Equipment, supplies are vital to injured workers’ recovery experience

March 14, 2024

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While the medical care an injured worker receives immediately following a workplace accident can make all the difference, it’s important to remember that much of the recuperation process occurs in the home. Providing injured workers with clinically appropriate medical supplies and equipment to support their safety, healing and quality of life at home can be just as essential to promoting recovery. As many employers look for ways to improve employees’ claim experience and to control workers’ compensation costs, the effective management of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) offers a prime opportunity to simultaneously achieve both objectives.

Effective DMEPOS management matters

Employers are responsible for providing injured workers with the care they need to become whole again (or, at least, to achieve maximum medical recovery) — and that includes the related equipment and supplies. There are several reasons why DMEPOS should be part of a successful workers’ compensation program: 

  • Promptly and efficiently providing injured workers with the right medical equipment and supplies improves the likelihood they’ll follow doctors’ orders. Consider an individual who is in pain or struggling to adapt to their post-injury reality; what are the chances they’ll have the strength or make the effort to procure medical supplies? They shouldn’t have to. Having those needs met without having to think about it alleviates one impediment from an already challenging process. Delays in securing DMEPOS can prolong recovery, and an extended claim duration is bad for the employer’s bottom line and the injured worker’s well-being.
  • Oversight of DMEPOS is critical to controlling costs. For instance, most equipment and supplies can be purchased wholesale rather than at retail prices, and many items are available in generic versions that are lower-cost and just as clinically effective as the name brands.
  • Without the right equipment, injured workers may be at-risk of incurring additional injuries. For example: Mobility supports like crutches and walkers can prevent falls, and use of an appropriate prosthetic device reduces the amount of stress on an amputee’s other body parts. 
  • Smooth coordination of DMEPOS demonstrates employers’ commitment to holistic caring for their injured workers. At a time when many aspects of the employee’s life have gotten more difficult, getting the medical equipment and supplies they need should be easy and hassle-free. It’s an important part of the overall claim experience.      

Benefits of having the right partner

Many employers partner with an ancillary care provider to help them manage their DMEPOS programs. The current post-COVID period of inflation — which has driven up the prices of materials like rubber, plastic and metal — has given rise to additional vendor partnerships as companies seek new opportunities to curb costs.

Ancillary care providers can offer employers a wealth of expertise in the types of equipment and supplies on the market and how to get the right items for the best price. They can help their customers control DMEPOS-related claim expenses by applying a variety of tactics, such as:

  • Pre-negotiating rates with the lowest-price wholesale suppliers of high-quality products.
  • Identifying equally effective generic alternatives to prescribed name-brand products and working with prescribers to secure approval for the lower-cost versions.
  • Exploring whether purchasing a device may be cheaper for the employer than covering an extended month-to-month rental.
  • Conducting retrospective reviews of DMEPOS billing to reprice out-of-network purchases and direct recurring orders to network providers. This practice can help employers enjoy savings of as much as 15% below state fee schedules and usual and customary reimbursement rates.
  • Reaching out to injured workers to validate their ongoing need for supplies and implementing other system-driven controls to limit fraud, waste and abuse.
  • Bundling devices with supplies and support services at all-inclusive pricing, eliminating the need for additional approvals and claim reserves. As an example, Sedgwick’s ancillary care network offers an audiology programthat enables workers with occupational hearing loss to receive audiology testing, as well as hearing aids and their batteries, filters and domes, and any provider support they may need, for one flat price. These comprehensive bundles can save employers as much as $675 per claim over five years.

The right partner can bring talent, scale, resources and innovation to employer programs — helping them to systemically reduce costs, improve operational efficiencies, ensure compliance, and provide employees with clinical and logistical support.

Showing injured workers how caring counts

At the heart of all workers’ compensation managed care programs is supporting the needs of injured employees during a vulnerable and challenging time. Everyone who is a part of our DMEPOS ancillary care program — from the leadership and medical network liaisons to the customer service agents and care coordinators — is committed to providing our clients’ injured employees with top-quality equipment and supplies and a seamless user experience. 

Nearly 60% of our DMEPOS volume is drop-shipped directly from our wholesale vendors to injured workers’ homes (or wherever they are choosing to recover). We take great pride in acknowledging all drop-ship requests within hours, processing orders the same day, and having products delivered within two days. When it comes to equipment, we always look for the best options that require only toolless assembly and can quickly and easily be put to proper use. Our job as the DMEPOS provider is to take care of things in the background, so injured workers can focus on taking care of themselves and their families.

Recently, we received a letter from the widow of an injured worker for whom we provided DMEPOS. She shared how much it meant to their family that her husband’s medical supplies arrived at their doorstep each month without them having to give it any thought. The touching letter was a poignant reminder of how much the work we do each day matters to the people on the receiving end. DMEPOS is about so much more than medical equipment and supplies; it’s about improving people’s quality of life and helping employers take good care of their valued employees.

Learn more — read about Sedgwick’s best-in-class ancillary care solutions, including the effective management of DMEPOS, for workers’ compensation programs

by Jaysen Eldridge, VP, ancillary care operations, Ryan Johnson, service center manager, and Luke Parnell, director, medical networks

Delivering flood resilience: minimising the impact of flood claims

January 15, 2024

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One billion people globally are at risk of experiencing a flood. In the UK alone, an estimated 5.2 million homes and businesses are at risk. And the probability of flooding is increasing with climate change. Increased winter rainfall — projected to increase 35% by 2070 — and more severe weather events will exacerbate an already untenable set of circumstances.

The impact of flood risk on businesses is also troubling. In the UK, once a flood hits and affects a business, only 60% of them ever re-open their doors. And for businesses that do, each flood claim entails, on average, 50 lost days of business. Meanwhile, government strategy is shifting, with a newfound acceptance that ‘we can only reduce the risk in some places,’ rather than eliminate the risk altogether.

Now, more than ever, we must harness solutions to proactively mitigate flood risks wherever possible.

Do you know the flood risk for your assets?

Investing in flood resilience is driven by an awareness of the flood risk by the key stakeholders (e.g. building owner / occupier / insurer / lender). For property owners, that means assessing a wide range of factors.

