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The connection between the insurance industry and salvage isn't new.
In developed countries, salvors and salvage professionals have been
working with Underwriters and Adjusters on a regular basis.
Underwriters have been able to lower down their claims ratio to a
great extent by getting the salvage managed, marketed and advertised
through these professionals.
Salvage Management is not only being used as a Claims Management tool
but also as a much needed Risk Management tool in developed nations
such as the U.S.A. and the U.K. Let us examine as to how Salvage
Management can manage both risk and the claims.
I. Salvage as a Risk Management Tool:
As per a U.S. magazine, Insurance Agents and Brokers can save money
for their clients by properly managing and using the salvage after a
loss. By being proactive with a salvage plan in anticipation of losses
and responding quickly after a loss with effective salvage of damaged
goods or disrupted shipments, clients can reduce their net loss from a
mishap and the total claim against their insurance policies. Clients
can keep large losses within their self-insured retentions or
deductibles and completely eliminate extra charges against their loss
ratio. In this time of high rates and hard markets, salvage can be
turned into real premium savings. Agents and brokers are usually the
first to hear when a disaster befalls their clients, but when they get
that fateful call, there’s only so much they can do to help. They
alert insurers, contact an adjuster if an underwriter asks them to,
and try to provide as much personal support as they can until claims
compensation is ready. But a loss is a loss and that’s the way it is.
Various global brokers such as Aon are working with salvage managers,
to incorporate salvage into client risk management programs and use
the salvage process to reduce claims and, as a result,
property/casualty insurance rates. In our country, insurance brokers
do not pay much attention to the salvage process. It is pretty much a
local activity and considered incidental to the risk management and
claims process.
II. Salvage as a Claims Management Tool:
Facing severe competition from the market, we are looking to improve
operations so as to drive the bottom line. It is imperative to employ
innovative strategies for loss minimization and cost avoidance. To
stay competitive, we must improve all elements of the claims
settlement process such as total claim turn around time, salvage
proceeds, and cost avoidance.
Underwriters/Insurers maintain data relating to premia collection,
claims reimbursement, profit/loss etc. but seldom the attention is
given to the proceeds collected from sale of salvage, the compromise
made due to limited availability of salvage buyers, product knowledge,
product marketability etc.
By adopting salvage management, following benefits would accrue to
the Insurers to start with:
a.
Maximizing realization from sale of salvage over a period of time
leads to much needed ‘lower claim ratio’ for the Insurers;
b.
Shorter Claims Turn Around Time (TAT);
c.
Complete salvage management solution saves time and manpower of
Insurers, which can be invested in developing some more innovative
ideas for claims handling and
management;
d.
Insurers are able to have complete control over the salvage
settlement/disposal activity with our transparent salvage management
system.
One of the hidden and most beneficial result of salvage management as
per my experience, is that is acts as a check on loss assessment
activity itself and parties involved in loss assessment, apart from
assisting them. Salvage is interlinked to so many aspects in relation
to a claim. A re inventory of salvage when salvage is retained by
Insured can unearth misappropriation of salvage (Refer Chapter 7, Case
Study I), proper and dedicated inventory and segregation can make an
Insured to reduce the claim estimate itself by more than 50% (Refer
Chapter 7, Case Study II) and so on.
Conclusion:
Innovation is the need of every industry. In insurance industry there
has been a lack of innovation, especially in the way we process our
claims. By adoption of salvage management, a much needed break may be
given to the Industry and the claims processing might improve.
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