Insurance Renewals: Seven Ways to Assess Claim Service

Great American Insurance Company is catching flak from some policyholder and legal quarters for a coverage stance it has taken on a Houston office fire. Three people died in a 2007 blaze and their estates are suing the building owners, who are insured by Great American. The insurer is disclaiming coverage based on the policy’s “pollution exclusion,” arguing that smoke is a pollutant and the smoke caused the fatalities. At issue is $25 million in claims. Is this a smokescreen or a legit coverage defense?

Those voting “smokescreen” seize on this vignette as an example of bad claim service and the need for insurance buyers to factor in quality of claims-handling when making insurance buying decisions. I will not endorse or excoriate Great American’s coverage stance. Rather, my focus is on how risk managers and insurance buyers can assess claims-handling quality in the buying equation.

Call me a cynic, but I wonder how many risk managers or buyers would still take an insurer’s price if the quote was low enough. Put differently, I wonder just how much – if at all – a “bad claims reputation” really weighs materially in buyers’ decisions if they can save dollars on coverage cost. Too often lip service is paid to claims-handing quality, but too often in the real world marketplace -- when push comes to shove -- it’s more often all about “getting the lowest quote.”

Premiums are expressed in dollars and cents. The cost is measurable. Financial rating agencies like A.M. Best and Moody’s provide quantitative assessments of financial strength.

Measuring quality of claim service? That sounds pretty warm and fuzzy. Here, however, are seven suggestions for risk managers and insurance buyers in trying to assess the quality of claims handling for a prospective insurance partner:

1. Ask for client references and contact information. (The obvious drawback here is that the insurer would have to be an idiot to give anything other than cherry-picked, glowing references.)
2. Have your insurance broker assess the industry perception and “scuttlebutt” about a candidate carrier’s claim service.
3. Check with the state Insurance Department regarding the number of complaints filed against a carrier. (In some states, you can do this on-line.)
4. Ask the insurer for the resumes of the claim professionals who would be handling your claims. If it balks or says it cannot determine who would be in charge of your claims, that is a bad sign.
5. Ask the insurer rep to give you three reasons why their claim service is better than the competition. If they bumble stumble or harrumph, move on to the next candidate.
6. Request a copy of any written customer/claim service standards that the insurer has that governs claim-handling procedures
7. Have an attorney do a quick Lexis-Nexis search on the carrier to gauge how often it is engaged in coverage litigation, the fate of such cases, the frequency of bad faith suits, etc.

Price-driven insurance buying decisions are not necessarily bad. However, some risk managers and buyers may find out that the coverage quote was cheaper for a reason. By the time they get stuck with crappy claim service or a farfetched coverage disclaimer, no one is likely to console them by reminding them that they got a 10% discount on the cost of coverage.

Measuring and assessing quality of claim service is probably never going to be as easy, measurable or quantitative and is comparing costs or financial ratings. Nevertheless, astute buyers can elevate the caliber of their due diligence in ferreting out this crucial component of the buying decision. Further, astute insurance companies and adjusting firms can assess these suggestions and proactively package their proposals to demonstrate a commitment to high caliber claim service.

And that’s no smoke job

“YES WE CAN!” may be new Plaintiff’s Bar Mantra Starting in January ….

For claim adjusters, the tort landscape is their battleground. It shapes and frames the rules of the game. Those rules can mean the difference between a boxcar reserve or a nuisance value number, between a defense verdict or a runaway award. A recent Business Insurance article (BI, 11/10/08, “Risk: Future of Several Issues Debated,” p. 25) cites three factors that may cause the Obama Administration to impact the tort landscape.

First Supreme Court appointments likely to be made within the next four years may influence areas of employment law.

Second, an Obama Administration may take a more circumspect view on Federal preemption. This arcane defense has huge financial implications for sectors including but not limited to pharmaceutical and medical devices. Preemption is the notion that, in some cases, Federal approval of a tightly regulated product renders that product immune from state tort claims saying that a product is defective. Billions of claim and defense dollars ride on this issue.

Third, Vice President-elect Joe Biden has been a consistent opponent of tort reform.

So, while the build-up for the January inauguration continues, claimants and members of the personal injury bar may ask, if only rhetorically, “Can we be more successful in pursuing claims starting in 2009?”

The likely answer is, “Yes we can!”

Jay Leno Gets Comic Relief from Insurance Claims

Jay Leno’s opening monologue on November 17th included two insurance jokes.

One poked fun at NBC. Leno said that, if the raging Los Angeles wildfires got too close to the NBC studios, audience members should do nothing to quell the flames because, “NBC needs the insurance money!”

He also observed that, after an LA-area disaster response simulation on November 14th, scientists had now figured out a way to give citizens 30-seconds of notice prior to an earthquake. “Of course,” Leno quipped, “that won’t give you much time to do anything but it will give State Farm enough time to cancel your policy!”

Who knew that insurance claims provides so much comic relief?

Does Speed of Claim Processing Correlate with Customer Satisfaction?

At one point during the movie Top Gun, Tom Cruise’s character – Maverick – turns to his fighter pilot buddy Hondo and yells, “I feel the need for speed!”

Claim adjusters may merely climb into the cockpits of their company cars instead of an F-15, but many still feel the need for speed. They feel it from bosses, from corporate service standards, from policyholders, claimants and attorneys.

Does faster claim service correlate with heightened customer satisfaction? A question on a LinkedIn discussion group among P&C Claim Professionals got me thinking on this topic.

The type and texture of the claim may dictate greatly the correlation between speed of processing and customer service. For example, if it is a straightforward first-party property loss, speed and customer satisfaction may directly correlate.
The insurer that can handle that claim in 24 hours or so will likely get high marks from me in customer service and satisfaction.


