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COLOGNE, Germany-Insurance buyers must arm themselves with a battery of defenses against growing liability exposures in Europe, a German insurance executive warns.

The best defense is for the risk manager and insurer to "stick together in tough times," according to Herbert Schilling, a member of the board of Cologne, Germany-based Gerling-Konzern Allgemeine Versicherungs A.G. A company's risk management department should make sure it has fully analyzed potential risks and that the company and the insurer share the same risk management strategy, Mr. Schilling said. "They should become real friends."

Liability exposures have increased over the past four decades as legal systems have become stricter worldwide, he said.

"The claimant is always seen as a good boy who needs help," Mr. Schilling said in a presentation to delegates at the Risk Management & Risk Financing in Europe conference earlier this month. "There is an assumed empty pocket to be filled from an assumed full pocket, though it can drive companies to bankruptcy."

Public opinion also has put pressure on companies from both media and politicians, he said.

At the same time, contradictory expert opinion on assessing causes and effects of potential risks is muddying the waters further.

"Scientists have left insurers in limbo with respect to risks," said Mr. Schilling, giving the example of electromagnetic fields. "No one until recently regarded (EMFs) as a risk," he explained, and while there may be no basis for a bodily injury claim, the fear of injury alone may be enough to create problems.

As these types of issues grow, people will see health risks everywhere, even where they don't exist, resulting in increased claims and increased costs, he said.

Insufficient scientific knowledge of product-related diseases also is contributing to the increased liability problems.

"Science cannot keep track" of product-related risks, said Mr. Schilling, and "the public cannot accept that uncertainty leads to the disadvantage of claimants" rather than strengthening their cases.

Mr. Schilling criticized the increasing "claims consciousness" in society, noting that he thought it is "approaching claims aggressiveness." There is a "decline in assuming personal responsibility," he added.

While the public is looking to shift responsibility, top management is proving weak both financially and psychologically in the face of such claims, Mr. Schilling contends.

Corporations don't like to be publicly criticized, he said. Consequently, management's main concern is "to get rid of the uproar and media and save the company."

As a strategy, this may lead the organization to make larger settlements than necessary, which in turn could make it uninsurable in the future, he said.

And if the worst does happen, Mr. Schilling said, both insurer and risk manager need to show "nerves of steel."

Individually, the risk manager can use several weapons to fight the liability exposure, he said. First in the risk manager's armory is creating a strong public image for the organization, an image of safety and consideration. This will lend less credibility to liability claims.

Mr. Schilling also recommended strength in the face of public criticism, with no signs of nervousness or trembling lips.

In fact, Mr. Schilling advised that risk managers should destroy paperwork that indicates a possible liability problem such as product defects. Documents relating to product development and manufacturing processes should be kept if possible, though, particularly because of the long-tail nature of some of these issues, he said.

He also suggested that risk managers learn how to fight unfounded claims and the increasingly large numbers of claimants, class actions and lawyers. Crisis management techniques and legal training can help the risk manager in these situations, he said.

Finally, Mr. Schilling suggested that insurance buyers ensure they are using the most qualified and solvent insurers available.

Insurers also have a role to play in dealing with the increasing liability problems. They must be certain they have the best internationally experienced staff, said Mr. Schilling, and they should develop close contact with the policyholders. This means not just the insurance buyer, but the legal department, the technical department and top management, he said.

The insurer constantly should be monitoring technical, legal and scientific trends, and develop alternative strategies to defend claims.

The insurer also must play a role assisting its client with political and marketing issues relating to liability problems. And where claims need to be fought, they should be fought strongly, he said.