Internalizing the Claims Function – Honing Specialization.

Companies that bring the claims function in-house are often motivated by a third factor: specialization in claims-handling ability. In-house adjusters are more attuned to the claims management philosophy and procedures of the client employer. Such adjusters also develop expertise in a particular aspect of claim investigation through repeated handling of certain types of cases. The more you do something, the better you tend to get at it. We understand this in most every vocation and walk of life.

Near where I live, a local plumbing contractor has a fleet of vans with signs on the side that read, “We fix all of your plumbing problems ... including your husband’s repair jobs!” If you have a genuine need, you want a specialist.

The outside adjuster may be a jack-of-all trades, but that is becoming rare. Those days are gone. Specialization in adjusting fields has become the norm. However, some policyholders have claims that are so specialized that they chafe at having their losses “serviced” by generalists. They often feel they are reinventing the wheel each time a new claim arrives. They spend loads of time trying to educate the claims person to the nuances of their particular niche.

Such clients may feel a strong temptation to bring the claim function – wholly or partially – in-house. Many TPA’s may tout specialization of expertise. With some, the boast is genuine. For others, it is marketing puffery. Hiring adjusters in-house is one way to cultivate expertise that an adjuster might not earn during a lifetime with ABC Generic Adjusters.

For example, one municipal transit authority brought all of its liability claim investigations in-house. Its staff quickly developed expertise in escalator accidents at subway stops. This specialization is tougher to find among outside third party administrators (TPA's) because, realistically, they rarely have a brisk volume of escalator claims.

Whether we agree or disagree with the wisdom of this approach, we can see that some risk managers and commercial policyholders want to pull in the reins and bring the claims function in-house. Here, they hope to either hire specialists and hone their skills or to hire a claims person with a knowledge base and mold them into a specialist. Rather than “buy” the skill sets retail, they opt to purchase them wholesale.

One upshot for insurer claim departments and TPA’s: be prepared to make a convincing case for your specialists and their availability in selling your services to skeptical policyholders and brokers.

Internalizing the Claims Function - Release Your Inner Control Freak

“Control freak.”

This is a term, often pejorative, applied to a person who is detail oriented and who seems to want to call the shots on everything.

Being a control freak may not necessarily be bad, though. One reason why companies bring the claim function in-house is due to their desire to exercise more control over the claims process. It often boils down to a “make or buy” decision. Do you pay retail or wholesale?

Beyond that, companies find that they have more control over how their claims are handled by internalizing the function. Tighter control over the process can often lead to better outcomes as a result. These controls might include service standards relating to claimant contacts, completion of investigations or subrogation pursuit. Better outcomes represent “the bottom line,” both figuratively and literally.

As a client of an independent adjusting service, the risk manager is still one fish – often a small fish -- in a big pond. He or she still competes for the time and attention of an outside adjusting staff. Sometimes clients may have “dedicated” adjusters. Typically, this means that the adjuster is handling only the cases generated by Client ABC. Realistically, the client needs to have a certain brisk volume of claims to make this cost-feasible for an outside claim service provider.,

Another way to define “dedicated” adjuster, though, is to say that only Adjuster X will be handling my claims. The caseload of adjuster X may be comprised of file assignments from other clients, but the distribution of caseload assignments from Client ABC will not be sprinkled amongst seven different adjusters.

With a wide range of adjusters handling claims for a particular client, adherence to a client's claim procedures may be spotty. Inconsistency looms. From one case to another, the risk manager may not know which adjuster is going to handle a loss. Constant turnover of personnel is often epidemic among insurer or TPA claim staffs, frustrating clients.

Internalizing the claims process can often address these problems. Having the adjuster as an employee instead of an outside service provider can enable the client to exert a more powerful influence in getting the right things done, and getting them done right. Claims could be handled the way they should be procedurally, with greater accountability for results. The on-staff claim adjuster has no competing constituencies. He or she has but one client: the employer. The field adjuster working for an independent claim service is juggling dozens of demands from many clients. None of them sign the adjuster’s paycheck. Some take priority and others may go to the bottom of the priority pile.

When the claims staff is in-house, though, the client’s name IS on the paycheck. Through the power to hire and fire, through performance reviews, coaching, physical proximity and compensation systems, the client can better “mold” the claim-handling activities of internal adjusting staff.

While cost savings often drive the decision to bring the claim function – wholly or partially – in-house, control issues also often factor in.

"Down With Lawsuits!! (Unless it's MY Lawsuit)"

GOP presidential candidate, Rick Santorum, is coming under fire on a tort reform issue. Candidate Santorum endorses caps or limits on medical malpractice lawsuit recoveries by aggrieved plaintiffs. In 1999, though, Senator Santorum testified for his wife in a medical malpractice lawsuit she filed against a Burke, VA chiropractor. (See article in the Washington Post, 1/29/12, http://www.washingtonpost.com/todays_paper?dt=2012-01-29&bk=A&pg=6 )

In 1999, Sen. Santorum’s wife gave birth prematurely to a baby boy, who died that same day. Suffering from back pain post-delivery, Santorum’s wife sought relief from a Fairfax County, VA chiropractor. That chiropractor performed what he and other experts later argued was a standard spinal manipulation, usual for such symptoms. Soon thereafter, Mrs. Santorum was diagnosed with a herniated lumbar disk, necessitating surgery. Karen Santorum sued the chiropractor and won a $375,000 jury award. Post-trial, the judge reduced it to $175,000.