If I am a commercial policyholder facing a complex third-party property claim with time element features and find that my adjuster, in the interests of speed, has settled a claim in three days I may be tempted to think I got screwed because the adjuster
(a) did little or no investigation and/or
(b) over-paid the claim to slam the file shut quickly.

The context of the claim may a factor in correlating speed vs. customer service; in some instances, those factors may be inversely related. It’s tempting to give a lawyerly “It depends” answer to the question. Depending on the type of claim, though, adjusters could say “Speed Thrills” while others could accurately say, “Speed Kills.”

Faster is better … except when it’s not.

If Dems Win, Adjusters Can See Silver Lining in Resurgent Tort Bar

Today’s Wall Street Journal has an article (“Lawyers Aim to Roll Back Curbs on Lawsuits”) that addresses a theme the Claims Coach discussed a few weeks ago.
(http://online.wsj.com/article/SB122567159552291829.html)

It examines the implications of a prospective Democratic victory at the polls tomorrow. Apparently tort lawyers are licking their chops and refueling their Gulfstreams at the prospect of an Obama Administration. Financial contributions from law firms weigh heavily toward the Democratic side. Curbs on lawsuits, tort reforms, caps on recovery for non-economic damages, mandatory arbitration clauses in consumer agreements are all at risk.

Tort reform has not been a hot campaign topic in the McCain vs. Obama race. No surprise there. Amidst the panoply of more oppressing issues – the tanking economy being foremost – it’s hard to make any case for tort reform being a big deal.

Adjusters and claim professionals may lament the prospect of their jobs being rendered more challenging if the tort climate evolves into a more pro-plaintiff atmosphere.

On the other hand, to the extent there are more claims and loss severity grows due to changes in the legal environment, perhaps those factors will drive a stronger need for employing good claims talent.

Here lies a possible silver lining: whatever provides full employment for the plaintiff’s bar may as well provide full employment for claim professionals!

Will your claim file be the subject of the next consumer blog?

Time was you urged adjusters to consider the New York Times test in assessing their actions. You told them, don’t write anything in the claim file that you wouldn’t want to have on the front page of the morning New York Times. Don’t do anything you wouldn’t want reported in the New York Times, either.

That is still sound advice. In the Internet Age, though, it might bear some tweaking. Nowadays, if you shortchange a consumer – or (perhaps more importantly) – if a consumer thinks he or she has been mistreated by an adjuster, there’s a chance you could wind up as the subject of a blog.

Over the past month, the Claim Coach has seen at least a half dozen blogs fueled by steam coming out the ears of disgruntled policyholders and claimants. It has been said that nowadays the three most feared statements are,

“Here’s a letter from the IRS …”
“The doctor wants to discuss your test results ..” and
“Would you like to read my blog? …”

Many blogs are very specific in naming names, companies and excoriating claim practices. The Internet provides an electronic pulpit for disgruntled consumers to rant about how the adjuster never returns phone calls, wants to replace the quarter-panel with substandard parts or is balking at paying for smoke damage to the kitchen.

Have a good consumer experience and you may tell three other people. Get burned by a claim adjuster and you can let thousands know through the electronic bully pulpit of the blogosphere. This is an era where there are websites with URL’s such as www.dellsucks.com or www.ihatewalmart.com If you wanted to be famous on the web, I doubt that any adjuster, insurer or TPA had that in mind!

None of this is to inspire paranoia on the part of adjusters or their companies. If they are on solid ground, stick to their guns. It highlights the reality that companies, adjusters and an industry sector has a reputational risk at stake due to how we treat policyholders and claimants. If all your actions, inactions and statements were reported on the blogosphere, would you still feel comfortable?
Consider that as one yardstick for assessing your file-handling.

Adjuster fame through an irate consumer flame-job is no way to become well-known!

My Fellow Americans ....Is there an "Adjuster's Candidate"??

Which Presidential candidate stands to improve the lot of claim adjusters? Is one of the am “Adjuster’s Candidate”? Seriously, I don’t pretend to know. Nor should any of the following comments be seen as an endorsement for one candidate over another, not that such imprimatur would sway anyone’s vote. However, we can hazard some projections on how political issues might align with adjusters’ interests.

One issue that engages many claims people is tort reform. Adjusters toil in the vineyards of the tort system every day. For them, it is not some ethereal policy debate. Adjuster have to open their company’s checkbooks regularly because of the tort rules, and often end up feeling – rightly or wrongly – that those rules are stacked against the adjuster and for the claimants and their lawyers.

Historically, Republicans have been more congenial to reforming the liability system. By contrast, Democrats tend to see tort reform as a guise for pro-business interests and a way to shortchange consumers. Plus, the personal injury bar is historically a huge financial contributor to Democratic candidates.

One problem with this stereotype is that, against the backdrop of economic crisis and foreign policy challenges, it is unlikely that either candidate is going to be focused on tort reform as a burning domestic policy issue. Further, Sen. Barack Obama was a supporter of the Class Action Fairness Act. Amidst all the domestic and foreign policy hot potatoes, it is difficult to see any type of tort reform legislation getting much traction. This, coupled with the growing public image of big businesses getting government bailouts, throwing a tort reform “bone” to big business will not win any politician brownie points.

Bottom line: adjusters should not expect any Federal movement on tort reform in the near future.

This may be a good news/bad news situation, though. Should tort reform become a relatively dead issue and liability claims proliferate in a tough economy, more claims might portend a higher demand for claim personnel. View it as a Full Employment Act for Adjusters!

Perhaps that is one silver lining that merits bipartisan support.

Nothing Succeeds Like Excess (Coverage) ….

