In House Expertise

When former property sector accountant Kimberley Daley became part of a team handling a complex mining claim, she could not have foreseen the path it would lead her down. 

That particular experience gave Kimberley the impetus to do something more with her knowledge, so 15 years ago, she made the move to insurance as a forensic accountant. She is now Partner and Head of Forensic Advisory Services (FAS), an independent division of global giant Cunningham Lindsey. 

“Everyone knows what an accountant does,” says Kimberley. “They record transactions, monitor financial performance, prepare monthly accounts and budgets and prepare financial statements. They work in and record the financial performance of a business. 

“Forensic accountants don’t do any of that. We don’t record accounting information; we don’t audit or prepare financial statements. Our job is to use the information that other accountants prepare, along with other information, to form a view on a certain issue.” 

Whether investigating fraud or looking at someone’s potential losses due to breach of contract or a business interruption claim, Kimberley and her ilk are financial detectives who help insurers understand the financial ramifications of a major loss. 

“When a loss adjustor manages a claim, they rely on us to help them quantify the losses on a business interruption claim,” explains Kimberley. 

“An insured will often put forward a view on what they believe their losses have been as the result of an incident. Our job is to request the financial information and any other information available, analyse it and form a view on the claim. What would the sales have been prior to the incident? What would the savings have been? What were the costs incurred?” 

INTERNATIONAL TEST CASE 

It’s this level of intricate financial sleuthing that put Kimberley on the path to something more. Stephen Hope, now Global Natural Resources Practice Leader at Cunningham Lindsey, had worked extensively with Munich Re on a number of claims and sowed the seeds of Kimberley’s international adventure. 

“It was the brainchild of Stephen Hope,” explains Kimberley. “At the time, Munich Re was evaluating the expertise within its claims teams. The claims team consists predominantly of lawyers and engineers and, despite referring to accounting reports, had no accountants, forensic or otherwise. 

“Stephen’s discussions with Munich evolved and they were interested in the idea of a secondment opportunity, as they felt they weren’t sufficiently equipped to challenge the forensic accountant. Of course, I put my hand up.” 

Kimberley found herself in Bavaria for three months teaching, instructing and providing insight into the workings of forensic accounting. She tutored  the Munich Re claims team in how to better understand and challenge an accountant. 

“There’s a natural reluctance for people when it comes to numbers,” says Kimberley. “The business interruption component is in many cases the most substantial component of a loss. If you have an engineering background, you feel comfortable discussing the engineering issues. Similarly, a lawyer will feel comfortable discussing the policy. 

“There’s benefit to having someone on the team who is immediately at home with a spreadsheet and who understands how these claims models are prepared.” 

MUTUAL BENEFIT 

According to Elke Gunsenheimer, Inhouse Counsel – Claims at Munich Re, understanding the role forensic accountants play in business interruption claims is paramount. She shared an office with Kimberley during the latter’s three-month Bavarian stint, eagerly bombarding the accountant with questions while providing Kimberley with a deeper appreciation of the intricacies involved in managing a claim. 

“We’re claims people, and most people in our department have law degrees or engineering degrees. We don’t have any accountants,” acknowledges Elke. “I got to ask Kim a lot of questions, as did my colleagues. Kim was able to go into the details of the figures, explaining how things were calculated, which is something claims people don’t really have the time or expertise to do.” 

As is often the case, questions beget questions and answers highlight gaps in thinking, introducing more questions until both parties form an almost symbiotic understanding of how each area works. 

“The time we spent together was so beneficial to us,” says Elke. “Kim made us familiar with so many aspects of claims that we hadn’t previously thought about. And because we now have a much better understanding of how forensic accountants work and the models they use, we are in a position to ask better questions.” 

In what has become a reciprocal arrangement, Elke recently spent a month in Australia working closely with the FAS team, immersing herself further in both the world of forensic accounting and the local claims management industry. 

“I was able to see firsthand how the forensic accounting team worked with loss adjustors and claims people on the ground,” says Elke, adding that this helped her gain a better understanding of the system as a whole. 

Kimberley agrees and says the time she’s spent with Elke, both here and abroad, has improved her understanding of the many factors claims managers need to consider. 

“It was incredible,” she says. “The benefit you get from seeing how a client works, their internal workings, what concerns them, what they have to consider at underwriting stage and how underwriters interact with claims people is immeasurable. 

“I was exposed to the engineering and underwriting teams and asked for input on new products and wordings and whether, as a forensic accountant, I’d be able to quantify those losses. Brainstorming how it would work in a claims environment before the product has even been developed was really valuable.” 

Kimberley and Elke are both now more confident about how the different elements of the claims process fit together. The benefit harvested from the seed of an idea is clear, with Munich Re’s Corporate Insurance Partner’s recent appointment of an in-house forensic accountant. 

“We’ve heard other insurers are looking into doing something similar,” says Elke. “Inviting a forensic accountant to work in your claims department – it’s too valuable to ignore.”