As world economies have tightened, so has the trend towards larger SIR's (self-insured retentions) and policy deductibles. By increasing an SIR or Retention limit, premiums can be negotiated downward by the insured. The flip side of reduced premium's, is increased responsibility on the part of the insured for settling (in the case of SIR) or contributing towards claims costs (in the case of Retention).
This change has manifested itself into an increased focus and attention to detail on the exhaustion or erosion of the SIR. Also, with larger deductibles, insurance carriers are being challenged legally as to their rights of settlement, where the deductible forms a significant part of the payout, for both expenses and indemnity/damages. Several cases have been tried in favour of the carrier related to deductibles.
Coverage disputes are not uncommon in the insurance industry. However, a growing and worrying trend is beginning to emerge related to claims for coverage, where the SIR be fully and properly demonstrated as completely eroded. Effectively, coverages are being disputed where it cannot be proven that full erosion or exhaustion of the SIR is proved. Several cases can be cited, with a proportion spawning fresh E&O claims for claims mishandling or alleged lack of meeting fiduciary duty, amongst the most common.
E&O claims are also being brought against TPA's (third party [claims] administrators), wherein claim-file mishandling is being alleged by the insurance carrier or in some cases the insured, where a large deductible is involved in settling the case/claim.
There are technologies and other tools designed and available to assist in the tracking of SIR's, in order that proper and full exhaustion or erosion may be proven and demonstrated to have been managed in accordance with the terms of the insurance policy.
These tools will provide for the application of current litigation and legal spend management protocols to be applied from dollar one, thus protecting the needs of the insured, as well as satisfying the requirements of the insurance carrier, under the policy.
They also lend themselves to tracking the deductible or "early claims costs", in order that the insurance carrier can make better informed decisions over settlement and resolution of the claim.
By utilizing workflow technology and electronic matter management, SIR and Deductibles can be tracked from "dollar one". The data from this process provides for transparency on the effectiveness of the claims adjusting/handling and reduces ambiguity over coverage.