Occasionally I am called to serve as an expert witness on insurance coverage disputes. A disproportionate number of them have involved matters of reporting to excess and umbrella carriers.

Well, maybe I should say matters of NOT reporting or late reporting to excess and umbrella carriers.

In one case, the policyholder did not report a general liability loss to an upper level excess carrier until a freaky trial result delivered a multi-million dollar plaintiff award. In truth, the first defense attorney had evaluated the case as having modest “legs” on liability, but the damages were significant. There was much dispute later over the wording of the excess policy CONDITIONS, as to whether it required reporting if the insured had reason to believe that the claim would never penetrate the excess.

In another case, a primary insurer failed to notify an umbrella carrier of a personal lines auto claim which – you guessed it – blew north of the primary limits. The primary’s adjuster made some quick phone inquires to the agent and broker, was told that they couldn’t locate an excess policy, and the adjuster then assumed there was no such coverage; this despite the policyholder’s insistence that he did in fact pay for coverage with a specific named umbrella carrier. Rather than report it on to the umbrella (“throw it up against the wall and see what sticks …”), the adjuster assumed that absence of evidence (“We can’t locate the policy…”) equals evidence of absence (“There is no umbrella coverage …).

In both matters, literally hundreds of thousands of dollars in legal and related fees could have been saved had the risk manager (in case #1) or the adjuster (in case #2), invested just five or ten minutes to draft a letter to the excess/umbrella carrier. Five to ten minutes!

A sound risk management – and loss reporting -- adage is, “When in doubt, report it out.” There may be many reasons why insureds and primary carriers don’t do so. They may be too busy. They may have an oversight. They may be guilty of wishful thinking. They may have legit grounds to think it is a bogus claim. They may not want to come across as an alarmist. They may be worried that reporting a loss will cause the excess/umbrella to jack up the renewal premium. They may think the policy does not require them to. They may fear that the plaintiff’s demand will ratchet up once he learns of the added insurance limits. They may chafe at the prospect of some new upper layer insurer galloping in, nosing around and telling them to settle the case.

I understand all the reasons. Not all of them are flawed. Still, investing five to ten minutes to draft and send a letter to avert the huge risk of a coverage problem seems like a sound bargain to me. There is a huge upside (preserving coverage) versus a small downside (five to ten minutes of time).

Sounds like a good investment to me!

When they don’t invest the time, they are certainly providing full employment opportunities for coverage lawyers.

Gustav Gives Insurers Get Another Chance – Along with FEMA And NOLA

Some may think that I’ve beat up on State Farm and its brand management lately. Actually, that is not the case. What I did a week ago was to post a link to a blog by an unsatisfied State Farm policyholder. State Farm may have ticked off the wrong guy because he also writes business blogs on brands.

Recently I was reading a book on marketing and branding which singled out State Farm for doing an excellent job of pitching its brand – that State Farm is THERE. It commends State Farm for its response after Hurricane Hugo in 1992. (See The Invisible Touch: The Four Keys to Modern Marketing by Harry Beckwith (2000, Warner Books, p. 101).

With Hurricane Gustav bearing down on New Orleans and the Gulf coast now, we have heard a lot about how FEMA and the City of New Orleans have learned various lessons from the nightmarish Katrina experience three years ago. Katrina will also test the mettle of insurers – including but not limited to State Farm -- to see if they too are better prepared to avoid some of the servicing and coverage wrangles which followed the wake of that storm’s devastation.

Claim Service Drives the Brand … or Destroys it

Insurance companies have reputational assets from the goodwill, image and brand they try to project in the consumer marketplace. One insurer is like a good neighbor. One puts you in good hands. Another is on your side. Yet another might be able to hook you up with a caveman… or a gecko.

The flip side: insurers have reputational risks that can take a hit if an insurance company botches a claim. In the age of the Internet, where it seems that everyone has a blog (including claim commentators!), one client’s dissatisfaction with an insurance claim can quickly reach tens of thousands through the power of cyberspace. Such is the case with a recent blog by one John Fergurson in his August 12, 2008 blog, “State Farm is Where???”
http://brandinsightblog.com/2008/08/12/state-farm-is-where

Here, Fergurson relates the pain of a homeowners insurance claim he filed with Stare Farm. He quickly found that his soothing agent was not the one who handled his loss. In fact, he was surprised to learn that agents have little to do with the adjusters who “service” policyholders. / The agent is a local; guy or gal, part of the local community.

The adjuster is off, hundreds of miles away.

Whether you agree or disagree, I’d recommend you take five minutes to read “State Farm is Where?”

The point here is not to pile on State Farm or any other insurer. The point is to understand how claim service can either strengthen a brand or undermine it. Filing a claim is, for policyholders, where “the rubber meets the road.” Insurers who project warm and fuzzy treatment but who deliver hard-nosed, ball-busting claim service may find their brands tarnished.

They might even find themselves the target of criticism on the blogosphere.

Trial Lawyers Name Top Ten Worst Insurers: Hatchet Job or Food for Thought?

David Letterman has a Top Ten list. Now, America’s trial lawyers have theirs.

The trade group formerly known as ATLA – American Association for Justice – has released a list of the ten worst insurance companies in a free white paper, “The Ten Worst Insurance Companies in America.” (Download at http://www.justice.org/docs/TenWorstInsuranceCompanies.pdf)

Drum-roll, please … Here is the list

1. Allstate
2. Unum
3. AIG
4. State Farm
5. Conseco
6. WellPoint
7. Farmers
8. UnitedHealth
9. Torchmark
10. Liberty Mutual

Some observations. First, the list contains a mix of P&C carriers, health insurers and specialty niche carriers.

