Magazine article Risk Management

After the Dust Settles

Magazine article Risk Management

After the Dust Settles

Article excerpt

During a catastrophic event, risk managers often focus on protecting the health and safety of personnel, preventing further facility damage, implementing an emergency response plan, stabilizing critical operations at alternative sites, communicating effectively to customers and employees, and activating the permanent recovery plan.

The challenge considered last is how to actually collect the insurance proceeds that were contracted before the event. Will the care and consideration that was given to pre-event preparation and post-event response extend to selecting a claim preparation approach and preparing the claim documentation?

Like any other major business project, handling catastrophic insurance claims consists of three critical phases: planning (defining the objectives and how will they be achieved), implementation (engaging the resources necessary to implement the plan) and deployment (taking action to ensure the expected outcome is achieved). By using standard project management techniques, risk managers can organize and motivate their internal sources of information to produce claims that are fact-based, internally consistent, clearly documented and difficult for insurers to refute. Organized and motivated internal teams can produce claims of higher quality and at lower cost than self-contained teams of outside consultants.

It is critical that each operating unit potentially affected by a major loss should have co-responsibility with risk management for obtaining insurance reimbursement. Co-ownership is a powerful motivator, particularly if the potential loss is large relative to assets, revenue or profit. Ideally, co-ownership should be established in advance. Business continuity plans provide an ideal mechanism.

The logic of including insurance claim plans in business continuity plans is simple. Most plans focus exclusively on immediate recovery of critical operations. A valid recovery plan can minimize the loss of assets, revenue and profit but cannot eliminate the loss entirely. Insurance covers the unavoidable portion of the loss. Full financial recovery will require preparation and presentation of a claim. Most executives without previous claim experience will be surprised to learn that they are required to prove a claim to a very skeptical audience of insurers, adjusters and consultants. …

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