Saturday, October 12, 2024

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Captives expanding data and technology utilisation to handle and reduce claims


  • Data and technology being utilised in claim mitigation
  • TPA approach differs dependant on working directly with captives or a front
  • Cyber and D&O require specialist claims expertise

Captives are enhancing their use of claims technology, often provided by expert claims companies, as a means of reducing the number and cost of claims, as well as increasing the speed of handling.

The approach to claims management can vary between captives with some preferring to handle the majority of claims in-house.

Others offload the bulk of the claims handling to specialist firms, while some take a hybrid approach.

As captives increase their self-insured retentions and add additional lines to combat increasing rates in the commercial market, more are expected to outsource claims handling.



A captive’s overall approach to claims can vary depending on whether the captive is utilising the services of a fronting carrier or writing directly.

“As a carrier providing fronting services, we support captives by providing support and resources and taking care of insurance regulatory compliance, offering financial stability, providing underwriting expertise, and facilitating efficient policy administration and claims handling,” Adriana Scherzinger, group head of captives at Zurich, told Captive Intelligence.

“We do handle claims as part of our service, but we are also flexible, offering both bundled and unbundled services. If a customer prefers to bring in a third-party administrator (TPA), we can accommodate that as well.”

James Norman, international business development director at Sedgwick, said if the firm is dealing with a captive directly, they have more autonomy to discuss what the retention should be and how the process is going to work.

“If it is done via the insurer, then the insurer will likely have a preferred TPA, or they might ask Sedgwick, or it might be someone else,” he told Captive Intelligence.

“They’ll often ask if we can take on that book of business up to a certain level, and then above that level, it could be referred into the carrier.”

Norman said the company maintains excellent relationships with major carriers, many of which have captive-funded programmes, but that the preference is to work directly with captives and their risk teams.

“We see more value in collaborating closely with them while still partnering with carriers, when necessary,” he added.

Norman also highlighted that captives are a key growth area for the company.

“Post Covid-19, we’re seeing a lot more interaction, because a lot of captives are taking the opportunity to re-evaluate their claims programmes,” he said.

Data and technology

As the size of captives and complexity of losses increases, companies are increasingly utilising data and technology to help manage the claims and put in place more effective prevention and mitigation measures.

Amy O’Brien, vice president for carrier practice sales at Gallagher Bassett, said the firm collects hundreds of data points on each claim which allows captives to run key performance indicators (KPIs) and other statistics.

“The captives are looking for providers that have exceptionally thorough and accurate data capture,” she told Captive Intelligence.

“In commercial auto, if a client is managing a trucking insurance programme or a captive – whether they are a single trucking company with multiple terminals around the world or part of a group captive with several trucking firms – we want to ensure that technology, such as telematics, is included.”

O’Brien said the firm encourages vehicles to be equipped with sensors to track speed, sharp braking, and other driving behaviours.

“Ideally, we also want cameras to capture situations, whether the insured is at fault or not, as the footage can be extremely helpful,” she added. “There’s a significant role for technology and data in this space.”

Norman said Sedgwick’s preference is to use its own technology stack for managing claims.

“This allows us to use digital intake forms, integrate claims directly into our system, and ensure that we meet the specific language, licensing, and regulatory requirements of each country,” he said.

“By doing so, we can offer risk insights and risk management information at the back end, helping captives or corporate clients develop their strategies. This approach positions us as more than just a transactional claims partner.”

He said captive managers today are looking for much more detailed information.

“What we do, first and foremost, is focus on the intake process,” Norman said.

He added that the company collaborates with captives to create its customised digital intake forms for various lines, such as property, motor, or general liability.

“These forms are flexible, multi-channel, and multi-device, and can be provided in local languages,” he said.

“This is crucial for programmes operating across multiple countries—say, 50 countries—where it is essential to intake claims in the local language, whether they’re from a factory or manufacturing site,” he said.

Once the claim is submitted through the digital intake form, it is integrated into Sedgwick’s core platform.

He said if it is a low-value, high-volume claim, the firm may be able to handle it at the desk.

“However, for more complex claims, they may need to be managed by one of our local Sedgwick offices, whether that’s in China, Germany, Brazil, Dubai, or elsewhere,” he said.

“This is where the technology really plays a part, because the claim will come back, and because it is all on our system, we have a platform called ViaOne, which is the carrier and the corporate and the captive’s window into their claims.