Second, claim services (or lack thereof) figure prominently in making the list. Other factors include marketing and underwriting practices, poor corporate governance, etc.

Third, a unifying theme of many case studies is the existence of strong financial incentives for adjusters to deny claims. It refers to incentive plans where adjusters get free portable refrigerators for leading the office in claim denials. For example, it asserts that AIG locks claim checks in vaults, delays paying defense attorneys for a year and holds pizza parties to destroy documents.

Three of the Top Ten had retained management gurus McKinsey to come in and figure out how to pay fewer claims.. The “good hands” were replaced by boxing gloves in campaigns designed to delay, deny and defend claims. Good hands? No, but some consumers did think they got the good finger.

It will be interesting to see what if any industry response is forthcoming. Folks within insurance often wonder why that industry does not enjoy a better public image. I have heard and seen no rebuttal to the AAJ white paper. Surely there is an insurance trade group that can muster a response. To let this critique go unanswered would seem to be damming.

To be sure, this is one side of the story only. “The flattest pancake has two sides” and perhaps each company on the list has its own response. If so, let’s hear it. Insurers have no monopoly on problems. When it comes to excoriating greed, the plaintiff's bar can be caught living in their own glass houses as they toss rocks. Witness the shenanigans of Dickie Scruggs and Bill Lerach, for instance. At least CEO’s usually have shareholders to answer to.

When I first heard of the AAJ Top Ten list, I tended to dismiss it, unread, thinking maybe it was a badge of harbor being so named. So personal injury lawyers hate insurers. Big news!

On further reflection, I urge all claim folks – especially those in upper management – to read the report to gauge how financially driven metrics can be over-weighted to produce dubious results.

Of all People, an Adjuster Should Know!

Apparently in St. Paul, MN a young girl was riding her bike when hit by a car driven – and then drive off – by a Farmers Insurance Company claims adjuster. (You can check out the story yourself at http://kstp.com/article/stories/s514421.shtml?cat=1) 13-year old Sydney Carlson was beneath the car which, fortunately, came to a stop. The driver got out, apologized but then drove on without checking for injuries or calling 911. The girl recalled that the car had a Farmers Insurance logo on its side.

Contacted by the girl’s father, Farmers acknowledged that one of its claim adjusters was driving the car and that the Company was investigating.

Incredible. You would think that if ANYONE knew to stop and stay at the site of an accident, it would be an insurance adjuster. Isn’t that advice given by every insurance company to its own policyholders? This just shows perhaps that no one is immune to a brain fart. The skills and advice we apply in our professional lives sometimes flees us when it comes to our personal lives. This is not, however, to justify the adjuster fleeing the scene.

Maybe the adjuster was en route to investigate a traffic accident when he ended up having one of his own. It reminds me of a story told about a bus operator in England. After weeks of customer complaints that he drove right by the bus stops without stopping, management called him in and demanded and explanation. Unrepentant, the bus driver stated, “There is no way I can make my time checkpoints if I have to stop and actually pick up passengers!” Maybe the adjuster had certain time standards for completing claim investigations and he simply could not hit his “best practices” benchmarks if he had to stop after every pedestrian or bicyclist he ran over.

Of course, now the Farmers adjuster will need his own adjuster. Physician, heal thyself.

Likely he will need his own defense attorney as well.

The Few, The Proud, The … Adjusters?!

I’ve always said that claim adjusters were like the Marines of the insurance industry. Marines represent the country’s “tip of the spear,” translating highfalutin policies into real action.

Similarly, it falls to the claims people on the front lines to translate those lofty marketing assurances and policy provisions into concrete service.

Now, it turns out that the Marines and insurance adjusters may have more in common than I ever thought. A recent article in the Los Angeles Times (“Marines Act as Paymasters to Afghans”) (http://www.latimes.com/news/nationworld/world/la-fg-helmand6-2008jul06,0,5963950.story) describes how the Marines in Afghanistan are reimbursing Afghanis for property damage and business interruption occasioned by fighting the Taliban.

The article quotes Marine 1^st Lieutenant Shaun Miller as saying that paying claims was not exactly what he signed up for when he became a leatherneck. At times, he says, he feels like an . . . insurance adjuster!

Marines playing claims adjuster in Afghanistan raise a number of interesting case-handling issues, none of which are likely addressed in any of the Insurance Institute’s Associate in Claims texts:

· What kind of receipts are acceptable in processing a herdsman’s business interruption claim from destroyed poppy fields that would have yielded him a profitable drug crop?

· If you pay for a killed goat, do you value the loss on an ACV or replacement cost basis?

· In the event of a “total loss” of the goat, is there salvage value in using the goat’s remains for a dinner roast?

· Has ATLA (or, excuse me, Lawyers for Civil Justice, or whatever they call themselves this week) set up a branch near Kabul to make sure that the Marines abide by fair claim practices?

For now, these will have to be rhetorical questions. Adjusters may occasionally find themselves in tough situations, but none so tough as those faced by the brave Marines in Afghanistan and elsewhere who must add “claims adjuster” to their repertoire of professional skills!

Even in Claims, It's Sometimes WHO You Know, Not What You Know ...

We’ve all heard the expression, “It’s not what you know it’s who you know.” In the realm of claims adjusting, this was recently illustrated by the Washington, DC transit Authority. Seems that former Washington, DC Mayor Marion Barry sits on the Board of Directors for the Washington Metropolitan Area Transit Authority (WMATA), the subway and bus system that runs in the nation’s capital. Allegedly, a Metro bus collided with, damaged and then drove off from Hizzoner’s private passenger car recently.

