Insurance claims are growing increasingly severe and complex, challenging risk professionals to develop more effective plans and work closely with insurers and other stakeholders, panelists on Marsh’s The New Reality of Risk® webcast said.
Among other challenges, businesses are facing a spate of so-called “nuclear” verdicts that far exceed historical norms, said Sri Sridharan, Marsh’s chief claims officer for the US. This has been driven in part by a more organized and aggressive plaintiffs’ bar, social inflation stemming from greater distrust of businesses and the desire for juries to hold them accountable, and litigation financing that is enabling plaintiffs to resist settling cases before trial.
Specific areas of risk that are driving claims activity include:
· Securities litigation. More securities class actions were filed in 2018 than in any individual year since the dot-com crash; 2019 is on track to exceed even that total. And a 2018 Supreme Court decision means that companies involved in securities offerings could simultaneously face federal and state litigation, said Jack Flug, US claims leader in Marsh’s FINPRO Practice.
· Cyber risk. Claims continue to arise from the EU’s General Data Protection Regulation, which took effect in May 2018. Ransomware and social engineering claims are also on the rise.
· Employment practices liability. The #MeToo movement has prompted lasting change, including more harassment and discrimination claims and state laws allowing certain parties to more easily file suits for long-ago events, which could result in complex cases, said Chuck Moran, a senior vice president in Marsh Risk Consulting’s complex liability consulting practice. A Supreme Court decision that allows employers to more easily direct workplace disputes to arbitration is also fueling an uptick in EPL claims frequency.
· Product liability litigation. Lawsuits by state and local governments against prescription drug manufacturers and distributors are continuing. Juries, meanwhile, are returning large verdicts in cases alleging that glyphosate-based products and asbestos in talcum powder have caused plaintiffs to develop cancer, said Laurie Kachonick, a senior vice president in Marsh’s Casualty Practice.
These and other trends are prompting insurers to introduce far-reaching coverage exclusions in policies, limiting capacity for certain risks, and stifling innovation and growth among insurers. They also mean that policyholders must be prepared for more difficult experiences when managing large and complex claims.
To better manage complex claims, risk professionals must collaborate with all stakeholders, including insurers at all levels of their towers and defense counsel, ensuring effective communication among all parties from the beginning, Sridharan said. Brokers can play a critical role in facilitating communications, resolving coverage disputes, and providing other expertise.
Risk professionals should also carefully review their historical insurance programs, including identifying potential gaps and missing policy documents, Moran said. Insurance archaeology exercises can help organizations to recover and electronically preserve missing documents that can be critical to managing legacy claims.