Projects

KMRD Lowers Losses and Reduces Costs by $500,000 Over 10 years by Reducing Claims Experience

We noticed that a real estate development company specializing in high-quality, non-speculative community, neighborhood and regional retail projects had several large slip-and-fall claims exceeding $100,000. We took immediate action.

The Issue

During a loss experience evaluation of a real estate development company specializing in high-quality, non-speculative community, neighborhood and regional retail projects, our firm noticed several large slip-and-fall claims that exceeded $100,000. When we requested more specific information, the insured could not provide any additional details.

Our Response

After gathering loss information and analyzing the results, our firm developed and executed a four-point strategy:

1. We prepared a summary of losses in a manner that clearly revealed the insured’s average losses as compared to its premiums and exposure basis (square footage).
2. We categorized losses by location so the insured understood where its frequency of claims was coming from.
3. Using a dollar threshold, we identified “large losses” (severity).
4. We opened lines of communication by pursuing the carrier’s claims representatives on all large losses, while asking a set of simple but impactful questions.

The carrier’s response to our initial inquiry confirmed our diagnosis. The claims person had not recently reviewed many of the claims and the logic in the reserving process required a total overhaul.

Our questions triggered a re-evaluation of the reserve logic, yielding an immediate $150,000 reduction in reserves over the 5-year loss picture. The carrier tendered many of the claims to the insured’s subcontractors for resolution. These included landscaping firms, snow removal firms and janitorial service contractors. None of the tenders were previously accepted by the subcontractors’ carriers. In our assessment, the contractual risk transfer program needed to be reviewed.

The Results

These claims advocacy efforts settled many claims. This created a further reduction in the total loss picture by an additional $350,000 over the 5-year loss experience, yielding a total decrease in average losses of $100,000 over 5 years.

Over the next several years, many of the slip-and-fall losses were tendered to the insured’s subcontractors under the new process. The claims experience dropped dramatically. The underwriters targeted a 50 percent loss ratio to arrive at their pricing. With this improved loss picture, the policyholder’s average insurance costs were reduced by $50,000/year. Over 10 years, beyond the operational improvements, the insured will realize more than $500,000 in savings—and the insurance agent will have a very satisfied customer.

With our involvement, real estate insurance costs were reduced, the claims experience dropped substantially, and our client saw an improved loss picture. That’s the KMRD difference.