What sources of flooding are in the vicinity of the building? What are the flow routes and hazards i.e., how would the water flow to reach the building or asset you’re trying to protect? What’s the history of flooding at the property? Would potential floodwater likely be contaminated i.e., is a water source nearby fresh, or contaminated with sewage or farm waste? What’s the estimated frequency, duration and depth of potential floods specific to the property?

The basics of flooding

Each type of flooding has unique implications. Pluvial, or surface water flooding, occurs when the ground can’t absorb the water fast enough, so it runs over the surface. Fluvial, on the other hand, occurs when streams, rivers or small ditches overflow. Groundwater flooding occurs when the ground is completely saturated with water, and the water has nowhere to go. Finally, tidal flooding is the temporary inundation of coastal areas or areas around rivers during exceptionally high-tide events. An area not often considered is the risk of sewage backflow into a property when the combined foul and surface water system is overwhelmed. Compound flooding is a combination of any of the above flood types.

It may be counterintuitive, but more properties are at risk from surface water flooding than that flowing from a river or sea. If rainfall is prolonged or intense enough, and the ground can’t absorb the water it will flow over the surface and may flood properties which are often thought to be at low flood risk. 

Property flood resilience in practice

Property flood resilience (PFR) is a broad term capturing measures which minimise the impact of flood water on a property or asset — these can be both permanent measures built into the property or temporary measures deployed in a flood. 

PFR is two-fold: resistance measures, or those that reduce the amount of water entering a building (e.g. flood doors/barriers/automatic air bricks), or recoverability measures that limit the damage caused if water does enter a building (e.g. kitchens / floor and wall finishes not damaged when they get wet). The trick is in balancing both measures, and determining which are most effective and timely for a specific property.

When delivering flood resilience, there’s an important and clear methodology UK professionals follow: the code of practice (CoP) for property flood resilience (C790F), published by the Construction Industry Research and Information Association (CIRIA), an independent not-for-profit organisation.

The CoP lays out a six-stage approach that qualified surveyors should follow for effective delivery.

  • Flood hazard assessment – an assessment that reviews flood risk for the property; determines likely frequency, depth, severity and overall susceptibility to flood.
  • Property survey – a property survey and assessment of existing resilience (conducted by a qualified skilled surveyor).
  • Options development – deciding on PFR strategy and creating associated, detailed flood resilient design.
  • Construction – installing PFR products by appropriately skilled contractors or specialists.
  • Commissioning and handover – a post-installation audit conducted by an independent third-party surveyor confirming that measures operate effectively.
  • Maintenance – assigning responsibility for ongoing operation and explaining to customers how to maintain measures.

A separate document, ‘making your property more flood resilient’ (CIRIA C70C) is a helpful resource for home owners or business owners interested in at-home flood resilience guidance.

The importance of winning over customers

Much of the at-risk population in the UK doesn’t actively adopt mitigation measures even when they’ve been impacted by multiple flood events. Recent research found there are several psycho-behavioural barriers that subconsciously influence a person’s likelihood to pursue flood risk mitigation.

According to research commissioned by the Environment Agency, there’s a widespread lack of awareness among the public of the true extent of risk facing their properties. 

Many participants view themselves as being insufficiently at risk to justify any sort of flood mitigation investment. To that end, many misunderstand risk rates entirely. If a surveyor identifies a 1 in 33 annual flood probability, for example, many assume this means the property will experience a flood once in every 33 years on average. It actually means there’s a 3.3% chance of flooding each year — revealing the true risk to be much higher than perceived. This is made worse by homeowners and businesses not wanting to accept that there’s an ongoing risk.

Additionally, most participants didn’t feel empowered to act and had poor knowledge of which PFR measures were available to install. Self-efficacy also proved important in participant decision-making; those who felt confident in their ability to carry out PFR measures were more likely to do so. 

It’s critical to help customers understand their risk and further establish their appetite for risk. Customers must be able to understand the cost-benefit analysis of how much risk they might be willing to accept, and how much they’re willing to invest to protect their property. We must collectively distance ourselves from the belief that only properties near a river, or only properties in certain environments are at risk. All properties can be at risk — and the time to mitigate, using a holistic and strategic approach, is now.

Some of these concepts were previously shared in a recent webinar presented by Ian Gibbs.

Seamless management of injured workers’ care benefits all stakeholders

December 19, 2023

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It’s no secret that healthcare systems can be difficult to navigate. When care is associated with an injury or illness incurred on the job, the complexities of the workers’ compensation system may further compound the challenges. Many employers opt to work with experienced claims and managed care partners to give employees a better experience, facilitate recovery and return to work, control costs, and ensure full compliance with jurisdictional requirements. However, navigating a patchwork of specialists and ancillary care providers, along with their disparate online systems, can be just as challenging. Here, we will highlight how the seamless management of care for injured workers is a major win for all parties involved in the workers’ compensation system.

Benefits for employers

When an employee gets injured or ill at work, their employer is responsible for making them whole again. It’s a legal obligation, the right thing to do, and in the employer’s best interest. Organizations want the highest quality, most appropriate and timeliest care for their employees to maximize medical efficacy and recovery. What’s more, they want all of that at the best possible price, as Sedgwick’s workers’ compensation book of business shows medical spending accounting for about 50% of claim costs. 

While that combination may sound too good to be true, it is possible when employers work with the right managed care provider. By using a partner with an established network of highly rated, licensed and insured practitioners in the right specialties for occupational medicine, as well as pre-negotiated treatment discounts, employers can take advantage of rates well below fee schedule while providing employees with outstanding care. Premier managed care providers can offer “wholesale” rates for care due to their buying power and careful oversight; many also conduct bill reviews to yield an additional 10-15% in savings — with no additional work required by their employer clients. 

Another way we help employers reduce claim costs is by applying sound healthcare price management techniques. Among Sedgwick’s workers’ compensation clients, 32% of medical spending is on ancillary care, which includes durable medical equipment (DME) like canes and wheelchairs, as well as prosthetics, orthotics and supplies (POS). Much like in the pharmacy sector, managed care providers use formularies and product catalogs to identify generic equivalents — for everything from name-brand bandages to crutches — so employees receive equally effective care and supplies at significantly lower prices.

