DMB Risk Solutions, LLC

Case Study #2:

Legal Department of a Large Consumer Product Company

A large consumer product company was self insured for product liability for the first $1M per occurrence. Incoming complaints regarding product failures, warranties and claims directly from the customer were gathered by a third-party 1-800 service vendor.  The vendor completed a basic Excel form and emailed it to the client’s legal department.  The legal department would then review the form and manually enter it into an MS Access database for tracking purposes.  Within the database’s claim record, summary payment information would be kept, but not the individual payment transactions.  This was maintained in a separate MS Excel worksheet that acted more as a transaction log than a financial record. 

Due to nature of the manual entry and the duplicate records kept in multiple sources, the client had difficulty developing or projecting claims costs for accrual purposes. This became more critical as the client was tightening up its Sarbanes Oxley (SOX) controls.  In addition, with the softening insurance market, the client was interested in lowering their SIR (self insured retention).  However the data quality problems made it difficult to provide accurate loss history information to the insurance market.

We designed a client server database to import data directly from the third-party vendor forms to create an “incident” record.  The system has the ability to establish reserves and track payments made against the claim.  Based upon the actual payee, outgoing payments were codified to track investigation, defense and indemnity costs.  The clients SOX controls required triple signatures for claimant payments.  To assist in this process, the newly designed application generated a detailed payment request form that mimicked the one created by the clients accounting department.

The clients old data records were also scrubbed, merged and converted so they were compatible with the new application. The client can now generate loss triangles, development factors and loss projections for both accrual and insurance marketing purposes.  Due to the improved data quality, the client is now able to take advantage of the softening insurance market and significantly tightened their SOX controls.