Sedgwick appoints Mike Arena as Managing Director of Workforce Absence Business Development

January 8, 2024

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MEMPHIS, Tenn., Jan. 8, 2024 — Sedgwick, a leading global provider of technology-enabled risk, benefits and integrated business solutions, announced that Mike Arena has been named Managing Director of Workforce Absence Business Development. 

Arena is a recognized expert in the workforce absence sector with more than 25 years of experience consulting with a diverse client base to design customized claims and productivity solutions. Arena has been with Sedgwick for 17 years, most recently serving as Senior Vice President in Business Development. His experience spans a range of leadership roles in sales, account and claims management.

“Mike is a proven leader who is invested in client satisfaction and service excellence,” said Scott Rogers, Chief Client Officer of Sedgwick. “His integrity and knowledge of the complex absence landscape have earned him the respect of his industry peers and resulted in a strong network of long-term relationships.”

In his new role, Arena will develop strategies to drive global growth in today’s dynamic marketplace, leveraging technology to deliver compliant solutions that prioritize the employer and employee experience.

“I’m honored to oversee the continued growth of Sedgwick’s workforce absence business and excited about the opportunity to advance our strategic partnerships with clients, consultants and carriers.” Arena said. “We have the global expertise that allows us to scale all of our solutions to the needs of our clients and be able to provide support for every scenario in absence management.” 

About Sedgwick

Sedgwick is a leading global provider of technology-enabled risk, benefits and integrated business solutions. The company provides a broad range of resources tailored to clients’ specific needs in casualty, property, marine, benefits, brand protection and other lines. At Sedgwick, caring counts; through the dedication and expertise of 33,000 colleagues across 80 countries, the company takes care of people and organizations by mitigating and reducing risks and losses, promoting health and productivity, protecting brand reputations, and containing costs that can impact performance. Sedgwick’s majority shareholder is The Carlyle Group; Stone Point Capital LLC, Caisse de dépôt et placement du Québec (CDPQ), Onex and other management investors are minority shareholders.

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Evolving attitudes toward insurance fraud

January 4, 2024

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Insurance plays a critical role in our society and economy by providing protection against risk and uncertainty. Every day, the insurance industry makes people whole again after something unexpected occurs. Regrettably, there are a few bad actors who attempt to take advantage of this trusted system by committing insurance fraud. While the majority of claims are completely legitimate, as many as 10% can raise suspicions and merit further investigation. 

This blog will aim to define what constitutes insurance fraud and highlight some of the latest trends. Additionally, we’ll offer a glimpse into our research on the rise of fraud and the role of generational differences in attitude toward fraudulent activity.

What is insurance fraud, and how bad is it?

Insurance fraud is a crime and distinct from malingering or abuse in that it must contain four specific elements. For those of us who work to combat insurance fraud, “Got MILK?” is not just a catchy advertising slogan; it’s our daily mantra, as fraud requires:

  • Materiality: The misrepresentation must be material to the claim, such that the truth would lead to the claim being handled differently. 
  • Intent: The claimant must intend to commit fraud. 
  • Lie: Evidence of lying distinguishes a fraudster from a malingerer or an abuser.
  • Knowledge: The claimant must know they lied and that doing so validates or enhances their claim for financial gain. 

Fraud includes such things as submitting a new insurance claim for damage previously incurred to your home or vehicle or filing for workers’ compensation for an injury unrelated to your job. The Coalition Against Insurance Fraud estimates that the amount lost to insurance fraud in the U.S. each year is about $309 billion. Just 10 years ago, that number was $80 billion a year.