Fully integrated managed care programs offer benefits beyond cost savings, too. When injured and ill employees are referred for treatment through a managed provider network, claims are reviewed by clinical experts to ensure medical necessity and appropriateness of care. The use of well-vetted and credentialed network providers means a more accurate assessment of the warranted treatment plans. This approach brings tremendous value to any employer’s program — especially when it comes to high-cost products and services, such as custom prosthetic devices, diagnostic imaging and in-home healthcare services. System integrations further simplify processes and create efficiencies, and vendors and providers get paid faster due to pre-negotiated pricing.

Benefits for claims handlers

Workers’ compensation claims examiners and case managers on programs with integrated managed care are at a distinct advantage. Thanks to seamless technology interfaces, they can refer workers for care and order necessary medical supplies from multiple sources directly from their established claims system — without having to log onto separate vendor portals. 

Claims professionals know that having screens dedicated to managed care within their system of record is a real differentiator. Streamlining the number of password-protected websites they must use in their daily jobs promotes efficiency, lowers the risk of human error or data breach, reduces frustration and busy work, and improves their overall work experience. Furthermore, the integration enables electronic billing information to be transmitted directly to the claim file — and medical bills can be processed without further human touch if reserves are in place on the claim! 

Integrating the management of medical care with the workers’ compensation claims process also helps examiners focus on their primary responsibility, which is supporting injured and ill workers in their time of need. When examiners feel confident they’re referring workers to quality practitioners and equipment providers in well-managed networks, they can devote their energies to communication, removing barriers, and managing the fiduciary responsibilities of their assigned claims. 

To further support workers’ compensation claims examiners, some leading managed care providers have added ancillary care coordinators to their teams. These professionals spend a lot of time getting to know the services, equipment and supplies they manage, so they can ask the right questions and work with examiners to enlist the right resources on their claims. Care coordinators’ in-depth knowledge helps them readily identify issues as they arise and escalate them to the appropriate medical experts for accurate and prompt resolution. 

Benefits for injured workers

The ultimate beneficiary of effective management of care in workers’ compensation is, of course, the employee. The efficiencies and oversight of integrated programs enable workers to promptly secure appropriate and high-quality medical care after an on-the-job injury or illness, which helps them get back to health and productivity faster. Employers that include ancillary care in their programs offer a seamless experience to employees needing medical equipment, supplies or special services. The assigned examiner and care coordinator collaborate to arrange for ordering, delivery and setup, as well as any fittings or training that may be needed. Streamlining the process gives the employee the best possible experience and increases the likeliness they’ll use all available resources to achieve maximum recovery. 

With the constant threat of an unfavorable experience going viral on social media, combined with a lingering tight labor market, it’s more pressing than ever to take good care of your employees. One easy way to do that is to partner with a managed care provider with integrated capabilities that can bring the highest level of care to your workers’ compensation program.

Case managers: advocating for injured workers and influencing positive outcomes

October 9, 2023

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Discussions are common within the claims industry about the ins-and-outs of the workers’ compensation claims process and the importance of ensuring an injured employee’s case crosses the finish line to settlement. But between point A and point B, the position of an injured worker — whose physical and financial outlook is often bleak or unclear — is a vulnerable one. 

Sustaining an injury can be arduous. The experience is only exacerbated by losing one’s basic safeguards — physical capabilities, a daily routine, the ability to work, and in some cases, the ability to provide for their respective families. 

Who advocates for the injured worker’s best interests and guides them down the path of recovery? Who coordinates the employee’s recovery process, facilitates appropriate medical treatment, ensures needs are addressed and promotes a prompt return to work?

Enter case managers: multidisciplinary clinicians who build relationships with injured workers to help drive positive outcomes. 

A nurse case manager’s story

Constance, a Sedgwick nurse case manager, was assigned to advocate for an injured worker whose story changed her life. Constance describes Mason* as an American success story. After losing his parents to violence, Mason* was raised by his grandmother in New York. He began his career 20 years ago as a flight attendant, most recently setting down in Mississippi. 

Shortly after his move, Mason* was kicked in the foot while on the job, resulting in a peroneal tendon tear — a debilitating injury. Because the federal aviation industry prohibits modified work duty, in addition to the severity of the injury, Mason* faced the devastating reality of being barred from work for the foreseeable future. 

Constance guided him through the subsequent lengthy recovery process: an injection, followed by a surgery he was terrified of having. Constance coordinated dozens of doctor’s visits and physical therapy appointments and helped him manage unbearable bouts of pain. Throughout the process, Constance spoke with Mason* every day. 

Nurse case managers like Constance facilitate appropriate medical treatment while keeping claim costs down. From the initial point of contact, she worked with the treating physician, Mason’s* employer and the claims examiner to ensure a positive outcome. She identified barriers to the injured worker’s recovery and implemented solutions, all while forging a meaningful, supportive relationship. 

An injured worker’s greatest hope is to recover in a way that allows them to return to their everyday routines, to improve their health, to get back to work and to continue doing the things they love to do. At times, all Mason* needed from Constance was peace of mind when he felt fearful about the future. After more than a year, Mason* was back to full duty as a flight attendant — a career he loved. 

Making a difference

Injured workers need genuine support as they navigate an uncertain trajectory and recover. Across the U.S., case managers like Constance are committed to protecting the lives of injured workers, listening to their concerns, providing reassurance and coordinating their recovery. Each year, during the second full week of October, National Case Management Week (NCMW) provides an opportunity to recognize and celebrate case managers for improving health outcomes and advocating for injured workers. This October 8-14, join Sedgwick in shining a spotlight on this valuable profession. This year’s theme is one Constance embodies: keeping the person at the heart of collaborative care.

By providing the right care and coordination solutions — from clinical case management to networks and support — we’re driving better outcomes for injured workers. Find out how

Learn more > If you’re interested in career opportunities as a case manager at Sedgwick, visit sedgwick.com/careers.

*Names have been changed in these cases to protect privacy.

Getting ahead of marine liability risks

March 29, 2023

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When goods and machinery are produced on one side of the world and shipped to another, challenges arise.

After a loss, there are documents to review, shipping regulations to navigate and liability issues to uncover. Whether a company is shipping perishable goods from Peru to the Netherlands or steel throughout Europe, there are laws and compliance requirements to consider. The supply chain has not fully recovered from years of factory closures, border restrictions and overcrowded ports — making it even more challenging to conduct business as usual post-loss and determine liability.

