Cunningham Lindsey U.S. CEO: Market Conditions Not Slowing Growth

With its acquisition in early 2009 of the international business of GAB Robins (excluding its UK operations) and the U.S. forensic engineering firm, EFI Global, Cunningham Lindsey became the second largest property casualty insurance claims adjusting and risk management firm in the world.

Insurance Journal and Claims Journal Editor Stephanie Jones caught up with Dallas-based Cunningham Lindsey U.S. (CLUS) President and CEO David Repinski at the PLRB/LIRB Claims Conference in Seattle in March 2009.

In part one of a two-part interview, Repinski details how he believes Cunningham Lindsey has been able to distinguish itself and provide superior service to its customers. He also comments on how economic pressures are affecting the claims industry, as well as current challenges faced by loss adjusting firms. Additionally, Repinski discusses some of the intricacies involved in conducting business internationally.

Insurance Journal: What do you see as the core strength of Cunningham Lindsey?
David Repinski: It would be our size. We’re in 70 countries. Since the acquisition of GAB International we’re right at 7,000 employees now; [we have the] ability to handle claims of all different types, from the smallest to the largest to the most complex.

IJ: How does the company differentiate itself from its competitors?
DR: We differentiate ourselves in the U.S. by what we call our platform of verifiable quality. We’re proud of it. We believe we’re the pioneers of it.

In 2005 we decided to take a different approach to the business. For years the relationship between insurers and independent adjusters has been based on a handshake and personal relationships. And that’s great, but insurers are being pushed more and more by consumers for performance. So in turn we’re going to have to be able to demonstrate our performance to insurers.

With verifiable quality we provide a significant suite of data back to our clients [so] that they can drill down by region, by branch, by adjuster and by claim file. And we can show them how we did.

Did we make contact on time? How quickly did we get out to the loss? How quickly did we write an estimate on a property loss? How quickly did we report on the loss?

So we come in to them and say – hey, you gave us 5,000 claims last year, here’s how we did on them. I think that’s been a big differentiator for us.

IJ: Do you embrace any new technologies to enable you to do the work faster?
DR: We have. What we like to say is we’ve been as paperless as our clients will enable us to be. We actually got that way over a decade ago. We built a system called Link in the late ’90s – home built, home maintained – and it’s still cutting edge today through a series of enhancements.

Through Link, everything is created in a real time, central environment. Our client can look in through an application called e-Link, which is a secure, real time Web application. They can actually look into the claim file to see what we’re doing as it takes place.

As an example, we could be called out on a truck wreck, a rollover on the highway tonight. We could take 60 digital photos, interview the witnesses and have everything uploaded. And they could be looking at the file in the morning; they could committee it and put up a proper reserve. Speed is everything, right, so it enables us to be that much faster with what we do.

IJ: Do you concentrate on mostly commercial property claims?
DR: Because we’re so big we do many different things in many different places. The business unit that I’m responsible for primarily focuses on personal lines claims and primarily property. We’re about 60 to 65 percent property in nature and we’re probably about 70 percent personal lines in nature.

There are other segments of our business that focus purely on commercial, purely on high end and complex. There’s a business that we’ve termed Cunningham Lindsey International, which is London-based, that has people all around the world, including about 30 of them here in the United States, that do nothing but extremely high end, complex, industrial-type property losses.

IJ: What are some of the current challenges in the loss adjusting and claims areas?
DR: Soft market conditions have carriers competing on service. And it’s particularly the case with the tough economic conditions that are going on right now. So, you have a situation where claims are up. Certainly incidents of fraud increase when economic times are tough, but even the reporting of legitimate small losses [increases].

When times are good and somebody has a shower pan leak, they’re not inclined to report it. They’ll just pay the $2,000 themselves and move on. Now, even though they have a $1,000 deductible they’ll submit that $2,000 claim. So claims frequency for us seems to be up but there’s a lot of pressure on fees and there’s a lot of pressure on service.

IJ: Have insurance companies downsized their claims units to cut costs?
DR: You hear industry predictors suggesting that … insurers’ top line isn’t going to grow in 2009 and the outlook at least for the first half of 2010 isn’t particularly good, so if they want to increase their bottom line, which they’re going to have to do, they’re going to need to cut expenses. So I think in a lot of cases they’re looking to outsource more than they have in the past. But also cutting expenses puts pressure on our fees, right?

We’ve grown and we’ve grown despite the current market conditions. But I think that’s been more a product of our quality and service than anything else. We’ve grown by over 50 percent in the U.S. in the last few years off pure organic growth, which is exciting.

Then in late January we announced a transaction, buying most of GAB International – not buying their U.K. business and not buying their U.S. business with the exception of EFI, the engineering company. That was a wonderful acquisition, very complementary. It made us number one in markets where our presence was either non-existent or too low, such as Australia and New Zealand and China.

The integration that’s going to have to be done is relatively small. In the U.S. what EFI does is different than our business so we don’t have to integrate there.

There’s some integration in continental Europe but that’s not significant in France and the Netherlands. So really it’s the perfect complement of two companies coming together.

I think you’ll see more of that and I think you’ll see specifically some moves particularly in the U.S. market. We see the U.S. market, and our ownership sees the U.S. market as a massive growth potential for us. So I think you’ll see some more work done in this market.

IJ: What are some of the complications of conducting business internationally?
DR: There are many. … In [countries like] China and India … there’s heavy regulation over the percent of ownership that a company can have. So in some … markets we cannot have a wholly owned operation. We have to have a share. …

Another key issue for us, and this sounds silly, but we have to be careful to be in countries where there’s insured losses. When the tsunami hit, a lot of people said, are you getting a lot of losses out of that, and we said, no, because those places weren’t insured.

So the challenge is, is there an insurance market and what is it? Is it through domestic carriers? Is it mainly through London? Is it a reinsurance market where you’re going to be working mainly for brokers and reinsurers? Are you going to be working for London or for domestics or is it all of the above?

We’re fortunate here in the U.S., all those are sources of business. But you move into places, for example in Mexico, you’re not going to be working for as many domestics there because they simply don’t have them.

Then the other challenge becomes, [who] are you reporting back to? Are you reporting in English? Can your adjusters speak English? Are they giving reserves in U.S. dollars?

And then of course the issues that are associated with foreign exchange. Having to take a loss that you’re quantifying it in rupees; and now you’re telling the U.S. company how many rupees it is and the foreign exchange rate just moved and now it’s time for them to make a payment and they say – hey, wait a minute you told me it was 8 million rupees and now you’re telling me it’s 12. …

The other interesting challenge … is the question of … do you hire in-country staff or do you send in adjusters from afar?

If you look at Cunningham Lindsey International, which is London-based, complex loss adjusters, mainly working for the London market and reinsurers around the world, they tend to send in British expats. Our manager in Mexico City is a Brit. Our manager in Brazil is a Brit, that type of thing.

Now, do you staff it all with people who understand the Lloyd’s market and understand global insurance markets, or do you staff it with in-country staff who know the jurisdictions, know how they can get things done?

Really, what we’re finding is it’s a little bit of both.