Travelers 2013 Annual Report Download - page 30

reporting and control, and human resources strategy. This structure permits the Company to maintain
the economies of scale of a large, established company while retaining the agility to respond promptly
to the needs of customers, brokers, agents and underwriters. Claims management for International,
while generally provided locally by staff in the respective international locations due to local knowledge
of applicable laws and regulations, is also managed by the Company’s U.S. Claims Services organization
to leverage that knowledge base and to share best practices.
An integral part of the Company’s strategy to benefit customers and shareholders is its continuing
industry leadership in the fight against insurance fraud through its Investigative Services unit. The
Company has a nationwide staff of experts who investigate a wide array of insurance fraud schemes
using in-house forensic resources and other technological tools. This staff also has specialized expertise
in fire scene examinations, medical provider fraud schemes and data mining. The Company also
dedicates investigative resources to ensure that violations of law are reported to and prosecuted by law
enforcement agencies.
Claims Services uses technology, management information and data analysis to assist the Company
in reviewing its claim practices and results in order 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. The Company operates 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 those investments to ensure a
consistent optimization among outcomes, cost and service.
Claims Services’ catastrophe response strategy is to respond to a significant catastrophic event
using its own personnel, enabling it to minimize reliance on independent adjusters 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 recent years, these internal resources were successfully deployed to respond to a record
number of catastrophe claims.
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 associations, 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 applicable regulatory and/or court authority. For additional information
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