A full month after the alleged accident, the ex-Mayor telephoned in and filed his property damage claim with WMATA. There were no witnesses to the collision and the bus driver allegedly involved knew nothing about it. Nevertheless, the Transit Authority fast-tracked Barry’s claim and ended up paying him over $3000 in reimbursement for damage to his car.

Keep in mind that this is from a bureaucracy which normally could not find its own posterior if you spotted them two hands. The Metro system is replete with complaints of broken escalators, random service, late and overfilled trains, and incredibly poor response to derailments and power outages. The Authority just cannot get its act together.

Nevertheless, it acted with incredible alacrity in processing a property damage claim which, asserted by any other private citizen, would have probably been laughed out of the proverbial ballpark. If Joe Q. Citizen had phoned in a unwitnessed property damage claim one month after the date of the alleged accident, doubtlessly it would have been a case of denied liability. The poor claimant would have been lucky to receive a form letter denying his or her claim, months after the loss report.

Of course, both the ex-Mayor and the Transit Authority staunchly deny that politics or pull had anything whatsoever to do with the remarkable speed with which the claim was processed.

It just goes to show that, even in the realm of claims -- or perhaps especially in the realm of claims -- it’s not just what you know but who you know!

Adjusters Go Hollywood! Ciao, Baby!!

Claims adjusting – the new glamour profession in Hollywood?

NOT!

OK, so maybe we are not going to see claim folks on TV in prominent roles. We can, however, turn on the DVD player and see that adjusters have had a variety of movie parts through the years. Cases in point:

Edward G. Robinson in Double Indemnity Robinson plays a claims adjuster who goes on a memorable rant to Fed MacMurray about the many roles that adjusters serve.

In The Truman Show, an insurance adjuster played by Jim Carrey discovers that his life was a television show; his every move monitored by cameras; every person in his life a performer, and his world a gigantic soundstage.

The Incredibles. Mr. Incredible, a/k/a Bob Parr (voice by actor Craig Nelson) is relegated to working as a claims adjuster at an insurance agency after a rash of lawsuits result from the former superhero rescuing a train from a major calamity.

The Adjuster Claims adjuster Noah Render spends his waking hours serving clients, from arranging temporary housing to … fulfilling their sexual desires. Enter affluent couple Bubba and Mimi, who -- under the pretense of making a film -- trick Noah and his wife into renting out their home. Little does Noah realize that he's about to learn an ironic lesson in this disquieting independent film.

Low and Behold Insurance adjuster Turner goes to work in New Orleans, sifting through insurance claims in the aftermath of Hurricane Katrina. He ignores the people around him until he meets Nixon, whose simple request in finding his daughter's lost dog will change how both men view strangers, the disaster and each other.

Black House An insurance claims adjuster investigates a decrepit house and discovers terrible secrets inside involving suicides and murder. The more he learns, the more the terror mounts, building to a blood-soaked ending. Time to call in a restoration specialist!

Future movie – Get Him to the Greek. A fresh out of college insurance adjuster is assigned to accompany an out of control rock star who is traveling from London to his next gig in Los Angeles. (How do we get an assignment like THAT?!)

Next time someone tells you that claims adjusting is a boring job, just remind them of all the "glamor" that our profession has on the silver screen!

Solution to Claims “Brain Drain”? Likely NOT in New Tech Tools…

Don’t look now, but even insurance claim execs say they are worried about an imminent “brain drain” in the claims area. A recent Towers Perrin survey of P&C claim officers reveal that 82% feel that attracting and retaining top talent is the Number 1 priority for success in the claims industry (“Recruitment a Priority for Claims Officers: Survey,” Business Insurance, 3/24/08).

What to do? Interestingly, Towers Perrin concludes its study by urging insurers to deliver better outcomes via new technology. It does not exactly specify the nature of this “new technology” or how it can stem the incipient brain drain among seasoned claim professionals. Towers Perrin mentions better analytics as an example of the technology solution.Maybe I’m the only one curious and skeptical here. Towers Perrin cites high-level concerns over an exodus of claim expertise. Its solution is …. New technology.

Methinks this may have something to do with the fact that it’s easier for a consultant to sell “new technology” than to sell the ideas of: treat your claims people better, pay them more, enrich their jobs and institute better mentoring programs for younger adjusters with attractive career paths. The latter are squishier and take time to implement. They may not involve any whiz-bang technology.

A “brain drain” in the claims area is likely due to the graying of the workforce, job burnout, a sense of compromised career options and inadequate investment in mentoring, training and succession. The root cause of the claims brain drain does not (primarily) lie in technological factors. Even though selling tech solutions may yield higher margins for consultants, I don’t think technology – at least by itself -- will solve the brain drain phenomenon in claims.

Your thoughts?

Claim Adjusters Too Risk-Averse???

Andrew Kaufman is a medical malpractice defense attorney with Kaufman Borgeest & Ryan in New York City. Recently, he authored a provocative article in the monthly newsletter of the Professional Liability Underwriting Society, perhaps better known as PLUS. The article was titled, “Behavioral Finance: What lessons can be learned by the insurance claims professional."

One point made by Kaufman is that claims people tend to be exceedingly risk averse and this creates a bias toward settlements, generous settlements, and a reluctance to take cases to trial. Kaufman argues that the “potential fear and embarrassment of reporting an unanticipated loss to one's superior can, on occasion, create a level of anxiety in the attorney and claims representative that is statistically unjustified. One can imagine how multiple layers of management may serve to magnify this phenomenon."

Kaufman suggests that claims people are quicker to forget their victories and successes then that they are to forget setbacks and defeats. Because of the potential of having to report an adverse jury trial outcome to one's boss or supervisor, a subtle but powerful momentum exists to eliminate any risk of trial by settling cases. Let me emphasize that Kaufman is not indicting or criticizing claim adjusters here. He is simply making behavioral observations.