Valuable and vulnerable loads

Imagine a company is dealing with particularly valuable and/or vulnerable loads. During transportation of these goods, there are several touchpoints that often require a second set of eyes before determining possible liability. On behalf of customers, we frequently review the handling process of these goods to inspect their condition and verify lashing/securing measures, as well as subsequent loading/unloading methods. By playing a role in the supply chain, the state of the goods is clear before any potential risk or transfer of responsibility takes place.

After all, at various touchpoints, different handlers with different agreements are in progress. Confirming that all goods are in proper order before they are transferred to the next party in the chain can make a significant difference during a potential claim in the future — saving time and money. Assessing the condition at various ports before, during and after shipping is key to identifying any losses or damages that may have occurred.

Bulk goods

The role we have in this point of the supply chain is unique, as usually only loading or unloading surveys tend to be carried out. Consider the example of common practices with bulk goods. At Sedgwick, we have expertise to carry out surveys at various stages of the supply chain, as well as for very different loads such as breakbulk goods, containers and air cargo. Our vast network is ready at a moment’s notice to arrive at terminals and take part in each requested transfer stage. If goods are damaged when they arrive, our experienced colleagues quickly assess the damages on site and assist with mitigation. To calculate the exact loss, it is crucial for our team to understand how the goods are processed, the state of the goods after production, the intended end product and where it is marketed.

Documentation and awareness

In addition to being present on the ground to assess the condition of goods, our team can investigate the stream of information and documentation that is involved. This way, we can detect possible hick-ups in the supply chain before they get the chance to develop into full blown delays or other inconveniences that might lead to monetary losses. Moreover, we intend to generate awareness for all parties involved about the consequences that might result from the manner in which documentation is being drawn up. In the unfortunate event of damage to goods, there’s potential to complicate or hinder effective resolutions if documentation is not completed properly. Maximizing the chances to successfully recover from a financial loss is a key area of focus when investigating the stream of information and documentation.

Carrying out surveys

No matter the type of cargo or complexity of a marine liability claim, a comprehensive survey should be completed. Many shipping agreements are made via email or telephone and there is a chance that contract details are missed. Reviewing all documents, agreements and regulations, and generating a thorough report helps support the claims resolution process. Beyond the loading survey of goods, having a partner to assist with the investigation ensures smooth supply chain operations that can just as easily be carried out at other stages of transport, storage or handling.

In an unpredictable environment, companies must anticipate future challenges and be prepared to take early action. Before supply chain disruptions occur, make sure your organization has a clear plan in place and a partner they can trust. Whether you need support with determining liability during shipment, tracking the production process, assisting with forwarding issues, reviewing packaging requirements, investigating thefts or identifying issues involving perishables — Sedgwick’s global team can support. For more information, please contact us at [email protected] or [email protected].

Securing temporary housing after Winter Storm Elliott­

March 22, 2023

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In December 2022, extreme winter weather conditions caused power outages and freezing pipes across the United States — damaging properties and displacing residents. In the days that followed, our temporary housing team took on an increased claims load to secure accommodations for policyholders.

In addition to the stress of being displaced, families were concerned with whether their temporary accommodations would accept their pets, as well as the disruption to everyday school and work routines. During situations like this, it’s up to our colleagues to show how “caring counts” and to listen and address their concerns. We specialize in arranging temporary housing that fits each customer’s unique housing needs and keeps them as close to home as possible.

Th­­e time of year added another layer of complexity. Since many policyholders were traveling for the holidays while Winter Storm Elliott took place, they couldn’t evaluate the extent of the damage until it was too late. Significant damage resulted from a variety of issues following the storm, primarily due to frozen pipes that burst. Insureds may have gotten home only to find leaks; and if there was sitting water, there were additional risks, like mold, to consider — forcing them to leave the premises. What was supposed to be a season of cheer, quickly turned into despair — reinforcing the need for our temporary housing team to approach each claim with empathy.

An empathetic approach

Following a traumatic event, the last thing any policyholder wants to deal with is deciding where to temporarily live. Many insureds felt anxious and overwhelmed as they worked through the stages of grief for their damaged home. Learning to identify trauma and respond productively fosters a better claims outcome. That’s why, beyond needing temporary housing knowledge, our colleagues are trained to listen intentionally and act with empathy.

Positive outcomes

We began receiving requests for temporary housing immediately and despite the storm affecting the entire U.S., our strategic catastrophe response planning allowed us to ramp up quickly and handle the call volume. This included conducting early cross-trainings and onboarding a large group of temporary colleagues so we were able to continue providing the level of service customers expect. With the option for all claim requests to be easily submitted and tracked through a digital platform, our experts acted fast — calling policyholders quickly to begin providing housing assistance.

Some policyholders only had a single pipe burst that may have required them to wait on a plumber but continue living in their home. Others had severe, uninhabitable damage that has forced them to evacuate for what will likely be several months to a year. As a result, the temporary housing needs varied from flexible, short-term accommodations in a hotel to a long-term property rental. While our team took care of coordinating temporary housing, insureds could focus on what matters most to them – their safety and recovery after a loss – while staying in their community.

Preparations for policyholders

It’s recommended that policyholders regularly review their insurance policy to understand the response to winter weather-related losses and whether temporary housing expenses are covered if their home becomes uninhabitable. Ways to protect properties include wrapping outdoor pipes and faucets with insulating material, opening cabinet doors under sinks to provide warm air flow and keeping the temperature at 55 degrees or warmer inside (for more tips, click here).

Winter Storm Elliot may be several months behind us, but our teams are committed to being there as long as it takes to support our clients and their policyholders. When natural disasters occur, we can provide temporary housing assistance for first responders, insurance carriers and service teams – from loss and claims adjusters to mitigation and repair employees. Our network of hotel brands and short-term housing options ensure we provide quality temporary housing with the best lease terms when it matters most. If we can be of assistance to you, please contact our team at [email protected].

The impact of inflation on claims: what lies ahead in 2023

February 15, 2023

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By Andrew Cavan, director, head of major and complex loss (North)

As reported in the Financial Times, on 31 August 2022, the head of one of the world’s largest building materials companies confirmed that he’s seeing a ‘second wave of cost increases’ following the surge in gas prices.

Spiralling energy prices are just the latest addition to the cocktail of global events that have driven high inflation and a recession in the UK – and currently, there’s little indication that this market uncertainty will improve in the immediate future.