“It provides all of the individual claims information on their portfolio.”

José María Corsino, Delonia Software CEO, said captives are generally more dynamic entities than large carriers, and as a result are often capable of handling claims faster in-house.

“If you outsource to a big player they tend to move slowly, like an elephant, and will treat your captive as just another customer,” he said.

“In terms of claims management, yes, it is costly at the beginning to manage things in-house, but in the long run, it is a significant advantage compared to relying solely on third parties.”

Corsino said the company has a number of customers with serious claims, such as those dealing with earthquakes in Latin America, where losses have amounted to nearly $200m.

“In such cases, it can take years to get money from the insurers while you need to rebuild your company in weeks or months. So, that’s where captives can perform,” he added.

Corsino said it is not just about the finances or the numbers, but also about understanding the nature of claims.

“They go beyond the accounting or pure financials and focus on risk management,” he said. “By analysing the frequency and impact of claims they can take proactive steps to reduce the overall claims ratio.”

He believes captives need to invest either in services, solutions, or software but that the payoff can be significant.

“For example, take a water distribution company that was experiencing several claims due to pipe breaks. Without any analysis, they wouldn’t know the cause,” he said.

Corsino said the water company implemented a claims management system, gathered more data, and realised that most of the claims were caused by specific components.

“They replaced those parts, which ties back to risk management,” he said.

“Another example is a customer who analysed theft incidents and discovered that they had frequent theft in their warehouses in South America, impacting both property damage and business interruption.

“They added extra security measures, which reduced the number of claims, ultimately lowering their costs and premiums.”

Colin Donovan, CEO of STICO Mutual, said the captive handles all its claims in-house but utilises third-party inspectors for boots on the ground.

“We have trained them on what to look for, what photos to take, and how to report their findings back to us,” he said.

Donovan believes the mutual needs to maintain control over the claims handling process because it helps minimise costs.

“By addressing claims early, knowing exactly what to look for, and reaching a resolution before any lawsuits are filed, we can prevent claims from becoming expensive,” he said.

He told Captive Intelligence that the firm recently invested in a new policy and claims management system that uses artificial intelligence to analyse claims data and provide underwriting recommendations.

“However, it will take time before it becomes truly effective, as we need to input a lot of data for it to start drawing useful conclusions,” he said.

“Up until now, our claims data has been mostly self-analysed, relying on the knowledge we have built within the company.

“But moving forward, I think technology will play a major role in helping us dig through that data and make better underwriting decisions.”

Lines of business & different types of captives

The approach to handling claims can also differ dependent on the lines of business being written in the captive as well as the type of captive.

O’Brien said that when a client is in a homogeneous or heterogeneous group captive, the firm works directly with the members.

“Each member is a part owner and has a stake in the financials,” she said. “Amongst them, they share risk.”

She said the group captive model tends to involve the most stakeholders when it comes to individual claims.

“We are working directly with the captive owner, and there may be a consultant, captive manager, broker, and the carrier involved as well,” she said. “The fronting carrier might also be part of the discussions.”

Cyber and D&O are two lines of business that captives are increasingly exploring, and both come with their own unique claims challenges.

“We highly recommend involving a specialist for coverages like directors and officers, errors and omissions, and cyber insurance,” O’Brien said. “It is essential to have claims experts who truly understand those types of claims.”

O’Brien said Gallagher Bassett has a specific specialty claims team that does handle those types of risks.

“Many of the staff are attorneys by trade, so they understand how to read contracts, and certainly are excellent at policy interpretation,” she said. “So that is part of our value add.”

Norman said the volume of these claims tends to be quite low, and they require a completely different approach to the claims handling.

“There would be a lot more technical collaboration with the insurer, there’d be a lot more thinking around what the escalation triggers are, what referral, how the captive would approach it, and what their risk appetite is around these types of claims,” he said.

Gary Osborne, VP of Risk Partners, said almost all his property clients are using specialty firms that focus specifically on property risk.

“There are not many of these firms, but there are enough,” he told Captive Intelligence.

He said very few clients writing the more traditional line such as commercial auto, workers compensation, and general liability use specialty TPAs.

“For areas like medical malpractice or professional liability, they often manage claims themselves, sometimes with a lawyer, rather than using a TPA,” he added.