Some now criticize Candidate Santorum for being hypocritical, suggesting that there is one standard of recovery for the masses and a different one for the politically elite.

Santorum counters that his proposed cap is on general damages of pain and sufferinhttp://www.blogger.com/img/blank.gifg, not on special damages.

I don’t intend to get political here or throw bricks at Rick Santorum. The vignette spotlights an interesting issue, though. Sometimes our public policy leaning – often influenced by our profession – clashes with our real-life habits. As a claims person, I tend to favor tort reform, or most variants of it. If, however, my wife or my kids were seriously injured due to another’s negligence, I would likely “sue for the max” to make them whole, unconstrained by any analytical arguments for tort reform.

For example, despite all the jibes about lawyers, if you or a loved one find yourself in a tough jam, you definitely want a lawyer and the best one available.

We can joke around and quote Shakespeare who wrote, “First, kill all the lawyers…” When the shoe is on the other foot, though, and you are in crisis, a good lawyer is often what you need and want. There are scads of lawyer jokes but, as I often point out, the lawyers often get the last laugh, all the way to the bank.

That does not make us – or Rick Santorum – hypocrites, at least not in my view.

Have you ever had a personal experience that prompted you to reassess your “professional” view as a claims/risk professional on the tort and legal system?

A Radical Notion? Pay Lawyers for Results, Not for Time …

The following quote jumped out at me as I was reading the latest book from marketing expert Jeffrey Fox in his book How to be a Fierce Competitor: What Winning Companies and Great Managers Do in Tough Times:

Lawsuits are expensive, risky and an enormous expenditure and diversion of management time. (So manage and pay your lawyers for results, not hours billed.)

What a radical notion?

Have you had success in transitioning your outside legal counsel from an hourly billing arrangement to an alternative fee arrangement or “pay-for-results arrangement?

New “READJUSTED” Book Offers 20 Traits for Claims Unit Success

READJUSTED: 20 Essential Rules to Take Your Claims Organization from Ordinary to Extraordinary by Christopher Tidball, © 2011, CT&A Publishing, Jacksonville, FL.

Author and claims guru Chris Tidball has penned “Readjusted,” the functional equivalent of “Chicken Soup for the Adjuster’s Soul.” Tidball’s subtitle is “20 Essential Rules to Take Your Claims Organization from Ordinary to Extraordinary.”

In READJUSTED, he spotlights twenty “rules” – each the focus of its own chapter – he believes can transform a claim operation. These rules range from Change Management (#10) to Attitude (#12) to Shooting for the Top (#20). Tidball decries the sloppiness and superficiality he sees in many claim operations. He advocates for a back to basics approach to recapture the essence of quality claims adjusting.

One nice feature of READJUSTED is that each chapter is a standalone essay, ranging in length on average from four to six pages. You can dip and graze from this claim-themed buffet line at your leisure and finish the book during one plane flight.

Alternatively, you can easily savor one chapter at a time. READJUSTED is a small (145 page) book that packs a big punch.

One theme that comes through from Tidball is that hiring for subject matter expertise is over-rated. In many cases, he has found it more effective to “hire for attitude and then train for skills.” Too often, he has seen seasoned adjusters hired, adjusters who brought with them more baggage than an O’Hare skycap. Better, he feels, to take someone with an open, eager and receptive attitude and mold that unformed lump of clay, sculpting that person into the claim professional that builds sound habits from the get-go.

Sports enthusiasts will relate to READJUSTED, as Tidball – a volunteer youth football and lacrosse coach -- sprinkles his advice with examples from the world of sports and quotations from prominent athletic coaches. In fact, the book closes with a quote about professionalism . . . from none other than Joe Paterno. (In fairness, READJUSTED was published before the Penn State disclosures hit the fan.)

Doubtlessly, Tidball sees multiple parallels between building winning sports teams and molding highly effective claim units. (Perhaps if any adjusters slack off, we can order them to “Drop and give me twenty Proofs of Loss!”)

As a bit of cherry-on-top reading dessert, Tidball includes a closing section of Afterthoughts – Crazy Claim Stories and Wacky Accident Report Descriptions.

So, in the end, what is it that needs readjusting in order to elevate your – and your claim unit’s – adjusting “game”? What is needed to, as the celebrity check Emeril Lagasse might say, “kick it up a notch”!

Note: For more tips, listen to Kevin’s FREE podcast interview with author Chris Tiball at http://claimscoach.podbean.com

Bringing Claims In-House? The Cost-Savings Factor

“Show me the money!!” was wide receiver Rod Tidwell’s (played by Cuba Gooding) refrain in the movie, Jerry McGuire.

It is also often THE prime motivator for companies to decide to bring the claims-handling function in-house. In this blog series, let’s look at reasons why companies, self-insureds and risk managers are tempted to internalize the claims function rather than leave it to an insurer or a TPA.