Understanding the sharp increase 

The past few years have given rise to a great deal of anti-corporate sentiment in America. Many people today negatively view insurance companies as large employers who seek to deny coverage in order to turn a profit. They see corporations as faceless and increasingly automated. They detect an opportunity to get paid for this perceived imbalance of power and lack of caring and oversight, and who better to pay than an entity considered to have deep pockets. This attitudinal shift regarding responsibility and “fairness” has also fueled alarming trends like social inflation, litigation spikes and nuclear verdicts, as explained here

Some misguidedly view insurance fraud as a justifiable and “victimless” crime. However, it actually hurts us all, as fraud costs American families nearly $900 a year in additional insurance premiums. It also diverts resources away from those truly deserving of benefits, coverage and support in their time of need.

Varying attitudes toward fraud

With insurance fraud on the rise, our special investigation unit (SIU) leaders were curious to know whether age is a significant factor in this trend. We hypothesized that younger people (Generation Y — born between 1980 and 1994 —and millennials/Gen Z, born in 1995 or later) would be less likely than their older counterparts (baby boomers and Gen X) to view claims fraud as an egregious crime and more likely to pursue such activity. To explore our hypothesis, we did some digging into a combination of data sources, including Statista, the Coalition Against Insurance Fraud and 13 years’ worth of anonymized SIU files. What we found took us by surprise. 

In actuality, surveys show baby boomers (born 1945-1964) have similar attitudes about fraud to those in Gen Y, while Gen X (born 1965-1979) has much in common with Gen Zers. What informs their perspectives, in essence, skips a generation. 

Our findings can be explained by some of the traits these generations tend to share. On the whole, both boomers and Gen Yers favor the collective/team, are relationship-focused and doggedly pursue their goals; Gen X and Z, on the other hand, are more individualistic, autonomous and focused on work-life balance. This distinction in outlook gives the former groups a broader understanding of the societal impact of insurance fraud, while the latter groups may be more likely to focus on the individual impact.

Education is key to prevention 

There are, to be sure, many more nuances to this research than were provided in the synopsis above. (Anyone interested in the details of our findings is welcome to contact me for more information.) In my view, the overarching takeaway from our research is the troubling incidence of fraud and popular belief that falsifying an insurance claim is a harmless crime. That the national cost of fraud has gone up nearly 300% in 10 years shows that society has lost sight of the proper value of insurance.

Nearly one-third of the past decade was lost to the era of COVID, when people had minimal face-to-face interaction, saw a significant increase in automation, and experienced severe economic setbacks. Collectively, we lost a natural sense of order during the pandemic, and that includes an appreciation for the purpose of insurance. As that order continues to be restored — with many workers returning to offices and everyone adjusting to the new post-COVID “normal” — it’s never been more important for insurance professionals to demonstrate their commitment to taking care of people while sharing the latest trends and research findings.

We in the insurance industry have a lot of work to do in (re)educating the public about the societal value we’re intended to provide and the harm caused by attempts to fraud the system. Both the Coalition Against Insurance Fraud and Association of Certified Fraud Examiners offer valuable informational resources on the dangers of insurance fraud and what each of us can do to curb this alarming trend.

Learn more — read about how the efforts of Sedgwick’s special investigation unit (SIU) help companies combat claims fraud and promote financial and reputational stability

The rise of claim severity and complexity

December 18, 2023

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Conversations around severe weather events, rising inflation and lingering labor shortages and supply chain issues have become commonplace; because these trends affect our lives, our businesses — even our insurance. Rising claim complexity and severity doesn’t seem to be slowing down, and it’s important to explore the factors driving this trend and its potential implications for the property and liability claims sectors.

The impact of climate change

Globally, we’re seeing more extreme weather events and conditions, occurring more frequently — resulting in an unprecedented number of claims and a higher percentage of them involving significant complexity and severity. 

The first half of 2023 saw elevated disaster losses, according to an Aon report, with the fifth-highest economic impact on record and the highest since 2011.The single costliest disaster was the February earthquakes in Turkey and Syria, although remaining insured losses were largely driven by severe convective storm activity in the U.S. 

This year, close to a dozen insurance companies in Florida went bankrupt, while others restricted coverage due to increased hurricane losses and litigation costs. Insurers are declining to write policies in hurricane-prone areas of Louisiana; one stopped issuing new policies in California altogether. Another carrier reduced its coverage to homes along the East Coast at risk of flooding and those in western states at risk of burning. 

