Transcript Slide 1
The Insurance Manager’s Role in a Crisis
October 2003 Meeting
Philadelphia Insurance Manager’s
Association
A Group Discussion
Facilitated by Doug Hartman
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Genesis of the topic
The impetus for this topic arises out of my shock, disappointment and depression as a result of wellpublicized crises that impacted my clients. I set out to find out what crisis management is and to
find out what the role of the insurance manager should be.
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9/11 – Executives with whom I was working on client matters perished in the World Trade Centers.
I basically stopped working for a month, mainly because I didn’t feel like it. It took weeks for
phone services to be restored to lower Manhattan – and months to reconstruct lost client
documents. I asked myself, “What can I do to prepare my clients in case this happens again?”
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Bankruptcy of Enron – Four years ago, as a special products underwriter, I had some contact with
Enron’s risk manager. By chance I spoke to him the day before Enron went under. All those
employees who lost their retirement savings – what a travesty. Enron still employs 19,000 and my
risk manager friend, to my great relief, found employment with one of their divested subsidiaries.
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Class Action Suits against My Client – Soon after completing a workers comp loss payout study,
news of the recall of 17,500 hip implants hit the papers. As far as I could tell, their risk manager
became a key player in the recall and eventual settlement of claims. What help should I have
offered this company?
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Suits against a Roman Catholic Archdiocese – Six or seven years ago I managed a risk
management audit of an archdiocese. I was told that priest misbehavior incidents and claims were
outside the scope of my review – and that God would take care of the sinners. Should not I have
though about the criminal implications of this and not just the insurance implications?
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Criminal charges against executives of HealthSouth – Ten years ago I did some work for them. I
am baffled as to how such criminal theft and accounting fraud could have happened – under the
nose of my former employer, Ernst & Young!
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What kind of crises are we talking about?
Potential Causes of a Crisis
Plan Elements
These are the types of events we
discussed.
The four components of crisis
management are:
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1.
2.
3.
4.
Property perils
Liability claims
Workplace violence
Terrorism
Executive misbehavior
Emergency management
Business Continuity
Crisis Communication
Security
Core Assets
What
1.
2.
3.
crisis management is all about:
People
Finances
Reputation
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What happens to insurance managers in a crisis?
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Answer depends on the scope of responsibilities
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Insurance transactions – If you are solely responsible for insurance transactions, you are
probably going to be confined to working with the insurance company to maximize your claim
recovery (if one is due) and avoid cancellation prior to the expiration date. Before saying
anything to your broker and insurance company, confer with the senior executive at your
company who is managing the crisis. Your broker account executive can facilitate getting
your information to the carrier(s) so as to avoid cancellation or denial due to violation of an
insurance policy condition.
Insurance claim administration – If your job description includes claims, you should count on
spending a lot of time and energy in the defense of your company – or in seeking recovery for
lost property. Again, your broker should be able to guide you through the claim presentation
and negotiation process. An expert in business interruption claims is essential in large
property losses.
Management of self-insurance mechanisms – Risk managers with self-insurance trust funds,
captive insurance companies and other alternative mechanisms will face additional chores,
such as notification of reinsurers and appointment of legal defense firms.
Safety Department – Safety and design professionals on staff can provide valuable input to
the management of a crisis. Companies without these professionals on staff are advised to
seek help from their brokers or other professional service firms.
Are these new Enterprise Risk Managers or Senior Risk Officers the “Smartest Guys
in the Room?” Not according to Bethany McLean and Peter Elkind, authors of a new book about
Enron bearing this title. Insurance managers who are no longer the owners of the risk
identification process, need to lay claim to responsibility for event risk management.
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What can the insurance manager do?
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Crisis management plans and committees – While published materials advocate the
formulation of plans and the organization of committees, our group of insurance managers had
little to say on this topic. One risk manager told about his company’s well-orchestrated hurricane
evacuation plans.
Emergency Checklists - It is a good idea to use checklists in a crisis. Examples of emergency
checklists include what to do if there is an aircraft accident, a school shooting, an epidemic, a
chemical spill, civil commotion and an earthquake.
Handling employees and their families – We discussed the importance of the company taking
the initiative to notify families and provide them assistance. A number of important do’s and don’ts
were discussed.
Releasing information to the press and the public – Published materials stress the
importance of channeling the internal reporting of information to a senior executive or committee
so that a designated person can release information to the public. Our group seemed to recognize
this. At the same time, they realize that their company needs to be responsive to their insurance
companies who are not likely to leak anything untoward to the public.
Ground rules for effective crisis communication:
Employ aviation communications techniques: Read back what you hear.
Orient all communications toward action. Effective crisis response is not passive
Honesty – the Best Policy – Does Not Mean Saying Everything Bruce T. Blythe, Blindsided, Ch. 9
If a consultant is hired, your law firm should engage them so that whatever they
discover is protected – Our insurance manager group understood the importance of this. I
provided them some Web sites to visit for help. These included www.MarshCrisisAcademy.com ,
where you can test your company’s crisis preparedness, www.cmiatl.com and
www.CrisisExperts.com
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How can insurance managers plan for events that never have
happened before?
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Risk mapping, tornado diagrams and other analytical techniques –
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Enterprise-wide risk assessments –
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How to plan for events that never have happened before?
We
discussed the starting point of the 5-step risk management process, which is the classification and
measure risk. Our group had familiarity with these analytical techniques. However, none in our
group said that they had had this kind of analysis performed.
Our group was familiar with the ascendancy of the
senior risk executive or enterprise risk manager, although none had an executive that had one of
these titles at their company. Nor did anyone in our group say their company had conducted an
enterprise-wide assessment.
We ended with a
general discussion of Weik and Sutcliffe’s concept of the High Reliability Organization “HRO.”
HROs are…
– Preoccupied with failure. Any lapse is a symptom that something is wrong… separate errors
can coincide at one awful moment.
– Reluctant to simplify. Skeptical, they look beyond the consensus perspective.
– Sensitive to operations. Attentive to the front line, they look for loopholes in safety
procedures.
– Committed to resilience. They detect, contain and bounce back from errors.
– Deferential to experts. They promote diversity and are not hierarchical in their organization.
Weik and Sutcliffe, Managing the Unexpected, ch. 1
Having served aboard U.S. Navy aircraft carriers, a prime example of an HRO, I could relate to
what Weik and Sutcliffe had to say. Their book is available at www.BarnsandNoble.com
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