So how will this impact insurers’ costs for property reinstatement and business interruption (BI) claims in 2023?

Materials and labour

It’s universally well-known that the global shortage of many basic building materials is driving prices up, and the ongoing war in Ukraine has exacerbated this issue. Europe has a high level of dependency on Russia for gas, and they supply 20% of the world’s softwood. Ukraine is a global producer of metals – nickel, copper and iron – and any shortage significantly impacts the production and supply of steel, which is crucial to several industries, especially construction.

However, there’s evidence that the scale of these price increases is slowing, and we’ve even seen some price decreases in timber commodities. But the most important factor now is rising energy costs, particularly in the production of energy-intensive products, such as bricks and steel.

Higher prices aren’t the only issue to consider. Long replacement times for many materials are also causing major problems, with lead times more than doubled on products such as steel joists, roofing membranes and insulation.

Labour costs are also increasing in the UK due to Brexit, the post-COVID Great Resignation and a general shortage of skilled workers, from plumbers and electricians to lorry drivers. Employers are offering higher salaries to attract and retain staff, which results in increased costs. And so, we go on.

When will it end?

Every indication is that building costs will continue to rise in 2023, with an obvious impact on material damage and BI settlements. The Building Cost Information Service, the leading provider of cost and price data for the UK construction industry, is currently seeing an 8.5% increase in year-on-year returns, and they forecast this figure to be 7.5% in quarter one, 2023.

Sedgwick’s repair solutions quantity surveying team’s current inflation forecast for the insurance building repairs market in 2023 is 6%. This assumes some market stability, and as a result, material costs begin to fall off.

However, in practice, there continues to be a lot of building work available, and contractors can afford to be choosy in what they take on. Recently, we’ve seen a higher incidence of contractors declining to tender and not accepting projects because costs have shifted since they submitted their quotes. The support of a reliable and robust contractor network will be essential as we work through various challenges in the coming months.

Mitigation measures

Adjusters and insurers can’t control market forces, but we can react to them with pragmatic and nimble solutions. Planning is crucial, and we need to be aware of potential delays and bottlenecks in the supply chain and be ready to work around them.

In building reinstatement, orders for critical materials should be placed as quickly as possible, and early payments to contractors can assist with this. We could also consider different reinstatement methods or materials where economic and appropriate, and a single contractor approach if it saves time and reduces BI costs. Where plant and machinery are being assessed, we could look at suitable second-hand equipment. Early cash settlements might also assist the customer in terms of cash flow and help manage uncertainty for both policyholders and insurers.

Essentially, everyone in the insurance industry wants to avoid any reduction in settlements due to under-insurance or shortfalls if the sums insured are exhausted.

Adequacy of cover

Given the current economic climate, it really is essential that businesses regularly review the value of their assets. If the sums insured aren’t up to date, the impact of the continued and projected levels of inflation could be dramatic.

Long lead times on materials can affect the speed of building repairs, which means business interruptionperiods will be extended. Replacement machinery and stock are also likely to take longer to source, which will again impact the early recovery of the business.

The time to review sums insured and business recovery plans – across both material damage and business interruption maximum indemnity periods – is now. This will help customers steer through any period of disruption and emerge stronger. While worldwide economic uncertainty continues, it’s more important than ever to ensure that we are ready and fully equipped to manage the challenges ahead.

The wonders, risks and future of medical imaging equipment

January 26, 2023

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by Curtis Anderson, forensic engineer, EFI Global

As the medical imagining sector continues to rapidly grow, so do the risks of malfunction and catastrophic failure in its technology.

Imaging equipment manufacturers are the primary service providers for equipment repairs, however, there can be a wide range of warranty exclusions that leave high-repair costs or replacement decisions in the hands of the equipment’s owner. Consequently, in the event of a loss, it’s critical to understand imaging equipment and its potential challenges to mitigate risk and ensure a swift post-loss recovery.

A look back

Until the 1950s, the only way to acquire skeletal and foreign object images within humans was through traditional radiography, or X-ray. X-rays are a form of electromagnetic radiation that, when using a detector on one side, can form an image that represents the shadows of bones or objects inside the body. All such technologies depend on some radiation exposure and are still used today to detect bone fractures and tumors.

In the ‘70s and ‘80s, several key innovations greatly expanded the tools available to diagnostic radiologists, including the computerized axial tomography (CAT) X-ray, the ultrasound, the nuclear magnetic resonance (NMR) or magnetic resonance imaging (MRI), and the positron emission transaxial tomography (PETT) or positron emission tomography (PET).

Potential equipment risks

Each type of equipment carries unique risks. However, all radiological equipment has a finite life cycle span, meaning an inevitable breakdown and decrease (or loss) of image quality that will eventually render equipment useless. For this reason, virtually all U.S. hospitals and imaging centers have service contracts with at least one original equipment manufacturer (OEM) for post-warranty service of the equipment. Equipment older than 10 years may need to be replaced if not adequately maintained, as operating costs will be higher compared to new equipment. Older equipment also has a higher risk of failure and breakdown – which risks consequential delays for diagnosing and treating patients.

MRIs (and the suites the machines are housed in) in particular, pose significant fire protection and life safety risks due to the powerful magnets and high level of power utilized. MRIs incorporate magnets thousands of times stronger than those on your kitchen fridge, which are kept operational by liquid helium cooled to about -452 degrees F. If that helium escapes its casing, evaporates, and mixes with oxygen, pressure from the escaping gas can cause an explosion. While rare, these explosions do happen – in March of 2015 one occurred at Oradell Animal Hospital while three MRI technicians were dismantling the unit.

Other equipment risks may involve an MRI quench or the “missile effect’. A quench occurs when there’s a rise in the magnets’ temperature, causing the liquid helium to boil into gas, leading to a sudden, dramatic and expensive release of helium gas. The missile effect refers to metal objects that become projectiles because of the considerable force that is exerted on them, which is why patients are asked to remove metallic objects/materials that have a high susceptibility to magnetization.

There is also the risk of natural and man-made disasters, as hospitals/imaging centers are just as susceptible to damage from such disasters as any other facility. Manufacturers and service vendors are quick to point out that an “act of God” exclusion exists in most contracts. Experienced loss consultants are all too familiar with this exclusion, and work with OEMs and third-party service providers to ensure that equipment is restored to a pre-loss condition, while assuring service contracts remain intact.