Other contributing factors

The human drive to build bigger and better is fueling innovation in sophisticated building design and the use of new technologies and materials in construction. But stretching the bounds of aesthetic and technological precedents also leads to greater risk and more complex claims against the companies behind the work when something goes wrong. Whether it be traditional materials used in new ways or complex features like retractable roofs, the more companies deviate from standard procedures, the more risk they assume.

Labor shortages in the construction market coupled with wage inflation, high demand for projects and the steadily rising costs of materials are all contributing to higher repair and replacement costs. Increases have been exceptionally high for the goods and services that drive personal insurance claims.

Inflation is further driving up costs. McKinsey and Company estimated that inflation alone increased U.S. property and casualty insurance loss costs over historical levels by $30 billion in 2021.

In our increasingly litigious society, according to Sedgwick’s book of business, litigated claims account for as much as 50% or more of the total amount paid on all claims. According to a Carlton Fields survey, class action spending has increased for eight consecutive years due to two major drivers: claims are getting larger, and more companies are facing such lawsuits. 

Preparing for and mitigating claims: best practices

Because litigation is one of the primary cost drivers in liability claims, we recommend that companies always lead with litigation avoidance. But if necessary, having the right partner with a strong management process for legal spend can ensure attorneys are maintaining each individual case and billing according to agreed-upon guidelines. Robust attorney oversight is vital as well.

It’s important to have partnerships, policies and emergency plans in place in advance of a catastrophe to minimize business interruptions and expedite restoration and resolution. These plans should be current, tested regularly, and reflect industry best practices for disasters like hurricanes while aligning with your carrier’s specific terms. Ensure your partners possess both technical expertise and a service-minded, empathetic-led approach.

To counter climate change-related challenges, sustainable construction practices — such as designing for sustainability and energy efficiency and selecting locally sourced, renewable and recyclable materials — have emerged as a proactive way to reduce the building industry’s adverse impact on the environment. By using water-efficient fixtures, rainwater harvesting techniques, and adopting waste reduction and recycling practices, companies can conserve and decrease waste output.

Looking forward

As we continue to face the reality of managing larger and more complex claims, insurers must keep an eye on trends and adapt strategies accordingly. Establishing the right partnerships, preparing in advance, and employing proactive mitigation and litigation practices are all critical to fulfilling our commitment to taking care of the people we serve.

Some of these ideas were featured in issue 22 of Sedgwick’s edge magazine.

Bumps in the road: pain points and proven solutions for auto and motor claims

December 13, 2023

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The global automotive claims landscape is currently facing a range of significant challenges — the impact of electric vehicles (EVs), talent shortages among commercial drivers and repair technicians, product recalls and in-market remediations, and increased litigation and legal system abuse, to name a few. Here, we explore some of today’s critical pain points in the U.S. and Europe auto and motor claims markets and what can be done to alleviate them. 

The U.S. market

Despite a short-lived reprieve during the pandemic when the commercial auto combined loss ratio fell below 100%, the industry saw 10 straight years of underwriting losses prior to 2021. Claim incidence and costs are rising once again. Still, there’s a lot more the U.S. auto claims industry needs to tackle.

In what would’ve been exceptionally rare only a few years ago, we have entered the era of thermonuclear verdicts, where seemingly routine injury cases result in multimillion-dollar verdicts and settlements. Personal injury firms are using a variety of sophisticated tactics in their pursuit of the trucking industry, the long-favorite target of the plaintiffs’ bar. 

As a result, settlements and verdicts above $1 million have shot up drastically, and those of $10 million or more have become much more frequent. Reaching for higher settlement amounts can arguably be explained in part by social inflation, where some jurors are determined to take aim at what they see only as a faceless corporation with deep pockets. 

