Travelers 2009 Annual Report Download - page 31

Claims Services uses advanced technology, management information, and data analysis to assist the
Company in reviewing its claim practices and results to evaluate and improve its claims management
performance. The Company’s claims management strategy is focused on segmentation of claims and
appropriate technical specialization to drive effective claim resolution. The Company continually
monitors its investment in claim resources to maintain an effective focus on claim outcomes and a
disciplined approach to continual improvement. In 2007, the Company opened a state-of-the-art claims
training facility, offering hands-on experiential learning to help ensure that its claim professionals are
properly trained. In recent years, the Company has invested significant additional resources in many of
its claim handling operations and routinely monitors the effect of its investments to ensure a consistent
optimization among outcomes, cost and service.
In recent years, Claims Services refined its catastrophe response strategy to increase the
Company’s ability to respond to a significant catastrophic event using its own personnel, enabling it to
minimize reliance on independent adjustors and appraisers. The Company has developed a large
dedicated catastrophe response team and trained a large Enterprise Response Team of existing
employees who can be deployed on short notice in the event of a catastrophe that generates claim
volume exceeding the capacity of the dedicated catastrophe response team. In 2008, these internal
resources were successfully deployed to respond to a record number of catastrophe claims, including
those resulting from Hurricanes Ike, Gustav and Dolly.
The Company continues to develop effective claim solutions that provide superior customer
service. One example of this is the Company’s auto claim service that features three Company-owned
auto repair facilities and selected independently-owned auto repair facilities with Company appraisers
on site to complete an estimate, handle all rental arrangements and monitor the repair process from
start to finish. By managing the claims in this way, the Company can help ensure prompt, quality
results and create a differentiated, superior claim experience for customers.
Another strategic advantage is TravCompSM, a workers’ compensation claim resolution and medical
management program that assists adjusters in the prompt investigation and effective management of
workers’ compensation claims. Innovative medical and claims management technologies permit nurse,
medical and claims professionals to share appropriate vital information that supports prompt
investigation, effective return to work and claim resolution strategies. These technologies, together with
effective matching of professional skills and authority to specific claim issues, have resulted in more
efficient management of workers’ compensation claims with lower medical, wage replacement costs and
loss adjustment expenses.
REINSURANCE
The Company reinsures a portion of the risks it underwrites in order to control its exposure to
losses. The Company cedes to reinsurers a portion of these risks and pays premiums based upon the
risk and exposure of the policies subject to such reinsurance. Ceded reinsurance involves credit risk,
except with regard to mandatory pools, and is generally subject to aggregate loss limits. Although the
reinsurer is liable to the Company to the extent of the reinsurance ceded, the Company remains liable
as the direct insurer on all risks reinsured. Reinsurance recoverables are reported after reductions for
known insolvencies and after allowances for uncollectible amounts. The Company also holds collateral,
including trust agreements, escrow funds and letters of credit, under certain reinsurance agreements.
The Company monitors the financial condition of reinsurers on an ongoing basis and reviews its
reinsurance arrangements periodically. Reinsurers are selected based on their financial condition,
business practices, the price of their product offerings and the value of collateral provided. After
reinsurance is purchased, the Company has limited ability to manage the credit risk to a reinsurer. In
addition, in a number of jurisdictions, particularly the European Union and the United Kingdom, a
reinsurer is permitted to transfer a reinsurance arrangement to another reinsurer, which may be less
creditworthy, without a counterparty’s consent, provided that the transfer has been approved by the
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