Risk Management 102: What You Cannot Find in a Textbook

1. Risk Management 102: What You Cannot Find in a Textbook

2. • Andreea S. Brezeanu • Senior Consultant, EY • www.linkedin.com/in/abrezeanu/

3. 1. Construction related insurance • A contractor or subcontractor could individually purchase insurance or purchase a Controlled Insurance Program (CIP) • Generally, CIPs are designed for large construction projects with construction costs greater than $50m • There are two type of CIPs that can be purchased: • OCIP – Owner Controlled Insurance Program • CCIP – Contractor Controlled Insurance Program • Coverage provided under CIPs include CGL, WC and umbrella liability • Recommended to conduct a cost/benefit analysis • Advantages of CIPs • Peace of mind that all contractors and subcontractors have adequate policy limits • Centralized risk management through a single insurance program • Potential for profitability based on claims experience • Disadvantages of CIPs • Administrative burden • Long-tail claims exposure • Market risk if the insurance market hardens

4. 2. Coordination of benefits • Practice to ensure that insurance claims are not paid multiple times when someone is insured under multiple insurance policies • One insurer is designated as the primary insurer, which means that claims are sent to that insurance company first • Traditionally, there is lost opportunity for recovery • This is a common practice in health insurance but it also applies to property and casualty insurance • EXAMPLE - Employee is involved in a car accident

5. 3. Difference in Conditions (DIC) / Difference in Limits (DIL) • A DIC/DIL policy is designed to broaden coverage by providing additional limits of coverage for specific perils • Also an insurance policy to fill in the coverage gaps so there is uniform coverage regardless of location (i.e. local policies) • Most commonly found in global property portfolios or management liability policies

6. 4. Benchmarking • Benchmarking is a way for a company to compare itself against its peers • There are various resources to assist in the benchmarking exercise • How benchmarking works • Determine industry/type of operations, revenue and employee size • Review limits, retentions and premium based on line of coverage • Benchmarking should be used as an indicator not as a final say

7. 5. Predictive Modeling • Companies are now utilizing data and creating predictive models for underwriting and claims purposes • In the case of Underwriting Predictive Modeling, models can be used to determine policy pricing • EXAMPLE – Telematics Auto Insurance • In the case of Claims Predictive Modeling, models can be used to assign and process claims • EXAMPLE – Slip and fall FNOL

8. 6. Legacy systems and new technology implementation • There is no denying technology plays an important role in our day-to-day lives and can be frustrating if not working properly • Companies realize they need to continuously improve how they interact with employees on the back-end and customers on the front-end • As you continue in the insurance industry, you will encounter a technology change and may even be involved in the process • Providing input to how technology should look or what functions is should have is an exciting opportunity • EXAMPLE – Claims software upgrade

9. Summary • Construction related insurance • Coordination of benefits • Difference in Conditions (DIC) / Difference in Limits (DIL) • Benchmarking • Predictive Modeling • Legacy systems and new technology implementation

10. Questions? • For additional information, please contact: • Andreea S. Brezeanu • 212-773-0657Andreea.Brezeanu@ey.com • www.linkedin.com/in/abrezeanu/