Reduced costs often factors in as a prominent reason. At some break-even point, the risk manager finds the notion attractive to save money by bringing the adjusting function inside. By so doing, the risk manager buys the in-house services wholesale rather than retail. Whether shopping for Christmas gifts or claim services, wholesale prices are cheaper than retail prices. The costs for the self-insured entity or risk manager are then salary and benefits for the staff adjusters. These are fixed costs, however.

For example, if a company is paying, say, $750,000 per year in outside adjusting fees, the risk manager may figure that three quarters of a million dollars per year can buy a sizeable adjusting payroll, and still leave some money left over.

However, the company is now paying salary and benefits instead of adjusting fees. For a company which has less than twenty claims a year, hiring an in-house adjuster or claims overseer may not make economic sense.

However, if a company has a high volume of claims, then this option may start to look increasingly attractive. It is a “make or buy?” decision. As with any "make or buy" decision, making the service yourself is often cheaper, but you often lose some convenience. Many companies, however, become disenchanted with the billings and results of outside adjusting services. They are frustrated with turnover, superficial investigations, claim-handling lapses and unmet promises.

As a result, risk managers often believe they can do the same job better, and more efficiently. Whether or not their hopes for internalizing the claims function bear fruit is another story. This is, however, how it is supposed to work in theory.


What has been your experience in internalizing the claims function? Has it proved to be cost-effective? Did it attain the financial goals that drove the decision?

Special Events Risks: Accident Calamities Spawn Insurance Claim Opportunism

Indiana prosecutors have charged two Indianapolis women with insurance fraud arising out of the Indiana State Fair stage collapse in the Summer of 2011. Authorities report that Stephanie Murry and Sandra Hurn have been charged attempted theft, forgery and perjury.

Allegedly, each woman each submitted claims totaling $22,500 to a private relief fund and the State’s tort claim fund. Authorities also claim that both women submitted falsified hospital records describing injuries they alleged to have suffered at the Aug. 13th concert. The collapse killed seven people. According to prosecutors, neither woman actually attended the concert.

Claim adjusters know all too well that calamities can bring out the best in people and the worst in people. Put attempted insurance fraud in the latter category.

Learning of this sad vignette reminded me of a story I heard about the Philadelphia area transit system, SEPTA. One claim manager told me that, when a SEPTA bus had an accident, one of the first priorities was to cordon off the surrounding streets near the collision. This puzzled me – why was there such an edict?

“Simple,” he replied, “it was to prevent other people from running and jumping onto the bus after the collision, hoping to collect money from the claim.” Before this protocol, imagine the puzzled SEPTA adjuster wondering how one bus could possibly hold the 227 passengers claiming injury from a low-speed impact!

Years ago, Aerosmith had a hit song, “Jaded.” Claim professionals can become similarly jaded when they read of such opportunism. It is easy to become jaded and callused when reading about the calamity du jour. In one tongue-in-cheek list titled, “Top Ten Signs that You May be a Claims Adjuster,” one sign was, “You read about a catastrophe in the morning paper and exclaim, `Boy, I wonder how many claims will come out of THAT?’” Sorry, but that reaction can become an occupational hazard.

Four take-aways for claim operations:

1. Weave fraud-fighting into your claim-handling culture. Do you have an SIU unit? Is there an adjuster evaluation yardstick tied to fraud fighting and awareness. Remember the management maxim, “That which gets measured gets done.” When it comes to fraud fighting and awareness, are you measuring it? Do you tie it to adjuster performance reviews as one piece of the puzzle?

2. Be alert to “red flags,” but don’t assume that they all signal insurance fraud. Vigilance does not mean assuming that every question mark implies a fraud. Just because someone has had a prior claim (or two) doesn’t necessarily signal a professional claimant. Just because an accident was unwitnessed doesn’t necessarily mean it was staged. Fraud awareness must be tempered with good sense. Hyper-vigilance can lead to over-reaction which can lead to lost customers and bad faith lawsuits.

3. Train and train again. How often do you offer training in fraud-fighting? Sporadically? Regularly? Training can take many forms: in-house case studies. Inviting in guest speakers. Lunch and learn sessions. On-line modules. Circulating articles. Putting it on the agenda of claim staff meetings. It is not a “one and done” activity where you cross it off a checklist and assume that adjusters are now “inoculated” against insurance fraud encroachments.


4. Monitor – and limit – caseloads. When adjusters are overwhelmed with volume, there is a powerful temptation to cut corners. Adjusters are so busy putting out (figurative) caseload fires, they may not have the time, inclination or bandwidth to investigate questionable (literal) fires. They may pay claims and ignore fraud-fighting investigative avenues simply as a coping mechanism, the path of least resistance as they struggle to stay atop a 200+ file caseload. Adjusters with manageable caseloads are more likely to apply a learned “smell test” and follow up when something about a claim just doesn’t seem right.

Special event calamities can spawn not only tragedy and legit claims, but also fraud. Commit your claim operation to detecting and fighting fraud.

Make this an ongoing commitment, not a one-off “special event”!

In what other ways can claim operations show an ongoing commitment to fighting insurance fraud?