Loss Development can be one of the most challenging actuarial topics for underwriters and other insurance professionals to get right.
Loss Development factors are variables influencing the difference between an insurer’s initial estimate of the value of a loss and the actual value of the loss as the claim closes and payment is made. There are an infinite number of factors influencing loss development. Three of the most prominent factors influencing loss development are:
- Inflation in the consumer price index during the period between when a loss is reported and settled – changing the value of money.
- Cycle time between when a loss occurred and when insureds report the loss to their insurer.
- Introduction of new information at the end of the policy period.
In simple terms, loss development is important to consider as some claims never close, they simply get adjusted.
Accurate estimation of risk helps to allocate accurate policy coverage and minimise issues of exclusions down the line.
The challenge with accurately estimating loss development is that factors are versatile and are often in the hands of the insured themselves. Partner sourcing is a tried and tested solution to the versatility of loss development. Leveraging a partner who has the industry experience, know-how and flexibility to strengthen your team where and when it needs it will support your team with the resourcing needed to minimise the occurrence of factors influencing loss development.
The top four tips for eliminating loss development accurately include:
1. Cycle Time
The claims management lifecycle is reliant on insureds reporting a loss within a relevant time frame and on insurers processing claims at a rate that delivers superior outcomes and avoids delays.
Leveraging a partner to outsource your claims management allows you to scale up support as needed. When processes are smooth and efficient the claims lifecycle shortens, reducing the impact of inflation and the introduction of new information.
As an extension of your team, GB’s experts will support you in introducing clear claims management systems and processes, encouraging swift claiming by insureds backed by strengthened internal reporting lines for speedy claims management.
2. Indemnity Cost Control
Indemnity cost control hinges on the deep expertise and ability to have expert people who truly understand the policy. Throughout the claims lifecycle, inflation in the consumer price index and costs incurred by the insurer will continue to rise. Outsourcing your insurance claims puts the pressure of costs into the hands of experts who understand how to strategize and organise your claims management lifecycle to best benefit your business and your insureds.
3. Leverage Tools and Tactics
Partnering with a third-party administrator who has access to industry leading tools and tactics will arm your business with the technology and insights needed to accurately estimate loss development factors.
Partnering with Gallagher Bassett doesn’t just open the door to expert claims management professionals, but also our:
a. Loss Adjusting Business
Gallagher Bassett’s internal loss adjusting business and the on-the-ground eyes and ears enables your team to accurately estimate the risk of loss. GB’s team of loss adjusters are armed with the technology, data and deep expertise required to consider past and future trends into their estimation.
b. Property Repair Business
GB’s property repair business offers a complete range of solutions for those who have experienced, or who are at the risk of property loss. The team’s wealth of knowledge and experience ensures that, where possible, risks are averted, and repairs are underway – shortening the claims lifecycle.
c. Legal Business (GB Specialty)
GB Specialty brings enhanced focus to claims in specialised lines of coverage and with significant severity and complexity. A division made up of defence attorneys and insurer claims executives who have dedicated their entire careers to managing a client’s most complex and challenging claims.
4. Innovative Responses – GB Live
Gallagher Bassett is the global leader in the provision of risk and claims management. Backed by more than 40 years of industry experience, our team of experts have the drive to take your claims management to the next level.
The expectations of loss adjusting have changed rapidly in recent years. Our solution is GB Live. GB Live is video technology that enables remote, unobtrusive site visits. While site visits will still be required on most losses, GB Live enables Gallagher Bassett to add value at every stage, employing the right resourcing at the right time to make immediate and informed decisions.
While there will always be an infinite number of factors influencing risk, there is peace in mind in knowing that your losses and risks are being considered thoroughly and all in one place.
Leveraging a partner to outsource your claims management opens the door to faster claims management lifecycles, indemnity cost control and innovative tools, tactics and business functions that will elevate your team’s capability to accurately estimate loss development.
If you are looking to reduce the risk of your business by accurately assessing the risk of others, contact our team of experts today to find out how Gallagher Bassett can support your team in delivering superior outcomes.