A glimpse into the future of medical imaging

According to a Research and Markets report, the U.S. imaging services market is forecasted to grow exponentially in the coming years – rising 9.2% annually, from $94.7 billion in 2020 to $192.1 billion in 2028. As the medical imaging service sector grows, service models will change from traditional arrangements to the emerging imaging “as-a-service” model. Until now, hospitals purchased imaging equipment and maintained it utilizing in-house biomedical personnel, or through paid maintenance service contracts with OEMs. In the as-a-service model, care providers are not required to purchase equipment outright, and instead partner with imaging vendors who provide the equipment/related services, with payments made either on a pay-per-use/scan or periodic basis. This model drastically reduces upfront capital costs and eases the burden on care providers’ budgets.

Medical imaging equipment is being reinvented to create versions that are smaller, faster and more efficient. In February 2022, the Food and Drug Administration (FDA) cleared the world’s first portable, low-cost MRI, which is now used for imaging of a patient’s head. It costs $50,000 – twenty times cheaper than traditional systems. Additionally, it operates on 35 times less power and weighs 10 times less. CT scanners are being refined in the same way. An analog scanner weighs nearly 4500 pounds and costs between $1 and $3 million to use. Compare that to a new, digital version with a significantly smaller footprint, weighing only 154 pounds. While the average CT scan costs a patient $1200, the digital version costs around $40.

As it relates to property losses, not every imaging modality will immediately experience a significant cost reduction – some equipment will cost millions for years to come. Regardless, understanding what should be restored post loss, how it should be restored, and which items make no economic sense to restore, are all important steps that should be considered to mitigate deterioration and minimize the business’s income loss.

Learn more — visit efiglobal.com or check out an expanded version of this article here.

Hurricane Ian: strategic preparation, critical response

December 14, 2022

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By Beau Bishop, SVP, catastrophe operations, Mark Della Giustina, VP, building consulting services, and John Gragson, SVP, operations

After plowing through the Caribbean, Hurricane Ian made landfall in southwest Florida on Sept. 28 as a dangerous Category 4 storm.

The catastrophic event took the lives of nearly 150 people and caused an estimated $70 billion in property damage in the U.S.; it’s likely the costliest storm in Florida’s history. Ian’s timing and trajectory caught many off guard, as predictive models had it arriving two days later and hitting further north.

As a major provider of catastrophe response services, we know that rule No. 1 with CATs is to expect the unexpected. Thanks to a winning combination of experience, preparation, expertise, flexibility and breadth and depth of resources, the Sedgwick property team was ready — in the right place at the right time — to help our insurance carrier clients handle the influx of claims associated with Hurricane Ian, and we continue to support their impacted policyholders throughout southwest Florida.

Before the storm

The services we offer are critical to the recovery of any area hit by a natural disaster. Beyond helping individual owners of homes and businesses assess the damage incurred, our adjudication of claims enables much-needed insurance payments and government grant money to flow into affected communities. This jumpstarts economic recovery, the rebuilding process and getting people back home, back to work and back to “normal.” Understanding the role we play as part of the first wave of catastrophe response makes our preparedness all the more important.

Beyond our annual readiness efforts in anticipation of Atlantic hurricane season, our targeted preparation for Ian began weeks before the expected severity of the storm made headline news. We were continually watching the weather models to gauge Ian’s magnitude, timing and direction, as well as examining the Florida footprints of our major insurer clients in the storm’s various possible paths. Throughout the weeks leading up to Ian, we were in daily contact with clients to plan for funding reserves in accordance with estimates on the resulting claims.

When it became abundantly clear in the days leading up to landfall that Ian would be a catastrophic event for the state of Florida, we had to make logistical decisions about how best to mobilize our team. These decision points require a delicate balance and the ability to adapt to changing conditions. When it comes to CATs:

  • We want to have a robust team of skilled experts nearby ahead of time to respond quickly, but also must keep our people out of harm’s way.
  • We can’t send our entire team to one area and leave the rest of the country unattended, so a staggered approach is preferable, even amid pressing needs.
  • We aim to begin assessing damage as soon as possible, but first must allow those responsible for restoring power and communication networks and conducting search and rescue/recovery to do their vital work.
  • We must be mindful of residents evacuating the target area and avoid occupying too much temporary housing in the surrounding region.

In the aftermath

Once the coast was clear, our first order of business was information-gathering. Insurer clients look to us to gain access to and inspect affected properties to help them understand the magnitude of the damage and manage their financial and service responsibilities to their policyholders. Our teams have years of experience working closely and safely with first responders, governmental authorities and others on the ground right after a catastrophe event.

In the first 30 days after a CAT, we experience a huge influx of claims. Within two days of Ian, we’d already received thousands of assignments. To ensure the right level of support to meet clients’ varying needs, we relied on our extensive resource network. In accordance with the general rule, about 80% of the claims were low-complexity and could be adjusted quickly. The remaining 20%, on the other hand, were more complex and required more time and specialized expertise. It is on these claims that we turned to various specialty teams within the Sedgwick/EFI Global family, including building consultingrepair solutionsforensic engineeringenvironmental consulting and more. With our collective in-house expertise, we are uniquely positioned to address a wide of client needs, and clients can enjoy the benefits of working with a single partner during an already hectic time.

Caring counts

Although we are in the business of property claims, our ultimate purpose is taking care of people. In the wake of a traumatic storm like Ian, one of the most important thing we deliver is empathy. Oftentimes, our adjusters and professionals are the first people owners of homes and businesses speak to about the damage they incurred and the awful things they experienced during and after a catastrophe. Beyond the technical knowledge needed for loss adjusting, we train our colleagues on the importance of listening carefully, making good on their word, following through quickly, and showing they care. They also know how to assist displaced policyholders in securing temporary housing until their homes are safely inhabitable again. The talented Sedgwick colleagues who do CAT work are on the front lines of conveying our “caring counts” philosophy.

Ian may be nearly three months behind us, but our teams are committed to being there as long as it takes to assist clients and their policyholders with whatever they may need. If we can be of assistance to you, please contact our team at [email protected].

