When a natural disaster strikes – and an enterprise sustains substantial property damage and disruption of its operations – there may be millions of dollars in losses involved. In these situations, timely insurance recoveries are essential for affected businesses to repair or replace damaged facilities, maintain income, and restore critical operations to full capacity.
In these instances, experienced insurance broker claims advocates can play a significant role in an organization’s ability to obtain a timely insurance recovery and minimize the delays and denials that threaten business recovery.
Unfortunately, losses related to natural catastrophes have skyrocketed in recent years. According to Aon’s Weather, Climate & Catastrophe Insight Report, economic losses from natural disasters topped USD232 billion in 2019, closing out the costliest decade on record. From 2010-2019, economic damage reached USD2.98 trillion, a USD1.19 trillion increase over the previous decade. In the aftermath of such catastrophes, claims recoveries can be challenging – even for organizations with large legal and risk management departments. Notably, despite their understanding of legal matters and contractual issues, corporate counsel and other legal advisers often are not equipped to navigate complex and specialized insurance policy wording, terms and restrictions.
Recovery obstacles abound
During the past several years, complex property insurance policies and program structures have been increasingly subjected to restrictive new clauses, more narrow loss definitions, peril-specific sub-limits and their subjective interpretation by carriers, and related controversies surrounding loss causation. These have led to challenges in securing fair and timely disaster-related insurance recoveries.
Any one of these issues can result in misunderstandings, more arduous and prolonged negotiations, outright coverage denials, inadequate financial recoveries and, as a consequence, more delays in restoring operations and performance.
Furthermore, in the context of large-scale loss events, such as those caused by natural catastrophes, including hurricanes, floods, tsunami and earthquakes, insurance company claims adjusters do not all have the technical expertise to analyze the claim in a way that will maximize coverage.
As risk managers anticipate the possibility of a potentially large and complex claim, they need to consider adding professionals to their claims management teams who have the background knowledge to analyze the claim in a way that fairly maximizes their available coverage.
Property brokerage claims advocates can help businesses navigate these issues and often achieve accelerated insurance recoveries. For example, when claims advocates at Aon were involved in large losses of USD5 million or more in North America in 2019, insurers on average paid 55 percent more than the initial insurer offer, resulting .in tens of millions of dollars of additional property claims recoveries for policyholders.
Property claims advocates typically work directly with insureds, the property brokers and insurer representatives to help insureds achieve the recoveries they anticipated when their insurance program was designed and placed. In many instances, claims advocates, such as those at Aon, can even be brought in after a property claim has been declined or a coverage offer has been made that is less than anticipated. Aon’s escalation protocols include a designated team that works with insurer counterparts to execute agreed claim resolution strategies to achieve optimal claim outcomes for clients.
Tapping into Pre-Loss Services to Flag Potential Controversies
To avoid coverage issues when disaster strikes, many firms engage Aon’s claims advocates to work with their brokers during their property renewals to review their programs and flag potential coverage issues before the policy is renewed. Experienced property claims advocates can be engaged for assistance with the following:
- Property Coverage Reviews. Claims advocates can review property policies and coverages during renewal to spot potential controversies before coverage is placed. They also can assist during the policy year to check these issues prior to a major loss event.
- Catastrophe Loss Response. When a major loss event occurs, claims advocates can be engaged to collaborate with the insured’s claims prep team and coordinate with the insurance company adjusters and experts to match coverages to specific losses and causes. This can help avoid potential disputes and speed recoveries.
- Complex Loss Scenarios. When catastrophic events occur and there are potential issues over causation or other policy issues, claims advocates can work with the insured’s claims team to identify coverages applicable to physical damages or operational disruption and help develop the claim narrative to present to insurers.
- Full or Partial Coverage Denials. Claims advocates can review insurance company reasons for denials, examine losses, identify relevant coverages and escalate the claims with the insurer.
It’s not unusual for property policies to be more than 100 pages with numerous complex and technical provisions. Property claims advocates experienced in negotiating post-loss claim recoveries can help insureds and their brokers anticipate claim issues and develop strategies to deal with them during the renewal process.