So what do you think? Do reporting structures within claim departments create biases toward settling cases so that adjusters and claim handlers can avoid the stigma of having to report an aberrant result to upper management? Have we become so risk averse in not wanting to be associated with a corporate setback that there are subtle but powerful incentives to over reserve and over evaluate cases to justify higher settlements that would avert the risks of trial? What could insurance companies and claim departments do to remove such a stigma and enable greater but well reasoned risk-taking on the part of the claims staff?

All provocative questions suggested by Kaufman's article in the March 2008 issue of the PLUS Journal.

The Flip Side - Do Adjusters Make Good Lawyers?

How about the flip side – Do adjusters make good attorneys?

Some adjusters get bitten by the law “bug” when they work in claims. They may work with attorneys so closely they start to think, “Hey, I could do that!” I have known a few attorneys who started out as claim adjusters, went to law school, got their J.D. degree, passed the bar and then entered private practice. One down side is that this process may take a minimum of three years, maybe longer. There may be an opportunity cost to the adjuster-turned-law student in that while they are attending law school, they cannot maximize their earnings from being a claims adjuster.

Some adjusters are gnawed by the perceived lack of pay, prestige and cache that goes with being “just an adjuster.” They may romanticize the life of a lawyer (even if they don’t see days spent by associates in windowless conference rooms, tediously going through boxes of documents under the guise of production!).

On the other hand, adjusters are often used to handling high caseloads. Typically, they are no strangers to hard work or difficult clients. Having been a buyer of law firm services, they may have a better insight once they are a provider of law firm services and be that much more adept in meeting client needs.

So … what do YOU think? Do adjusters make good attorneys? Weigh in on the issue by taking our latest poll!

Do Lawyers Make Good Adjusters?

Occasionally an attorney comes to occupy a claims position for an insurance company, self-insured or TPA. Some coverage programs that underwrite specialized lines of coverage may seek claim staffers with law degrees or practitioners who have worked in private legal practices. There are conflicting views as to the “fit,” however. A recent discussion thread on a risk management list serve (RiskList) veered briefly in this direction and got The Claims Coach to thinking.

Do attorneys make good adjusters?

Here are some thoughts on the pro’s and con’s of having attorneys transition into a claims role:

Pro’s

· Solid grounding in legal principles, especially tort, liability and contract principles

· Ability to analyze what liability and coverage defenses may fly and which ones are losers

· ork well with outside counsel since they “speak the same language” and have common frames of reference

· Effective review of outside counsel billings, knowing where the “fudge factors” might lie and having some sense of how long legal tasks really should take if done efficiently

Cons

· Paralysis by analysis. Constipated decision-making by never quite having enough information or facts. Decision-making is no longer done by the client, but by the claim-handler.

· Difficulty in adjusting to higher caseloads of claim staff, perhaps multiples of what counsel handled while in private practice.

· “Circle the wagons” affinity with outside counsel in relating to them so much that objectivity is lost.

· May over-compensate as a former attorney by bearing down too hard on outside legal bills, becoming outside counsel’s worst nightmare.

So what do you think? In your view, do attorneys make good adjusters and claim-handlers?

Help! Oprah Needs a Claims Adjuster!!

Sounds like a premises and operations claim to me. Apparently Oprah and her production company – Harpo Enterprises – are the targets of a recent lawsuit by one Orit Greenberg. The latter seeks at least $50,000 in damages, claiming that Harpo Studios negligently failed to exercise adequate crowd control during an “open seating” scramble on 12/5/06. The company told audience members to sit wherever they wanted. Allegedly, this triggered a stampede for the front row. The stampede knocked Greenberg down a fight of stairs, causing severe and permanent injuries.

No word on whether Greenberg eventually made it to her seat during that show. If so, perhaps there is some ready-made surveillance tape to scrutinize in assessing whether the plaintiff really looked injured or not.

Celebs – along with pro athletes -- are frequent targets for lawsuits. This is nothing new. They have money, perhaps few as much as Oprah, so they represent “deep pockets.” No telling how many civil suits Oprah has had filed against her, though I know of no “Oprah Class Action.” This is not the first civil suit against the big “O.” Years ago she was sued for defamation by the Texas cattle industry for making an anti-beef tirade on her show. Oprah eventually prevailed but it was during the trial that she came to know a jury consultant, Dr. Phil McGraw, later to become famous in his own right as “Dr. Phil.” Maybe this is an opportunity for a claims adjuster to become the next offshoot celeb (I wouldn’t bet on it, though).

The allegation against Oprah is reminiscent of civil suits years ago filed by plaintiffs injured in Cincinnati during an “open seating” concert with the classic rock group, The Who. Some patrons actually died in the trampling. Oprah’s melee pales in comparison but may draw from some of the same theories of liability, i.e., inadequate crowd control.

No word yet as to whether Oprah has liability coverage, a large SIR or is self-insured. Not only claim questions but litigation management issues abound. For example, does Oprah get to pick her own defense attorney or “settle” for the approved panel counsel assigned by her liability carrier? Will counsel be held to “panel rates” or bill at a gaudy stratosphere rivaling Skadden Arps? Will she be entitled to Cumis counsel if her insurer reserves coverage rights?

For those interested in becoming the next Dr. Phil – or Dr. Claims – step right up and offer to adjust Oprah’s claim. If you do well, maybe you will be the subject of a future Oprah show, “The Ultimate Adjuster”!