An experienced driver shortage is not helping. Despite efforts to improve recruitment, there is a tremendous need for qualified drivers — lagging far behind demand. The shortage, which can be attributed to the continued growth of online shopping and experienced drivers retiring, among other factors, has left motor carriers with little choice other than to place marginally acceptable drivers behind the wheel, adding fuel to the legal fire.

Additionally, the auto industry has been pushing for tort reform among multiple practices, including third party litigation funding (TPLF), a type of tort that encourages plaintiffs to file frivolous suits and leads to inflated medical costs, settlements and trial demands. One conservative estimate puts the price tag for TPLF at $5 billion. While it emboldens plaintiffs to seek medically unnecessary treatments and procedures, the price of these medical services in many auto-related claims is not reflective of reasonable and customary costs. 

The market in Europe

Much of the unprecedented pressure facing the European motor claims market is intrinsic to the rising popularity of electric vehicles (EVs). Although Europe has succeeded more than the U.S. in building the infrastructure needed to support EV usage and promote its environmentally-friendly benefits, there are drawbacks: EVs are estimated to increase accident risks by 25%.

Evolving vehicle technology, combined with supply chain issues and labor shortages, have driven up repair costs, too. “Figures from the Office for National Statistics show the cost of running and maintaining personal transport, including cars, has increased by 15% compared with a year ago, above the overall inflation rate of 10.1%,” The Guardian said in late 2022. Some UK customers report repair costs have jumped by as much as 90%. 

Europe has recorded an increase in traffic and accidents. The pandemic significantly curbed the use of public transportation as people grew accustomed to traveling via private automobile, and many opted to drive to travel destinations rather than fly this past summer, fueling the increase. 

Additionally, European countries are seeing an increase in other motorized vehicles, such as electric scooters, on roadways. Rising figures for accidents, as well as more frequent small motor claims — such as those related to parking incidents and other minor accidents — have followed suit. Some countries are adapting in kind. For example, in Norway, as of Jan. 1, 2023, drivers of all privately owned vehicles, including e-scooters that can be shared via an app, must have liability insurance.

Finally, as expected during periods of economic pressure, there has been a surge in global insurance fraud over the past few years, including many areas seeing more claims filed with reports of escalated and pre-existing damages. The “exploitation of actual loss” accounted for 27.2% of all motor vehicle fraud cases in Norway in 2020, with similar rates expected for 2023. Beyond individual claims, the BBC reported that, over a two-year period, up to 170,000 claims were linked to suspected “crash for cash” networks.

The value of specialization and experienced partners

Despite the complicated range of issues facing the industry, tackling global pain points is not only feasible — it’s happening. Many service providers (including Sedgwick) are turning to automated solutions to handle small claims, like parking accidents or damage to glass. Additionally, our motor team in Norway is finding that streamlined and highly tailored services are keeping claim costs down and minimizing opportunities for fraud. 

To meet the demands of today’s complex business challenges, the industry is moving away from a multi-line adjustment model and demanding greater specialization in high-frequency and costly, complex claims. This strategy — in addition to specialization between first- and third-party exposures (for example, liability, physical damage and cargo) — is vital to effective auto and motor claims handling.

Automotive manufacturers, transportation companies and insurance carriers should seek out partners with strong commercial auto and transportation practice groups, and a deep understanding of the essential challenges facing the industry today. Depending on their needs, specializations like major case units, brand protection, multinational expertise and mono-line focus areas may also be essential.

Learn more > Read more from industry-leading experts in issue 22 of edge, Sedgwick’s digital magazine.

4 business lessons from the Asia insurance market

December 6, 2023

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After more than 30 years in various loss adjusting and management roles in the UK and the international business, I had the good fortune to be appointed interim CEO of Sedgwick’s Asia operations. I’ve known since the age of 17 that I wanted to be a loss adjuster, but I couldn’t have imagined then that my work would take me from my native UK to the other side of the world. This position has afforded me the opportunity to explore new (to me) and exciting countries, client relationships and aspects of the claims business. 

