As the Canadian insurance market hardens, businesses countrywide are starting to analyze their insurance costs and question whether they can manage their financial exposures more effectively. With rates increasing more or less across commercial lines, many organizations are considering higher self-insured retention (SIR) or higher deductibles in order to manage their soaring premium costs.
This trend has had an interesting impact on third-party service providers. For example, claims and risk management solutions provider Crawford & Company (Canada) is seeing “more demands for extended services as a result of the hardening market,” according to chief client officer Greg Smith.
He told Insurance Business: “Five-years-ago, an insured might have sent all claims to the insurance company. Now, if they have a significant SIR – maybe $100,000 or $500,000 – where they have to cover those losses themselves, they’re relying much more heavily on companies like Crawford & Company to help them through their claims. They’re seeking help from zero to whatever their insured retention is, before the insurance carrier would step in and begin responding to them.”
Large corporations within the Fortune 500 have long used SIR as an effective risk management tool. They have sophisticated risk managers that run complex insurance programs and understand the financial implications of holding some risk on their balance sheets.
“About a year ago, as the market started hardening – more so in property than any other lines of business – insureds started to see rates increasing as they went through their renewals. This started driving up deductibles and SIR,” said Smith. “We’ve also had a number of customers come to us through their brokers and say: ‘This is the first time we have even contemplated managing an SIR. Tell us what that looks like from a claims perspective.’ They’re having us walk them through the impact that a high SIR could have, and explain what services we offer to make a high SIR a manageable thing for their organizations.
“Many organizations that are considering increasing their SIR in the hardening market are of the size and scale where they don’t have a full-time professional risk manager. They have someone whose job it is to manage the insurance portfolio along with many other things. So, they tend to rely more heavily on us, their brokers and their insurance carriers to bring all the building blocks of that program to the table for them.”
This reliance links to a wider trend of insureds wanting more from their relationships with independent claims administrators and third-party risk management providers.
Smith commented: “We’re seeing an extension in the nature of insurance claims. For the majority of claims that land, it’s the first and hopefully the only time an insured has to deal with that, whether they’re a large corporation or a small business. We’re able to lend our expertise to help them through that event, and that often extends beyond the narrow focus of adjudicating the insurance claim into aspects of communicating losses with key stakeholder groups and providing advice around managing other knock-on effects of the claim they’ve experienced.
“We try to work as closely as we can with the brokers to make sure that our offerings don’t overlap with what they offer. And we try to be careful to make sure that the brokers own that key customer relationship, we’re there to help them fill the gaps where it’s required.”
