president of LIU Marine Risk Engineering. Harrell leads the company's specialized marine businesses in the United States and Latin America. Harrell and Falcinelli explained that what works for a specialized product line such as marine is collaboration: highly experienced marine underwriters, risk engineers and claims professionals working together with risk managers.
TEAM EFFORT REQUIRED TO REDUCE CLAIM LOSSES
"Claims will happen, but reducing unnecessary and costly losses, especially when they are driven by these difficult times, takes a truly integrated, collaborative approach," Harrell said. "No single expert has all the answers, so it's critical to bring diverse experts together and unite them in a common cause."
"Most of all," he added, "it's important to find a carrier who can deliver an analysis that provides real, actionable help to risk managers. It's industry knowledge combined with the experience data of many clients with the same risk factors."
Harrell explained that while some of these emerging risks have been visible for years, with more economic pressure, they become heightened. He points to Mexico as a prime example of how much has changed recently.
"The corruption and theft taking place in Mexico today has dramatically increased from a decade ago," he said. "We believe the instability in many countries today increases the risk. In some of those countries, the infrastructure is improving, but progress is slow. It is not keeping pace with the local needs of those markets."
Harrell said that while underwriting and claims are key components in any collaboration, when it comes to marine coverages, the critical differentiator is risk engineering. By their complex nature, marine coverages often require proactive risk aversion techniques based on highly specialized engineering expertise.
PROBLEM-SOLVING IS THE MAIN FOCUS
Falcinelli said that the most effective approach when it comes to risk engineering and risk management collaboration is for the carrier to focus its expertise and resources, both human and technological, toward the cause of helping the client overcome problems, both proactively and reactively.
"To manage losses proactively, you need to take a hard engineering-based look at the nature of a client's operations and its history. It's important to know if the operation being reviewed came about from an M&A deal, or divestiture activity, or if it is the result of the client investing in a new operation in another country," he said. "On the flip side, you must also react quickly when there is a claim or loss to help resolve or mitigate the problem -- always with the goal of preventing future losses."
Falcinelli said only a handful of carriers currently offer a truly collaborative approach. Many have reacted to economic pressure by either divesting or at the least not investing in a specialized marine risk engineering group. LIU Marine's risk engineering team has recently used this collaborative approach successfully with clients by helping them increase safety and protect their products.
For example, in 2012, LIU worked with a large global crane manufacturer with operations in India, Brazil, China and Europe. This client, who ships large crane parts and accessories, was very interested in how LIU's marine risk engineering expertise could help them prevent claims.
The real benefit came from LIU's risk engineering team coordinating with the client's contracted surveyors to oversee load/stow plans for all large crane shipments.
In yet another example, LIU Marine helped an oil field tools company significantly reduce their high losses. While the first two years' loss ratios were over 200 percent, LIU Marine risk engineers and underwriters sat down with the client and developed a collaborative plan of action that worked over the next several years to bring the company to a net positive position.
COLLABORATION SPELLS SUCCESS
Harrell said those examples demonstrate how effective collaboration can spell success for both client and carrier.
"It can often require a non-traditional approach," Harrell explained, "which can help clients in unexpected ways, such as how they work with vendors or how they choose or approve vessels for transporting cargo. You might call it an 'under the surface' approach with big benefits."
Harrell explained that this approach requires carriers to focus on continually building deep knowledge of a specific industry, and designing risk management and safety programs for that industry in collaboration with a client. Encouraging and rewarding that effort is important.
For example, LIU offers a "Quality Operator Review" program that recognizes clients who use best practices as determined by the specific industry's top standards for safety and other operational issues.
"It is a holistic strategy using various analytical tools that go beyond a typical vessel or facility survey," Harrell concluded, explaining that marine risk engineers can add value beyond loss prevention.
"Ideally, the risk engineering team should function as an extension of the client's risk management team, bringing enhanced industry knowledge and perspective."
Liberty International Underwriters (LIU) is the global specialty lines division of Liberty Mutual Insurance. www.LIU-USA.com.
Don Harrell is Senior Vice President, LIU Marine. Contact him to learn more about how you can help reduce your clients' marine risks. Donald.Harrell@libertyiu.com; 212-208-2862.
(The above piece is part of our continuing Perspectives series designed to highlight key products and services to our readers. This paid-for Perspective was written and edited by Risk & Insurance®
on behalf of our marketing partner. Additional Perspectives can be found on our Web site at www.riskandinsurance.com/.)
August 22, 2013
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