Learn more — see our brochure for additional information on Sedgwick’s property claims solutions for the U.S. market and our flyer for details on our strategic claim resolution services for Ian-related losses

Maximum Indemnity Period: Is 12 months long enough?

May 4, 2022

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All too often, we see claims where an insufficient Maximum Indemnity Period (MIP) has been set — resulting in serious consequences related to the recovery of the policyholder’s business.

When the MIP — known as the time interval for insurance support after an incident — is assigned, it means that beyond that allotted time there is no cover, even if loss is ongoing. As such, the MIP needs to be long enough to take additional factors into consideration.

In most cases, the Maximum Indemnity Period begins when damage occurs and ends when the business is no longer impacted by the damage – or the MIP ends based on the set clause, whichever is sooner. In many commercial combined policies for smaller firms, covers have a 24 or 36-month minimum MIP. Unfortunately, once those firms are of a size that require bespoke cover — perhaps influenced by the higher premium a longer MIP entails — 12-month MIPs are frequently selected.

Selecting the Maximum Indemnity Period

When a business interruption (BI) loss presents itself in the scenario of physical damage, policyholders generally experience two phases:

Phase 1: The period of reinstatement, commonly known as the ‘mending period’, is when physical repairs are completed to buildings, machinery or other items, which form the material damage head of loss.

Phase 2: The subsequent period of recovery refers to returning the business to the position it would have been in, had there not been damage. This takes into account the recovery time to reinstate lost customers, retrain staff, etc..

Phase 1 is indirectly correlated with phase 2. The business recovery time can be exacerbated by how long repairs take; the longer phase 1 takes, phase 2 will be extended disproportionately. Therefore, when considering the MIP, the policyholder – with help from their brokers – should work on the assumption of a total loss and should also take into account a full recovery period (phase 2). For example, it may take six months to complete repairs to a building or replace machinery. However, it could take an additional 12 months to win back key customers lost during this period (or replace them with new customers).

Proportionately increasing gross profit for longer MIPs

Policies typically define gross profit as turnover, less uninsured working expenses (or specified working expenses), adjusted for movement of stock. Those will not be terms familiar to the policyholder, and gross profit in a policy maynot be defined on a basis consistent with how a policyholder uses the term gross profit in their accounts. Once this has been calculated correctly as an annual amount in line with the policy definition, it must be increased for longer MIPs. If an MIP of 24 months is selected, the gross profit figure must be doubled.

Most gross profit policies also offer cover for incurring additional costs to avoid gross profit losses happening in the first place (often termed ‘increase in cost of working’). This allows policyholders to spend money if it’s reasonable and necessary to avoid a reduction in turnover during the MIP. However, it must also be economical; insurers will allow policyholders to spend £1 to save £1, but no more. It stands to reason that a long MIP will allow more flexibility regarding this economic limit (the gross profit at risk over 2 or 3 years is greater than just 1).

Is 12 months long enough?

From experience, we can confidently say that a 12-month MIP is too short for almost all policyholders. The difficult question is, how long is enough? Ultimately, this should be an informed decision between the policyholder, their broker and insurer. There’s a myriad of potential issues that need to be thought through in detail when considering the MIP. This includes the site and premises – tenancy or ownership, use of buildings, space required, location – as well as retaining trained staff, outsourcing options, replacing plant and machinery, together with the time and cost of winning back business, and more.

With the financial implications of paying a higher premium (albeit for more appropriate cover), it may boil down to a question of economics. But with a robust disaster recovery strategy, policyholders should be able to make informed decisions on whether the MIP is adequate for their specific business needs.

We recommend that brokers offer a minimum MIP of 24 months to all policyholders, which should be committed to the written record. If somebody insists on only 12 months, give them the 24-month quote to avoid any misunderstanding when a loss arises and exceeds 12 months.

Catastrophe response: all in a day’s work

April 18, 2022

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By Andrew Bone, ACILA, Dip CII, chartered loss adjuster, MCL, New Zealand

Nearly one year ago, an Auckland-based manufacturer experienced a major fire that had a devastating impact.

With the business, brand and the livelihoods of 50 employees at stake, the range of immediate concerns and challenges went beyond anything the company had ever faced before. The crisis required swift action; insurers leaned on our team to handle the material damage (MD) and business interruption (BI) aspect of this substantial NZ$10M loss.

Mitigating the loss

The fire — which forensic investigators later determined was caused by an electrical fault — started in the office area and destroyed approximately one third of the building. The production lines, including 40 large machines and ancillary equipment, as well as stock, had been damaged by a combination of soot contamination and extinguishment water. Swift action was vital to mitigate the loss, although determining the best solution to every issue wasn’t straightforward; that’s when the knowledge and experience of a major and complex loss professional makes a difference.

Taking the lead

After building rapport with the organization’s management team and discussing the immediate needs, we worked collaboratively to implement a business recovery strategy.

  • Securing the site – The damaged building was fenced off, and static guards engaged to prevent looting by potential thieves as the unsecured building contained around NZ$5M worth of machinery. Wet and covered in soot, the building was degrading fast and required urgent repair. We instructed a specialist mechanical restoration company to spray the plant with anti-corrosion solution to preserve it and mitigate the loss.
  • Engineering expertise – With a six-month lead time to replace the machinery from the European supplier (should it be required), early assessment was critical. COVID-19 restrictions meant that the European-based technicians could not feasibly travel to New Zealand (NZ) to assess the plant due to quarantine restrictions. Instead, our own specialist engineering adjusting team based in NZ worked alongside the service agents to undertake detailed assessments and determine the repairability of the machinery within two days — as opposed to the four weeks that it would have been to get the overseas technicians into the country. The quick actions of the team identified that the largest injection moulding machine was beyond repair, and a new, NZ$500k replacement could be ordered quickly.
  • Damaged production machinery – Local resources were secured to undertake repairs to the remaining equipment — prioritising the machinery that were vital to resuming production. However, to repair so many large machines required about 900m² of floor space at an alternative site given the building required extensive repair. This created significant challenges given the extreme shortage of short-term warehousing options available across Auckland.

