By James Gerrie, National Manager Property and Specialty Claims
But while the services provided by claims preparers can be very valuable, they can also prove counterproductive if you engage someone who is not sufficiently qualified or suitable to perform the work. Let me give you an example.
Several years ago, a resort sustained significant damage during a cyclone. The broker engaged the services of a claims preparer to help manage the property and business interruption claims.
The work performed by the claims preparer created a series of issues for the broker and client. For starters, he inflated the business’ profits by 40 per cent – setting unrealistic expectations for the client. He also exaggerated some of the resort’s lost inventory. Where there was only evidence from the asset register and purchase receipts of two set of sheets per room, he claimed three sets were damaged at a cost of $120,000-plus – and so on.
Based on discussions with the claims preparer, the client was expecting a $17 million payout. You can imagine their disappointment when the settlement amount turned out to be several million dollars less than that.
And just when the claim was at a critical time and coming to a head, the claims preparer took off for a seven week holiday bringing the process to a halt and substantially delaying the settlement.
Brokers need to be aware that once a claims preparer has been appointed, the insurer is required to deal with that business entity until the claim’s resolution. So if you are engaging a one man band, it’s important to verify their availability throughout the expected claims process and to check what their back-up plan is for unexpected contingencies (i.e. who will manage the claim if they become seriously ill).
The problem with ambit claims is that it sets off alarm bells with claims assessors and insurers, who begin to ask questions about what else is being overstated? All aspects of the claim attract greater scrutiny, making the process more drawn out.
Another issue that has come to light in recent years is the inflation of some claims preparer charges. So if the policy sublimit is $50,000, the invoice comes in very close to that mark even if the work performed clearly doesn’t justify the charges.
So why is this a problem?
The cost of the claim affects your client’s loss ratios, which can mean the difference between premiums staying put or going up the following year. And while insurers might query components of an invoice that are obviously wrong – for example, charging five hours to review a letter or four hours for a phone call – it’s the client that ultimately pays the price in their next year’s premium.
Here are five basic steps brokers can follow to avoid some of these traps:
- Choose a claims preparer with relevant professional qualifications (e.g. an accounting degree and/or recognised insurance qualifications, like ANZIF Fellow).
- Verify the claims preparer has experience with your client’s industry (i.e. a retail business is very different to a manufacturing plant).
- If using a one man band, check the claim preparer’s availability for the expected duration of the claim. Make sure they aren’t over-committed with work or planning a lengthy holiday mid-stream.
- Find out the claim preparer’s daily rate to ensure it is realistic. Given a qualified loss adjuster charges around $220 per hour, can you justify an hourly rate of $375 for a claims preparer performing similar work?
- Ask for testimonials from your colleagues and associates; word-of-mouth recommendations are often the best strategy.
So while it can be tempting to engage the services of a claims preparer who is very personable and keeps dropping in with a box of muffins for morning tea, keep in mind that the quality of their work reflects on your service and has the potential to unbalance a long-term client relationship.
Do you have a story to tell about your dealings with a claims prepare – good or not so great? Share them here.