Here, I will highlight four meaningful lessons that have been reinforced for me during my tenure as Sedgwick’s CEO for Asia.

1. Differences matter

Many in the West tend to view Asia as one monolithic unit, but like any other part of the world, there are regional and national idiosyncrasies. Sedgwick owns operations in nine Asian countries, with affiliate partners in several others; each geography has its own distinct language (or languages), currency, governance structures, cultures, work practices and market nuances that must be appreciated and respected. To paint them all with a broad brush does them a disservice and limits one’s ability to effectively serve Asia’s diverse and dynamic needs. 

2. Relationships trump contracts

In Asia, more than in any other region where I’ve worked, business relationships make all the difference. Customers here have very high expectations for service and quality, and when it matters most, they seek out skilled professionals they trust to meet their standards for excellence.

While claim assignments in many parts of the world are largely tied to contracts and insurance panels, the Asia market in particular rewards those who invest in developing long-term, collaborative relationships. Clients prefer to work with partners who respect the local culture, take the time to listen carefully, and thoroughly understand their unique business challenges. Having passionate and experienced leaders with well-established relationships throughout the region is a cornerstone of Sedgwick’s success in Asia.

3. One size doesn’t always fit all

While there are many best practices from across our international operations that we’re working to bring to the Asia market to improve our offerings and customer experience, it’s important that each be considered in the appropriate local context. For example, Sedgwick has a wealth of expertise in responding to catastrophic events as part of the annual Atlantic hurricane season. Asia experiences similar weather systems known as typhoons that also cause a great deal of structural damage and flooding. However, due to the low propensity for domestic insurance in parts of Asia, typhoons do not typically produce the same surge in residential property claims as Atlantic hurricanes. Thus, our CAT response playbook has been adapted for Asia to focus more on commercial insurers and their policyholders.

On the other hand, many of Sedgwick’s global specialties naturally translate well to Asia: 

  • Not surprisingly, there is a huge marine market across the region. The top 10 busiest container ports in the world are in Asia, and the spectacle of ships waiting to dock in Singapore is a sight in itself. With this level of activity, our global expertise in hull and machinery can be useful in filling a gap in the market.
  • With so many of the world’s goods produced in China and other parts of Asia, manufacturers here face the constant threat of product recalls and related risks; our team of global brand protection experts can help. 
  • Additionally, offshore wind power is growing fast in Japan, Taiwan and other parts of the continent. Sedgwick recently launched a UK-based specialty practice focused on the power and energy sector, and we are exploring opportunities to leverage that expertise in Asia. 

4. Today’s workforce craves growth

Amid a tumultuous labor market, employers in Asia — and in the insurance industry in particular — are struggling to attract and retain talent. Employees today are continually looking to take on new challenges and learn new skills; those who feel they can’t achieve their career aspirations at their current organisations are likely to pursue development opportunities elsewhere.

As part of our commitment to colleagues’ career growth, Sedgwick recently launched our award-winning Pathfinder development programmes in Asia. Pathfinder is designed to support colleagues in realising their career aspirations without ever having to look outside the business — whether it’s developing from entry-level claims handling, gaining technical excellence, completing their academic studies, working on major and complex losses, or transitioning into leadership. The programmes enable mobility across different business functions, so colleagues can continue to be challenged and grow within the organisation. Investments in such initiatives are critical to workforce retention, businesses’ long-term sustainability and the capacity to properly meet clients’ needs. 

I, too, look forward to progressing in my personal growth journey as I continue learning the ins and outs of the Asia market as interim CEO. You can be sure that our talented Sedgwick team of 600 experts across Asia is here for you: watching trends, sharing ideas, offering support, bringing you the best of our global and local resources, and imagining what’s next. If we can be of service to you or your organisation, please reach out and contact me.

Learn more — read about our diverse offerings in Asia, and explore valuable career opportunities at Sedgwick