How commercial insurers can mitigate claims costs

Although inflationary pressures are adding to the cost of first- and even third-party property claims, commercial insurers can leverage their global resources to reduce these costs, says a commercial insurance exec.

“[Inflation] affects the cost to restore a building,” said Bernard McNulty, chief agent and head of claims of Canada at Allianz Global Corporate & Specialty. He explained the situation to Canadian Underwriter during the RIMS Canada Conference in Halifax.

“A first party property claim [is] 15%-to-20% more expensive,” said McNulty. “[That’s] when we’re dealing with lumber and, particularly, residential finishes.” 

But for a commercial insurer like Allianz, clients’ buildings are made with steel, concrete and sophisticated (and costly) building materials. “I would say some of our claims could be 30% more expensive because of inflation,” McNulty estimated. 

But inflation doesn’t just affect first-party claims. “Some people don’t realize this; it affects third-party claims as well,” he said. “[In] the liability policy, you’re insuring against slip-and-falls, but you’re also insuring against your client causing damage to a third party. So, when that third party has to restore their building because one of our clients damaged it, that inflation comes right through our liability portfolio; hits our books. 

“People think [only] the cost of the slip-and-fall is going up — and it is — but the [property damage] portion is hitting us as well.” 

Global commercial insurers, however, may be able to tap into their resources to mitigate these rising claims costs from inflation. 

“We’ve noticed on a complex claim, we can tap into our turbine expert, or our heavy construction expert globally — that could be in Chicago or Munich, wherever they are in the world — and you can really bring a lot of benefit to the client, because you can complete a claim faster and at a much better price,” said McNulty. 

“You can help the client procure specialized equipment they wouldn’t have otherwise. If you’re global right now, and especially the pandemic has made us look so much more global, you can really leverage that.”  

Feature image by iStock.com/AndreyPopov