Earlier this year, FM Global introduced an accelerated claims process for most gross claims less than US$100,000. And Renee Simms, assistant vice president, insurance, at RioCan, is quite pleased about that.
As Canada’s largest real estate investment trust exclusively focused on retail real estate, RioCan has been working with FM Global since 2001. “We can definitively state that FM Global’s new accelerated claims process represents a fundamental shift in our relationship—a shift in a positive direction,” Simms said.
Clients talk, insurer listens
Surveys in which clients indicated they would appreciate a more expedited claims process played a role in FM Global’s decision to consider new procedures. Another factor was the growth of Affiliated FM, a member of the FM Global Group that specializes in commercial property insurance for the middle-market segment of business and industry.
We can definitively state that FM Global’s new accelerated claims process represents a fundamental shift in our relationship—a shift in a positive direction.
“As the Affiliated FM book has grown over time, we have seen a significant increase in the number of small claims we are handling,” saysSteve Abbott,vice president and claims manager,Eastern division, FM Global. In fact, 84 percent of claims filed with FM Global are for gross claims less than US$100,000; however, these claims represent a very small percentage of what FM Global pays out annually in settlements.
“It just makes sense to quickly resolve the smaller claims and spend more time on adjusting bigger claims,” Abbott said. “We can be more responsive to our clients in their times of need on larger losses, and respond to large claim submissions faster, therefore improving client service not only on smaller losses, but also on larger ones.”
According to Abbott, the new accelerated claims process puts payments into clients’ hands much more quickly than in the past. “Our claims adjusters spend less time collecting documentation and compiling it into a claim package for approval.”
Instead of waiting for a client to receive a price from the contractor for emergency services before settling the claim, FM Global adjusters are now able to rely on their extensive experience to recommend an estimate to the client. FM Global and the client can agree on a net claim and initiate payment the same day. Adjustments to the payment can be made if the estimate proves to be too low.
“We are still meeting the basic statutory requirements for file documentation and handling,” emphasized Abbott.
Simms explained the claims process from RioCan’s perspective: “Historically, a claim submitted under the policy would be paid after all invoices were actually received by FM Global, and in most cases these costs would be paid first by RioCan. This process could take up to six months or more to see a claim to final resolution. But with the new accelerated claims process, a claim is submitted to FM Global with a copy of the approved contractor’s estimate and a copy of our purchase order confirming our binding agreement with the contractor. Now, within 60 days, payment can be issued under our policy.”
This is a dramatic improvement to RioCan’s bottom line. “In most cases, the costs incurred due to an insured loss would mean that our operational cash flow was negatively affected; and sometimes this negative impact would remain on our books until the loss was paid, which could be up to six months. With the new accelerated claims process, the impact to our cash flow is proving to be negligible as claims are resolved more quickly.”
Traditional process still available
Abbott notes that clients can choose to have their claims processed the traditional way if they don’t want to use the expedited process. He also explains that not all claims under US$100,000 are eligible for the expedited process.
If all goes well, FM Global will explore expanding use of the procedures to a broader subset of losses, for example, gross losses less than US$250,000.
This article first appeared in Reason Magazine Issue 2:2012.