7 Ways to Recession-Proof Your Claims Career

In a recession, claims people can be at risk for job loss. To trim expenses, insurers and others may look to the claim department for staff reductions as part of overall belt-tightening gestures. Less economic activity may manifest itself in the form of fewer claims. In turn, this phenomenon may create less of a need for claim professionals, prompting companies to lay off staff. How as a claim professional can you recession-proof your career? No failsafe techniques exist, but here are seven tips:

Work your network. Vigorously. Attend claim association meetings and conferences. Get involved. Consider joining a business-networking oriented social networking site such as LinkedIn (www.linkedin.com) Attend continuing education conferences when you can. While there, not only learn but mingle. Do more than swap business cards, though that’s a start. Follow up. Tend to relationships. The time to work your network is not after you are laid off or canned.

Treat the boss as customer client #1. Build good karma and positive constituencies throughout your company.

Be an ambassador for your company if you get the chance. If you get an opportunity to speak at an I-Day event, claims conference or participate in an industry function, do it.

Be visible within the company. Get face time. Volunteer for projects or committee work that addresses key parts of the claim operation.

Attend to your personal finances and get them in shape. Build a six-month emergency reserve fund consisting of liquid assets. Nuke all those high-interest credit cards. Take out a home equity line of credit, even if you do not immediately need it.

Update your resume. If it has been a while since you looked at your resume, get it out and dust it off. Bring it current. Update your references.

Dig your headhunter "well" before you're thirsty. Initiate and maintain a relationship with at least one placement specialist, a/k/a “headhunter” while you are gainfully employed. Again, the time to seek one out is not after you get a pink slip.

In today’s economic straits, perhaps the only certainty for claims people is … is the existence of growing uncertainty. By adding value every day, demonstrating one’s worth to the company and heeded the preceding steps, claim professionals can go far in recession-proofing their careers.

Coping with the “R” Word … and it’s not Risk

It’s “R” as in recession.

Many economic pundits predict that the American economy will drift into recession in 2008. Others believe that the economy is already in one. Put aside temporarily whether they are right or wrong. (One pundit once said that, if you took all the economists in the world and laid them end-to-end, they would still point in every direction…).

Assuming the Cassandra’s are accurate, we can speculate on six areas of impact for claim professionals:

• Tough economic times might produce an uptick in insurance claims, as folks with marginal claims have a heightened financial incentive to collect from insurance

• Increased insurance fraud, for the same preceding reasons. (Perhaps a favorable time to be positioned in an SIU)

• Less economic growth may equal lower sales which, in turn, lower insurance premiums. This might increase pressure on insurers to squeeze expense ratios by trimming claim staff and foregoing referrals to outside TPA’s

• Companies may belt-tighten and view a full-time risk management job as a “frill,” eliminate the job and outsource the role to their insurance broker

• Possible spike in workers compensation and employment practices claims if companies enact sizable workforce layoffs

• Claim managers may be under greater pressure to “rank and yank,” shedding departments and staffs of performers viewed as marginal or lacking in growth potential

What other “claim fallout” do you see from an economic recession?

Another follow-on question is, how can savvy claim professionals “recession-proof” their own jobs and careers? We will tackle that issue in a forthcoming blog post.

Steamed at Claimant’s Counsel? Write Right!

"That @#$# claimant attorney! And that ^&*% adjuster at XYZ Mutual!!!"

When writing to claimant/plaintiff counsel or to another insurer toward which your interests are adverse, strive to keep the tone both courteous and professional. Your relationship with the opposing attorney or carrier may impact the efficiency – and transaction cost (read: attorney fees) associated with the claim.

Cultivate a positive relationship that lets the claim develop with a focus on your insured’s or client’s interest, not the adjuster’s personality. While “chumminess” is unnecessary (and night be seen as unprofessional), cooperation and politeness will further the prompt resolution of the claim on its ,merits without the cost and headaches that policyholders can endure when adjusters needlessly spar or let their egos get the better of them.

The content of the adjuster’s communication to the opposing lawyer or insurer hinges on the purpose of the communication. A letter conveying a settlement offer has one tone. A letter responding to a deadline might have another. A message transmitting information should be concise and polite.

Never write a letter or email to the claimant/plaintiff attorney or to another insurer that you wouldn’t want a jury or the policyholder to see!

Government Slip-and Fall Claim Illustrates Double Standard of Tort Responsibility

Fairfax County, VA – coincidentally the area that I call home – is up in arms and crying “Ouch!” from the sting of the tort system. On January 31, 2005, Richard Thaxton was walking into court after a weekend snowstorm. Though county maintenance officials had just shoveled and salted the walkways.

But they missed a spot.

Thaxton – who had just had rotator cuff surgery two months earlier – slipped, fell and reinjured himself. So he did what any red-blooded American citizen would do. He sued the County government for $300,000, plus attorneys fees.

By a 6-4 vote, the Fairfax County Board of Supervisors decided to reject a proposed $100,000 settlement recommended by an independent mediator. The County was indignant that it could be found liable for having missed a spot and asserted the defense of sovereign immunity.

I must confess that such cases leave me conflicted. On the one hand, I think that the claim is ridiculous and that the County exercised reasonable care. In the event of a large settlement or award, I – as a Fairfax County taxpayer – stand to fund such a dubious settlement.

On the other hand, ever day businesses are held to these same standards and no sense of government outrage or injustice is offended. Governments always seems indignant at having to drink from the same bitter cup that they have prepared for the rest of us to take.

Legit slip and fall claim or snow job?

Reserving Coverage Rights does NOT Equal "Bad Claim Service"!

