How MGAs and Program Administrators Can Address the Increasing Severity and Complexity of Claims

The world has experienced a great deal of change over the past two years. From COVID-19, inflation, and extreme weather events, the types of claims and the ways they are handled have shifted. These events around the world have led to the increasing severity and complexity of claims.

Three of our experts, Jon Stambaugh, SVP — Carrier Practice, Rob Blasio, Managing Director, GB Specialty and Greg Perruzzi, SVP — Construction Vertical Practice, sat down to discuss how MGAs and PAs can best position themselves to overcome these challenges this year.

Q1. What does the current MGA and PA landscape look like?

Jon Stambaugh: The outlook for 2023 remains bullish. The industry has experienced tremendous growth in the last few years and all signs point for the trend to continue. While business has been good, headwinds such as navigating the “talent crunch” and enhancing the customer experience to gain a competitive advantage remain. When we meet with clients and prospects, we talk a lot about these challenges along with supporting their growth objectives.

Rob Blasio: MGAs and Program Administrators in the specialty liability space are currently confronted with some of the worst severity the industry has seen. Nuclear verdicts have become a regular event and are producing nuclear settlements at an incredible rate.

Greg Perruzzi: In the construction space, there is tremendous growth and opportunities to access fresh capacity for best-in-class quality contractors (those who exhibit strong safety and claims performance). MGAs are underwriting with creative solutions and embedded loss prevention services. Additionally, there is continued focus on partnering with organizations that provide access to leadership with construction industry claims management expertise.

Q2. Why is the complexity and severity of claims increasing?

Jon: Social inflation is not a new topic per se, but nuclear verdicts continue to put pressure on liability-centric programs. PAs that manage construction and transportation programs, for example, are hyper-focused on identifying underwriting and claims administration expertise to mitigate their exposure to shock losses.

Rob: The number one factor is social inflation. We have lotteries producing billion dollar winners and professional athletes who sign contracts on a regular basis for hundreds of millions of dollars. The plaintiffs’ bar has capitalized on social inflation by conditioning juries, and they have responded with huge awards.

Greg: The confluence of litigation trends, building and labor cost escalation, and supply-chain disruptions have increased the dynamics of claims complexity and the resultant high-value claims that have implications on total cost of risk (TCOR) for MGAs and PAs. The value proposition to invest in integrated loss prevention, loss mitigation, and loss control services have never been more important, as this trend is likely to continue for the foreseeable future.

Q3. What can MGAs and PAs do to address this issue?

Jon: From our vantage point, we’ve seen clients leverage our loss control services and Major Case Unit (MCU) to provide valuable pre- and post-loss counsel. For certain programs, the investment in this level of expertise more than pays for itself.

Rob: Claims handling has never been more important than it is today. MGAs and PAs need to ensure that their claims are proactively managed and that defense attorneys are vigorously attacking both liability and damages.

Greg: Selection of risk is paramount. By this, MGAs need to underwrite long-term partners with the right balance of risk management culture, quality, and safety. Those partners are not just the insured, but also all of the risk management service providers within the value chain. While we cannot control the nature of our economic and legal landscape, making the right decisions on partnership and shared values for success will help set all parties up for the best possible outcomes.

Q4. How can partnering with a claims expert like Gallagher Bassett (GB) help MGAs and PAs overcome this challenge?

Jon: It comes down to expertise and quality. When a complex case arises, PAs need the best on their team to swiftly diagnose the possible outcomes and drive toward a superior result. A trusted partner with a track record of success managing complex cases makes all the difference. Our clients count on us to deliver when severe claims arise—and we answer the call.

Rob: The key to success in claims is putting the right person on the right claim. MGAs and PAs are specialists, writing niche lines of business. By contracting with an experienced claims partner like GB, these organizations can ensure they procure the expertise that is essential to delivering superior claim results.

Greg: Our team is comprised of construction industry veterans who have intimate knowledge around the operational needs of MGAs and PAs. As such, we have a unique approach to the provision of our dedicated claims expertise with that of an in-house solution that integrates our technical services teams in loss prevention and loss mitigation services.

Need help overcoming the increasing severity and complexity of claims? Visit “Strategic growth for Programs and MGAs” to access useful tools to help you navigate challenges and identify opportunities in 2023.

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