In my job, however, I have to consider the financial loss this sort of catastrophe has on commercial enterprises. As a forensic accountant, I specialise in dealing with commercial business interruption losses.
Unlike my colleagues who deal in litigation disputes, the large commercial business interruption insurance arena in which I operate is normally more amicable. This is because there is a commercial relationship between the insurer and insured, and the end objective for both parties is aligned, aiming to measure the financial loss accurately and for the policy to respond appropriately.
However, this does not mean that there is never any friction or difficulties. As business interruption insurance is primarily concerned with forecasting how profitable a business would have been had an incident not occurred, differences of opinion can inevitably arise. Furthermore, insurance policy wordings vary and not all respond in the same way, particularly to a set of circumstances that may not have been anticipated.
To accurately quantify a loss of profit, detailed financial and operational data is required. The majority of this will be confidential in nature and, hence, is only available from the insured. This information requirement normally manifests itself in the form of a Document Request List (DRL) and can be a point of contention if the requests are not concise, relevant and proportionate to the size of the loss.
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My primary objective is to accurately measure the financial loss. Good communication and a spirit of co-operation with the insured is key to achieving this. A collaborative approach tends to result in a smoother and timely resolution that meets both the insured and insurer’s objectives.
It also helps to have an appreciation of everyone’s stress points. The financial director or risk manager will be concerned with how the business will recover, what cover is in place and when the first payments from the insurers can be made. The loss adjuster, however, will be under pressure to provide, with our assistance, the insurers with an estimate of the potential loss to set a reserve and to understand what support is available to make a payment to the insured.
Now, Rome wasn’t built in a day, so this process may not go smoothly from day one, but there is a particular instance that sticks out in my memory as an example that demonstrates how building trust between the parties can help lead to an amicable resolution.
An explosion at an Italian factory led to a half-mile cordon and significant damage to the premises, which halted production. The first meeting, at the head office in Belgium, lasted only 30 minutes and we weren’t even offered a glass of water. It was clear at this meeting that the insured did not want to engage with us.
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Due to the lack of information, we had to issue a generic DRL – and a few months later we were still waiting for a response, which meant that no interim payments could be made by the insurer.
When the insured eventually presented a claim, we met with them again and started off by explaining our role. We emphasised that we wanted to work with them to minimise their additional workload by agreeing a DRL that focused only on areas that would have a material impact on the claim – rather than being overly and unnecessarily onerous.
Having team members who spoke their language and who were familiar with the country certainly helped. This opened up the doors of communication and we even got a cup of coffee.
The insured soon provided us with supporting documents and the insurer made a payment. They even invited us to the factory where we had a tour of the premises and saw the affected areas in more detail as well as how their actions to mitigate their loss were working. At lunch, we also got to know the people round the table in a less formal setting.
As a result of these meetings, we were able to present our informed calculations to the insurer with an explanation of any differences we had with the claim. At the settlement meeting, we were able to provide the insured with full explanations and talked through the merits of the approach taken. Quickly, a settlement that was agreeable to all was reached. Indeed, the insured was so confident that this was going to happen they had already booked a three course lunch in one of the local restaurants to celebrate. How far we had come.
Now, I cannot say that all cases go as smoothly as this and, certainly, having any understanding of the local culture does assist when dealing with losses outside the UK, but if we can all have an appreciation of each other’s objectives then, hopefully, it will avoid any nasty surprises.
Imogen Swain is a senior manager in the London office of RGL Forensics with over 10 years’ experience in evaluating economic losses.