Claims advantages for taking out a single policy with a single insurer

Simon Radcliffe : Claims Counsel

Simon Radcliffe

Claims Counsel

The combination of bigger insured deals, favourable pricing and an increased focus on de-risking deals, driven by uncertainty as to the impact of COVID-19 on M&A, means that insureds are buying larger limits.  However, only a handful of carriers can offer large line sizes – up to $200m in Liberty’s case.  The majority are limited to line sizes of $50m or less.

In the event that an insured wants to buy a large limit it has two options – either it can look to build a tower made up of a number of policies each written by a different insurer or it can look to take out a single policy written by one insurer.

There are a number of distinct advantages with the single policy approach that a prospective insured should consider before making its decision.   These include:

  • An insured will only have to deal with one insurer, avoiding unnecessary duplication and ultimately saving time and money.
  • The risk of inconsistencies in cover between policies which can occasionally arise in a tower scenario is eliminated.
  • It is not necessary to obtain the agreement of multiple insurers to a policy endorsement or an assignment.
  • An insured will not be tripped up by the requirement to notify multiple insurers.

The greatest benefit, however, is seen at the claims handling stage, particularly in the event of a large loss.  In a tower scenario, an insured will have to deal with multiple insurers (and, quite possibly, legal advisors) some of whom may take inconsistent positions.  A huge amount of time and money can be wasted on this at the expense of focusing on helping the insured recover and move forward as fast as possible.

Despite the above, there is still reluctance amongst some insureds to embrace the single policy approach in certain jurisdictions – most notably the US.  The usual reason that is given is that they have reservations about putting their trust in a single insurer in case they don’t pay or behave improperly in a claims scenario.

The key to getting comfortable with this risk is to understand at the outset who sits behind the policy and their claims handling capabilities.  An established insurer with a strong balance sheet that writes M&A insurance for its own account is going to be best placed to respond promptly and sensibly to a claim, whatever its size – see this article for the reasons why.  It is also essential to partner with an insurer that has dedicated in-house M&A claims experts embedded in their underwriting teams.  An insurer with all of these characteristics, like Liberty, is uniquely equipped to deliver an expedited and efficient claims service to its clients no matter what the policy limit.

This website is general in nature, and is provided as a courtesy to you. Information is accurate to the best of Liberty Mutual’s knowledge, but companies and individuals should not rely on it to prevent and mitigate all risks as an explanation of coverage or benefits under an insurance policy. Consult your professional advisor regarding your particular facts and circumstance. By citing external authorities or linking to other websites, Liberty Mutual is not endorsing them.

The importance of considering claims handling when selecting an M&A insurer

Simon Radcliffe : Claims Counsel

Simon Radcliffe

Claims Counsel

The M&A insurance market has become increasingly crowded in recent years due to the significant growth in the number of specialist MGAs (managing general agents) looking to capitalise on the increased appetite for the product and strong deal flow.

These MGAs, under pressure to establish market share, try and differentiate themselves both on pricing and scope of coverage.  It is important, however, for a prospective insured to step back and consider, before making a decision, how its claim will be dealt with if the deal does not go as expected.

The key point for insureds to understand in this context is that MGAs are not the risk-taker for the purposes of the policy and will usually have little or no authority to settle a claim, instead needing to refer settlements back to the panel of insurers that provide their capacity.  Some of these insurers might be completely new to the market, meaning that they have no prior experience of handling M&A claims and no track record of paying M&A claims.  Some might only stick around for a short period before exiting the market entirely, or deciding to provide capacity to a different MGA.  They are able to do this with relative ease because they have not invested in the people and infrastructure necessary to write the business directly for their own account.  This means that an insured can sometimes find that the entity handling its claim no longer has any ongoing interest in the MGA that wrote the risk and is more inclined, therefore, to take technical points.  The risk is that this can all combine to result in a protracted and unpredictable claims process, which is the last thing an insured wants when it is looking to recover and move forward as fast as possible following a loss.

It is essential, therefore, for an insured to give proper thought at the outset to which insurer or entity will be sitting behind its policy.  Making the right choice at this stage can save time and money down the line in the event that it becomes necessary to make a claim on the policy.  This is particularly the case in the event of a large loss.  An established carrier writing the business directly for its own account will have been through a claim of this nature before – it will understand the challenges involved and its claims handling team will be well equipped, therefore, to deal with them.  In addition, an insured will only have to deal with one decision maker throughout the claims process – a key consideration bearing in mind that both speed and clarity of response can be critical in this scenario.

There are increasing signs that the mindset of insureds is changing, with many placing an increasing amount of emphasis on the value of claims service when selecting which insurer to partner with.  This is especially noticeable for insureds who have already been through the claims process because they understand better than anybody that the failure to do so may result in buyer’s remorse.  This is no surprise – after all, the true value of a M&A policy lies in the ability of the insurer to deal with claims promptly when they arise and to honor them whatever their size.

This website is general in nature, and is provided as a courtesy to you. Information is accurate to the best of Liberty Mutual’s knowledge, but companies and individuals should not rely on it to prevent and mitigate all risks as an explanation of coverage or benefits under an insurance policy. Consult your professional advisor regarding your particular facts and circumstance. By citing external authorities or linking to other websites, Liberty Mutual is not endorsing them.

