Building on experience

We all recognise the importance of complying with the appropriate regulations and ensuring that risk assessments, method statements and so on are drafted and fully incorporated into a business model. Such documentation is critical when it comes to successfully defending a liability claim and we are increasingly seeing proactive involvement on the part of brokers in ensuring the appropriate systems are in place for their clients.

While the existence of documentation is extremely important, this does not get away from the fact that the documents are worthless without any buy-in from clients' employees, as well as an effective means of communication. In that regard, it is about winning the hearts and minds of the labour force and re-educating them about the effects of accidents on productivity and the financial impact this has, even without the element of compensation.

Reducing solicitor involvement

Over recent months, a fairly radical programme had been undertaken by a broker in collaboration with a loss adjuster for one of its corporate clients. The broker's client was suffering an increase in incident levels and claims spend on their employers' liability account.

A flyer was developed and circulated to the entire workforce introducing a new way of handling EL claims, without necessarily going through a solicitor. The flyer outlined real-life examples of the typical cost to the business of a fairly minor claim, stating exactly how much a solicitor would actually receive, often exceeding the amount of damages.

The programme introduced essentially allowed an employee to approach a committee as soon as an incident occurred, with the employee's intention to claim being noted. The matter was investigated by an adjuster who subsequently forwarded his findings to an adjudication committee comprising management representatives, a member of the trade union and a senior member of staff.

The beauty of the programme, from the employee's standpoint, was that it allowed for swift access to compensation. However, the employee still had an option to consult a solicitor when the process was complete, if he felt that the findings were unfair.

It is anticipated that this method of claims handling will have a very positive impact on claims spend, reducing it by approximately 50%. Unsurprisingly, it has received full backing from the insurer.

Utilise rehabilitation programmes

Another in which there is evidence of claims being proactively managed is when absentee-management programmes have been introduced into the work place. The primary reason is to curb the number of sick days taken by employees and to be forewarned of any issues that require more active intervention.

As an aside, however, it is also a good indicator of injuries that occur in the work place and their effect on employees. If supported by a rehabilitation programme, such systems can reduce the number of claims and significantly impact the claim cost by reducing the claim for wage loss and getting the employee back into the working environment as quickly as possible.

It is quite common for employees to only reluctantly look at making a formal claim to recover their lost earnings. A proactive rehabilitation system allows intervention at an early stage and these issues can then be flushed out and dealt with.

The knock-on effect, of course, is that absentee rates are generally found to reduce quite substantially when employees have to report illnesses and undergo a questionnaire process to determine what is wrong and when they are likely to return to work. When faced with such an approach, even outside normal business hours, employees are found to be less likely to fake an illness for fear of being caught out.

An interesting story involved an employee telephoning their office to report an illness and being subsequently questioned and required to provide contact details. When all the information was entered onto the system, a query developed over the dialling code for the telephone number provided, which was a London number and the employee actually resided in the North-west. Further discussions took place and it materialised that the employee had been on holiday and had been delayed upon return. Needless to say, the sick day was substituted for an additional annual-leave day immediately.

Management team buy-in

As the above approach to managing risk exemplifies, the senior team of any business needs to buy into a risk-management strategy. The increasing predominance of self-insured retentions has served to provide a greater hunger in the corporate market for help to proactively manage risk. When mistakes are made, they are now seen to be directly hitting the bottom line and the cost benefits of simple strategies can be more readily accepted.

The most effective results arise when all interested parties act as a team. Seminars, run in tandem with brokers and insurers, provide some practical guidance on how to ensure claims are used to the advantage of the company moving forward. Furthermore, these allow access to individuals who would otherwise not be aware of the consequences of mistakes and the typical cost of an average claim to the business.

Mistakes do occur, but the team approach allows an efficient method of communication to be built into the claims-handling process. When an incident occurs, the investigations can be fast-tracked and either a robust denial of liability can be issued or proceed without delay to negotiate settlement of the claim. One of the more positive spin-offs from the conditional fee agreements is that the after-the-event insurer will not sponsor a claim where there is a significant risk of failure.

By providing a comprehensive disclosure pack and denial of liability at an earlier stage, a greater degree of transparency exists where the handling solicitor will, on occasions, positively confirm that their client will not be proceeding with the action due to the absence of funding.

There are not many positive changes within the current civil procedure process for insurers and their customers and, consequently, when there are areas to take advantage of, it is important that all contributing parties are encouraged to utilise them to their fullest extent.

The role of the liability adjuster in all of this has changed remarkably over the last few years.

Brokers digging deeper to protect their clients have ushered out the days when it was sufficient for the adjuster to simply investigate the claim in hand and ignore the underlying cause. Risk of repetition and a general review of risk management is now incorporated into the adjuster's site visit and the results are fed back to both the insurer and broker. This allows positive intervention at a much earlier stage.

It may also be a simple case of fresh eyes coming into an organisation and noticing hazards that the business itself has become so accustomed to that they have been made invisible. It is akin to that rolled corner of wallpaper that you pass by in your passageway on numerous occasions every day to the point where you become oblivious to it. A stranger arrives and their attention is immediately drawn to it. While risk management can, at times, be as simple as that - the impact of even very subtle changes can make a huge difference to incident frequency and claims cost.

In setting up an effective means of feedback from the adjuster's site visit, the broker benefits as they can now bring into play other areas of their client's business to look at risk-management strategies.

The insured party also benefits from hopefully avoiding a repetition of previous incidents and, therefore, this should have an impact on both the insured's own expenditure under the excess and claims experience. Of course the insurer benefits from reduced claims spend.

However, the adjusting business is all about building effective and enduring relationships and, while the claim numbers may well reduce on one programme, if the team approach works effectively, the adjuster who gets it right in the market will attract more and more business to make up for that. Just as in justifying investment in risk-management approaches, this is all about a long-term investment for the greater good.

Newly developed databases

The other area that does not perhaps get as much press is third-party or liability claims fraud. There are some great systems currently being developed to help identify fraudulent liability claims, using a variety of third-party databases to produce a useful and meaningful analysis.

During the last two years, the Department for Work & Pensions Compensation Recovery Unit has worked extensively with Insurance Database Services to develop full electronic links with the Claims Underwriting Exchange Personal Injury Database. The system has now gone live and allows full end-to-end electronic submission to the CRU with associated electronic responses.

The CEU PI database can be searched automatically during the claims load process or through real-time enquiry on an ad hoc basis and provides a picture of the claims history of the individual, effectively, identification of previous related claims or similar modus operandi claims against other compensators/insurers.

The key advantage of a system of this kind is the unique key differentiators to ensure accuracy. That is, the CRU form contains the claimant's unique National Insurance number, address and date of birth, and all of this information should ensure the accuracy of any feedback received.

Liability hot spots

One further area to explore from a risk-management perspective on databases of this kind is that they can be used to map out hot spots in the country where claims are more likely to be made. This is particularly interesting to civil engineering firms that are charged with tracking various roads across the country to install public services. If they can get to a stage where we have an accurate database, they then will be able to map out hot spots where incidents are more likely to occur and invest heavily in those areas on greater risk-management controls. They can also build this risk into their pricing structure in a much more intelligent way.

To conclude, risk management is all about brokers using the key resources and contacts available to them. The broker needs to build from its own expertise and that of others, the conditions whereby risk management is not simply restricted to an annual fit and proper exercise, but one that is endemic to the claims process. Risk management is not just about avoiding claims in the first place, it is about using them to the business' advantage moving forward and ensuring that innovative techniques are used to close down the cost of such mistakes to the business.