Nevertheless, within two weeks of the loss, we managed to assist the insured in securing suitable temporary premises where repairs could be undertaken. Production machinery was disconnected, carefully packed and relocated, the logistics of which was complex given the size and weight of each machine. It was estimated that it could have taken as long as six months to repair all the larger machinery which could have been catastrophic for the insured. With some ‘outside-the-box’ thinking and a collaborative approach, we managed to organise additional resources to expediate and complete the repairs in under three months. A valiant effort allowed the resumption of normal operations quicker, thereby reducing the business insurance loss.

  • Accounting expertise and early progress payments – Our team of experienced forensic accountants worked closely with the insured to understand the business and quickly determined that urgent working capital was required to pay staff salaries and other expenses to ensure business continuity. We therefore calculated an appropriate amount and recommended that insurers issued a substantial payment to the insured, which was organised immediately once policy liability was confirmed.
  • Relocation – We assessed that the severely damaged building, which the company had occupied for around 40 years, would take 10 to 12 months to reinstate. BI losses were mounting quickly and, with the added risk of losing substantial market share, we suggested that the insured considered permanently relocating the business to an alternative site. The insured decided to progress with this option in the greater interest of their business, albeit a somewhat bitter-sweet decision given the history of their business at the current site.
  • New site requirements – Apart from being adequate in size and location, the building had to accommodate a large gantry crane, specialist water storage and supply systems and an enhanced electrical supply to serve the production lines. Specialist property agents were engaged and after viewing over 80 different properties, a suitable site was secured just eight weeks after the fire. The insured was able to resume operations at a reduced capacity soon after as repaired machinery was transported from the temporary premises.

Balancing act

This claim was about as complicated as they get and selecting the easiest solution to each challenge could have ultimately led to exceeding the total MD and BI sums insured. By working closely and collaboratively with all stakeholders, our loss team quickly identified critical path items and helped create fast, practical resolutions that enabled the business to get back into production in the shortest possible timeframe and at the lowest ultimate cost. It was a balancing act, but our alternative ideas and suggestions kept the claim within the limits of policy cover and achieved a successful outcome for the insured.

Trust is essential

The key to the successful outcome of any major loss claim is to be proactive, solutions focused and in control of every issue from the outset. Looking at the situation holistically, identifying risks and thinking ‘outside of the box’ will ensure every issue and available option is considered. It’s not worth saving NZ$20K on one aspect of the loss when it might trigger a NZ$100K loss elsewhere. A collaborative approach — as well as building strong relationships with the insured and insurers — grows a level of trust.

Swift action and a collaborative, creative approach remains a top priority. For more information about major and complex losses, visit our website.

The rising tide of UK flood claims and rights of recovery

March 22, 2022

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By Duncan Muress, deputy head of complex liability and Dan Peck, regional director of complex liability

Landowners, developers, local authorities and government agencies can’t ignore the evidence of increasing flooding incidents.

Nor can they abrogate responsibilities to insurers for the subsequent costs. The challenges related to flood claims and rights of recovery are ongoing, but there are several measurers that business and property owners can invest in to stop water escaping from their land.

Climate change

Changing weather patterns have resulted in increased storm frequency, duration and intensity, which has escalated the risk of both flooding and drought in the UK. According to the Environment Agency, one in six UK properties is at risk of flooding — equating to 5.4 million homes and businesses. Worryingly, up to 40% of companies face devastating consequences following a significant flood event. In 2020, storms Ciara, Dennis and George cost insurers £540 million — contributing to a £1 billion total annual industry bill. When you add uninsured losses, that number could easily double.

Increased intensity of rainfall isn’t the only factor to consider. Soil that’s been saturated by previous storms or baked hard by the sun causes more surface water run-off into local watercourses. This introduces additional issues, including adequate and well-maintained drainage systems and flood defences. If rivers aren’t dredged and drains aren’t cleared, there is an obvious risk of flooding during a significant wet weather event.

Potential manslaughter charges

The July 2021 flooding in Germany cost the reinsurance and insurance industry between an estimated €4.5 billion to €5.5 billion. Tragically, some 141 lives were lost. According to press reports, German prosecutors launched an investigation and considered possible manslaughter charges following this deadly event. Failingto mitigate the effects of climate change and subsequent flooding events can potentially act as a catalyst for a complete review of the adequacy of flood warning and defence systems worldwide.

Improved land management

There are signs that a more cohesive approach is developing amongst responsible landowners, including new methods of river management. For example, in Cumbria, the National Trust is working with tenant farmers to move away from historic flood prevention practices. Previously, these practices exacerbated the flooding of downstream urban areas in favour of creating natural river flows. This effort could provide flood protection for other lakeland villages such as Glenridding in Ullswater and help create large wetland areas for wildlife to thrive.

Statutory acts and case law

When flooding losses arise, legislation provides guidance on the various rights and duties of landowners, with the maintenance responsibilities of water companies and wider government agencies. Put simply, if you own a plot of land, you cannot alter the watercourse or divert floodwater from your land to someone else’s land. However, you can erect defences to prevent floodwater from coming onto your land in the first place.

Countless incidents of case law have tested legal liability issues at common law – of both naturally occurring flooding due to extreme weather events and flooding occurring or exacerbated by the action or inaction of the landowner or occupier. In some cases, the landowners’ defence may have included claims that extreme weather conditions were the cause of losses to neighbouring properties. However, courts have previously ruled that the landowners did not do what was reasonable to prevent or minimise the risk of known or foreseeable damage or injury to the plaintiffs.

Potential for recovery

When considering the possibility of a recovery action or how a recovery action can be defended, it’s crucial to secure any available evidence early. The circumstances building up to each event must be examined and all lines of enquiry exhausted. This could extend to contacting local flood forums and investigating social media feeds to gather sufficient historical background and local knowledge.

Tipping point

The development of case law and the enormous publicity surrounding climate change suggests that we have passed a tipping point regarding any argument that landowners might be unaware of their responsibilities. Extreme weather events have become more frequent and can no longer be cited as ‘extraordinary’.

While insurers continue to spend significant sums of money annually on a growing number of flood claims, the need to take a closer look at recovery is wholly justified. The frequency and severity of weather-related events will continue to increase and there’s little doubt that litigation will ensue — escalating the cost to the insurance industry. A collaborative action amongst insurers by sharing expert evidence could set a new precedent on how flood recovery claims can be pursued or defended across the insurance industry.

For additional insight on statute and case law in relation to flood claim recoveries, listen to the full webinar here.