Meet the Liberty GTS Claims Team

Nick Horsmon : Claims Counsel

Nick Horsmon

Claims Counsel

Simon Radcliffe : Claims Counsel

Simon Radcliffe

Claims Counsel

Nick Horsmon and Simon Radcliffe recently joined Liberty Global Transaction Solutions (GTS) as our new claims counsel.  Nick is based in New York and services all GTS claims in the Americas.  Simon is based in London and services all claims relating to Europe, Middle East and Africa (EMEA) and Asia Pacific (APAC) business.  In this article they tell us a bit more about the claims counsel role and the impact that their unique positions will have on the claims service that Liberty GTS provides.

Can you tell us a bit more about the claims counsel role?

Simon: The most notable feature of our role is that we are dedicated solely to servicing GTS claims.  It is unique in our industry and will provide our brokers and our clients with a single, consistent point of contact during the claims process.  We sit with and work closely with our underwriting teams, participate in underwriting training sessions, provide input on wordings and are well-informed about ongoing deal flow.  This set up is invaluable in the event of a claim as our entire team is able to work together to ensure a timely and considered response.  It is all part of recognizing that offering an exemplary, in-house claims service adds value throughout the lifecycle of our relationships with clients, from prior to inception of the policy, to the point of claim and throughout the subsequent claims handling process.

How will the role positively impact the claims service that Liberty GTS provides?  

Nick: Quite simply, our goal is to deliver best in class claims services. In doing so, we will fill a void in the market by providing a truly holistic claims service.  This could mean reassuring a first-time insured that has reservations about the use of transactional insurance solutions, or working flexibly and expeditiously with a client when a claim arises under particularly urgent or unconventional business circumstances.  We are also passionate about the M&A market and enjoy discussing trends with our brokers and clients to get ahead of potential issues before they arise. No matter the situation, we strive to add value to our clients throughout the entire deal process – an outlook that is simply unprecedented in our space.

What are you looking to do differently?

Simon: We will be looking to collaborate with the broking community to draw up a set of best practices that will define the level of service to expect from us during the claims process and against which our subsequent performance can be measured and judged.  We will also be sitting down with our clients and brokers at the end of the claims process to evaluate what went well from their perspective and what could have gone better so that we can learn from and adapt our behaviors and how we work going forward in order to improve the overall claims experience.

Nick: In my experience, claims professionals at other carriers and in other areas of insurance are often assigned a claim file with no prior knowledge of the insured and without a real understanding of why the policy was even procured in the first place.  As a result, many claims managers fail to truly appreciate their clients’ business concerns when assessing claims.  This can lead to unnecessary tension and, in some cases, to an adversarial process that discounts business sense and overlooks the common goals that are shared by a carrier and its insured.  By embedding us as dedicated claims counsel within, not separate from Liberty GTS, our team is designed to avoid this downfall.

What influenced your decision to join Liberty GTS?

Simon: The main draw for me was the opportunity to become part of a global, market-leading underwriting team that is determined to place claims service at the front and center of their client proposition.  I dealt with many of the MGAs and insurers that are involved in this class of business during my time in private practice and none of them had a genuinely dedicated M&A claims function.  I had long felt that this was a missed opportunity given the complex, time-intensive nature of M&A claims and the importance of dealing with them promptly.  It was very satisfying, therefore, to find that Liberty GTS felt the same way and in that sense they were an ideal fit given my views in terms of the value that such a role can add to M&A insurance products.

Nick: I chose Liberty GTS because it meant joining a global team with trusted leadership, an innovative vision, and the backing of an iconic company.  Furthermore, the opportunity to round-out my claims analytical skillset with underwriting strategy, and operations management was unmatched.  I couldn’t be prouder to be part of this incredibly talented and experienced team as it continues to grow and expand its role as a leader in the market.

What do you see as the main challenges involved in your role?

Simon: I think that one of the biggest challenges we face is changing the mindset of buyers so that they focus more on claims service when considering their choice of insurer – after all, the true value of a M&A policy lies in the ability of the insurer to deal with claims promptly when they arise and to honor them whatever their size.  This has never been such an important issue given the recent influx of MGAs and other new entrants into the market whose claim function and their ability to deal with an increase in the frequency and size of M&A claims and absorb losses is in many cases untested.  It is why Liberty GTS attach so much importance to claims and how we deal with them as demonstrated by our investment in the claim counsel role and our recent announcement of the payment of a full €50m policy limit claim.

Nick: At a broader level, I hope to fundamentally change the way in which business people view insurance claims. Many market participants have endured contentious claims battles in the past and expect the worst in terms of the professionalism and business acumen of claims professionals.  We pride ourselves on changing that mindset and, thanks to the support and vision of Liberty’s leadership, we plan to set the bar for claims teams in our industry.

This website is general in nature, and is provided as a courtesy to you. Information is accurate to the best of Liberty Mutual’s knowledge, but companies and individuals should not rely on it to prevent and mitigate all risks as an explanation of coverage or benefits under an insurance policy. Consult your professional advisor regarding your particular facts and circumstance. By citing external authorities or linking to other websites, Liberty Mutual is not endorsing them.