Alexander Mack explains why the handling of a claim represents the moment of truth for insurers and warns businesses of the need to be extra vigilant on public holidays.
You have been directly engaged in the claims business for 27 years. What is the biggest change you have seen during the course of your claims career?
Alexander Mack: The evolution of claims from back office function to one of the key differentiators in the competition for clients. We see a significant increase in the demand from corporate clients to have a direct relationship with their key claims contacts and to establish bespoke claims handling protocols. Today, claims is a strategic function, not just a servicing one, and is a key part of the sales process. Claims handling is the moment of truth – the moment where we fulfill our promise. You can have excellent policy construction and coverage but what clients need most is a smooth and professional handling of a claim because a claim is not their core business. Their core business is to produce and sell their products or services.
What are the major causes of property losses worldwide?
Mack: We have definitely seen an increase in business interruption (BI) and contingent business interruption (CBI) claims in wake of the number of natural catastrophes in recent years (AGCS estimates that BI and supply chain-related losses typically account for 50% to 70% of insured property catastrophe losses).
This is due to the fact that in some regions of the world we have a concentration of the supply industry for many different sectors. We saw the impact this had in Thailand following the floods of 2011, as well as in Japan in the aftermath of the Tohoku quake the same year. (BI and CBI losses were significant contributors to total insured loss bills in excess of $12bn and $30bn for these events). Secondly, an interesting trend we have noticed is that during certain times of the year you have more property losses. This is particularly apparent on extended public holidays such as Christmas or when production sites go on annual summer breaks for example. Companies often operate with fewer staff and security personnel at these times and this can lead to more incidents occurring and late detection, particularly if production or safety teams are reduced.
Which emerging risks do you think will impact the claims industry the most in the future?
Mack: Due to increasing insurance demand we will see many more insured cyber risks than we have done in the past. The claims community will have to cope with this. Then there is the increasing number of non-physical losses, such as loss of reputation for example. The legal and commercial aspect of 3D printing is something we are also watching. From a legal perspective we expect to see a growing exposure to mass tort claims in parts of the world such as Europe and emerging markets where this has been unknown so far. On the other hand we see a trend in the US to address some of the excesses seen with class actions, setting higher barriers for classes to be certified in courts.
What is the most satisfying part of your job?
Mack: What is satisfying is when you have claims where you can be of real support to the insured.
Then you can really see the value of insurance. For example, in the event of a property loss our experts can help a company to be up and running again in a very short time frame. We can aid the rebuilding process and assist with bringing production back on track. We help our clients to not lose market share by getting them back in business as soon as possible. That is a good feeling.