Forensic Accountants and the claims process

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Forensic Accountants and the claims process

• Tony Levitt RGL Forensic Accountants and
  Consultants
• 6 October 2005

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Forensic Accountants and the claims process

• What is a Forensic accountant?
• Where do they fit in the claims process?
• What do they add?
• Case study typical claim
• What can be learnt from the claim
• Risk management

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What is a Forensic Accountant?

• Forensic relating to or denoting the
  application of scientific methods and techniques
  to the investigation relating to the courts
• Not just fraud
• Quantify claims
• How much
• Not how and why
• Specialist areas
• Stock
• Business interruption
• Fidelity

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RGL Experience

• Worldwide
• Varied situations
• Wide industry experience
• Mining (and downstream processing)
• gold / platinum / iron / coal / copper
• Power generation
• Manufacturing
• Hotels/Restaurants
• Packaging plants
• Telecommunications
• Extensive experience in Africa / South Africa

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Where do Forensic Accountants fit in the claims
process?

• Team approach
• Insurer AIG
• Loss adjusters
• Technical experts (engineers, process experts,
  etc.)
• Forensic accountants
• Insured
• Brokers
• Other experts
• Work together towards settlement

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When to use Forensic Accountants

• Large losses
• Complex claims
• Early settlement
• Claim methodologies (Policy wording)
• Gross profit
• Gross earnings
• Output
• Reconstruction of records - FTech

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What do Forensic Accountants add?

• Years of experience in the quantification of
  business interruption loss
• On site A.S.A.P.
• Quantum investigation run concurrently with
  liability investigations - once liability is
  established minimal time lag for settlement
• Early establishment of a meaningful reserve
• Timely processing of loss calculations to enable
  early payments on account
• Loss mitigation calculations
• Quantification of an early cash settlement

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Case study complex claims

• Based on our experiences on actual losses in
  South Africa
• Rebuild period of 8 months
• Took the opportunity to upgrade the production
  facility 6 months earlier than it would have done

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Issues in claim

• Liability
• Cause of loss
• Consider pre-existing damage
• Not like-with-like reinstatement
• Quantum
• Standard output daily rate reduced just prior
  to the loss
• Output alternative whether it was applicable
• Make-up resulting from additional capacity which
  was brought forward as a result of the loss

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Case study - positives

• Local loss adjuster on site day after the
  incident
• Forensic accountant on site shortly afterwards
• Established accurate reserve during the 1st
  meeting
• Purchase of product from overseas to help
  maintain the Insureds customers
• Established early on that the output alternative
  was applicable
• Worked together with the Insured to quantify and
  agree building blocks of BI

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Case study - negatives

• Company was going through restructuring
• Agreed figures changed different people
• Divergence of opinions
• Personality clash between members of team
• Feedback to Board
• Both sides became entrenched in their respective
  positions
• Long drawn out claim settlement could have been
  quicker
• BI did not move substantially for a year prior to
  settlement
• This does not help any of the parties
  (Insurers/Insured/loss adjusters and other
  experts)

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What can be learnt from the claim

• Responsibility for claims - in advance of the
  claim Insurance policy knowledge
• Manage expectations do not report unrealistic
  figures to the Board / Shareholders
• Work together - share information
• Do not get entrenched

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Risk management

• Prepare for claims
• Insured / Broker / Risk manager
• Ensure that adequate coverage is in place
• Sum insured
• Indemnity period
• Policy extensions
• Disaster plan keep up to date
• Retain accounting/management information

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Summary

• Prepare for claims they are going to happen
• Resolve issues as they arise
• Work as a team
• Fair settlement under the policy

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About RGL

• RGL is an international firm of Forensic
  Accountants and Consultants.We quantify claims in
  insurance and litigation, determine value and
  advise on related issues.What makes us special as
  forensic accountants and consultants is the
  combination of three core skills
• Forensic and investigative accounting
  uncovering the facts
• Economic loss calculation getting behind the
  numbers
• Financial valuation determining business
  value
• Forensic technology - analysing the digital
  evidence
• We establish the true facts and the correct
  figures, wherever they are hidden and whatever is
  being claimed.
• Offices
• Atlanta, Boston, Charlotte, Chicago, Cologne,
  Denver, Dublin, Indianapolis, Las Vegas, London,
  Los Angeles, New York, Orange County, Perth,
  Philadelphia, Phoenix, Portland, Sacramento, St
  Louis, Salt Lake City, San Diego, San Francisco,
  Seattle, Sydney, Tokyo