As concerns over asbestos liability continue to mount, industry observers say carriers need to find solutions to manage the risk-other than just throwing money at it.Insurance Services Office Inc. (ISO) estimates that newly incurred asbestos loss and loss-adjustment expenses rose from $1.4 billion in 2000 to $3.7 billion in 2001. Based on partial data, Jersey City, N.J.-based ISO estimates newly incurred asbestos losses more than doubled in 2002, rising to about $8 billion.
Furthermore, the number of total asbestos claims that have been filed to date-600,000-is expected to double by the year 2040 as more and more asbestos plaintiffs come out of the woodwork, says David Austere, president of Fairfax, Va.-based Claims Resolution Management Corp., an asbestos claims processing company.
To protect themselves from losses down the road, insurers have begun to issue huge asbestos reserve increases (see "Asbestos Liability Concerns On The Rise," March 2003, page 6). However, upping the ante on claims reserves is not viewed as a long-term solution. Industry observers indicate that the combination of legislative relief-in part, in the form of tort reform-and technology tools is the answer.
With no assurances that asbestos reform legislation will ever be ratified, insurers with a stake in asbestos liability are exploring the implementation of technology tools.
However, several large carriers contacted for this article declined to discuss their IT strategies to manage mounting asbestos claims.
"Asbestos litigation is a very complex issue," says Derek Koch, director of products and services for Chicago-based technology provider Visibillity. "At the enterprise level, there is not always a comprehensive way to deal with it.
"To make matters worse, plaintiff attorneys are going after the insurer if the insured is not around anymore. An insured goes out of business and years later asbestos litigation is dropped at the insurer's door," he adds.
Visibillity provides insurers with a collaborative approach to claims litigation management through a real-time reporting solution providing information that is critical to evaluating and managing total claim outcome. Visibillity's solution "focuses on upfront strategic planning to create a roadmap for claims," says Koch.
The element that sets asbestos claims apart from other types of claims is the permutational nature of them: Asbestos claims are constantly changing from point of origin to settlement.
So-called "long-tail" cases like these are among the most complex for insurers to deal with. In a long-tail case, a host of variables change over time. Visibillity says it offers carriers a solution that adapts to changing variables, and shifts operational strategy based on changes, says Koch.
"Paper processing in the insurance industry is a challenge in all lines of business," says Koch. "But a long-tail asbestos case can be carried out over months if not years, exponentially increasing the volume of paper that would be exchanged between multiple parties.
"You need a way to master the data and manage the risks," Koch explains. "We provide a way to dive into the data through a comprehensive solution that is not only transparent, but recognizes the unique roles that an adjuster, supervisor, CFO, and chief claims manager all play within the process."
Understanding potential exposure to asbestos claims would go a long way toward providing carriers greater operational stability. However, industry analysts say that the options of unleashing robust risk assessment or predictive modeling on asbestos are limited.
There are some pre-emptive measures insurers can take. "Developing a data warehouse can establish patterns and trends and help insurers pinpoint where asbestos exposure might be more prevalent," says Matthew Josefowicz, senior analyst for Boston-based Celent Communications Inc.
"They can use this to establish patterns and link cases where there might be asbestos (liability)," he says. "So if an insurer used a warehouse to determine that a certain dwelling was more vulnerable to asbestos than another, the power of the data could aid them in re-evaluating their risk position."
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