"Quinley" is an Irish name and my descendants doubtlessly hailed from Hibernia. My Irish acted up as I scanned the results of a recent Greenwich Associates study on claim service. Perhaps I was the only reader doing a double-take recently, reading the Business Insurance article of 12/10/07, “Claims Service Quality Varies Widely: Study.” On one level, this would seem to be a dog-bites-man story. The fact that there is variation amongst claim service quality by carrier is no more surprising than, say, underwriting expertise varies by company or investment management savvy, etc. Tell me something I don’t know. This is akin to headlines reading,

"Gravity Causes Objects to Fall to the Ground"
"Stocks Vary on Return and Yields"
"Britney Enters Rehab Again"

Thank you for delivering this hard-hitting news!!

But that is not what got my Irish up.

The article quotes an anonymous construction risk manager as pointing to one piece of evidence for lamentable claim quality the fact that commercial insurers “are quick to issue reservation of rights letters on some claims.”

Say what? The innuendo here is that such letters are invariably groundless, a claim which is unsupported at best and ridiculous at worst. Sending a reservation of rights letter is not tantamount to poor claim service. In many complex construction losses, legit coverage issues abound. Insurers are justified in notifying policyholders regarding the existence of coverage questions. Courts stand ready to “nail” insurers on waiver and estoppel if they do not meticulously reserve rights. Further, many states have exacting time guidelines within which insurers must reserve rights, lest they be estopped. If they fail to reserve promptly, they may be forced to cover gray area – or even uncovered – claims. Ultimately, the costs of such claims are passed on to the insured.

Sending a reservation of rights letter is no more bad claim service than submitting a gray area claim makes one a “bad” policyholder. Doubtlessly there are instances of specious reservation of rights letters. There is also no doubt instances of farfetched coverage tenders by insureds who are “fishing” for coverage that they knew they never really had or paid for. There are doubtlessly instances of sloppy brokering which leave risk managers exposed to perils which they thought were insured.

The reflexive notion that reserving coverage rights quickly signals “bad claim service” strikes me as ridiculous. It does underscore, however, that insurers could do a better job in making sure that such letters do not rub policyholders the wrong way. For example, claim reps could give the insureds an advance heads-up by phone call to discuss and explain what they were doing and why. They could do the same with the broker. They could emphasize the time requirements they have which force them to reserve rights in the face of incomplete information. They could make the letters’ tone more conversational and less legalistic. These are ways to soften but not emasculate the import of reservation of rights letters.

If foregoing the exploration of potentially valid coverage defenses is the price of good claim service, I submit that price is too high. Claim reps should look at other ways to “sell” the reservation of rights so that insureds will not reflexively assume it represents an effort to evade coverage.

Profiles in Professionalism: Interview with a Work Comp Claims Guru

As a periodic feature, the Claims Coach this month conducts an interview with w claims and risk management guru James Moore of J&L Risk Management of Raleigh, NC. Moore is the E.F. Hutton of workers compensation – when he talks, people listen! His website and blog are packed with insights and strategies for taming your claim costs in the realm of workers compensation. You can access these at http://www.cutcompcosts.com and his blog at http://www.cutcompcosts.com/www/blog.html. Let’s hear what Jim has to say on claim audits, workers compensation claim costs and the state of the claims profession.

Quinley: In doing claim audits, are there recurring issues or problems you see with claim-handling?

Jim Moore (JM): There are two that we see the most which heavily affect the outcome of a workers compensation file. Those two are Immediate First Contact and Poor Communications. Often we see where an adjuster writes the injured employee, employer, and treating physician a form letter and then documents that there was immediate three point contact. Talking with the employer, doctor, and employee about their workers compensation claim ASAP is a great way to start the proper communications in the file.

The other related area is adjusters working the file, but not making any contacts with all of the or at least some of the parties involved. Good communication is the main job of the adjuster. If this is not done as shown by a trend by an adjuster or by a TPA/Carrier, we become very concerned.

How should claims people prepare for an audit before undergoing one?

JM: Quit stressing when they hear their files are being audited. Some file audit firms consider a very nervous adjuster as a “red flag.” There is nothing that can be done to do a “quick-fix” on the files. The one thing that I recommend is to be friendly and smile at the initial meeting. Do not EVER put the auditor on the defensive if they ask you a question. Auditors that are on the defensive tend to be more subjective in their file appraisals.

What “red flags” do you look for when doing a claim audit?

JM: We do heavy statistical analysis on the 33 areas that we look at for trends. If there is a trend by adjuster or insurance carrier, then we red flag that one area. This happens very rarely except in one area. Over-reserving or under-reserving the files is a red flag that we notice very quickly. We do stat analysis to confirm our findings. The numbers speak the loudest.

Over the years, do you sense any differences in skill among the claims profession in general? Is claim service getting better or worse?

JM: Claims adjusting has followed a definite trend. It is how the industry or a certain carrier decides on the file loads for adjusters. An overloaded adjuster cannot do the job that the insureds are relying on them to do on their files. When the industry/carrier trend is to lighten loads, the file handling improves proportionally.

For a firm looking to tame its workers compensation claim costs, what is the ONE thing they can do to deliver the greatest return on investment?

JM: Time Management training pays big dividends. Stress management seminars seem to help. The old “claims roundtable” is also a great meeting to have for adjusters to discuss difficult files. We can tell the difference on file reviews between trained and untrained adjusting staffs. The one word is training.

How do workers compensation claims people avoid getting burned out?

(JM) They must remember that they ARE NOT claims adjusters. That is their job. In other words, leave it all at work. That is the secret to surviving in claims. Forget the files when you walk out the door every evening.

In a blind taste test, can you tell much of a quality difference between TPA claim services and insurer/staff claim services? Comment, please.

JM: Yes, when we compare files where a carrier also functions as a TPA. Flat-fee files seem to receive less attention.

If there is indeed a “brain drain” of seasoned claims people retiring, how can companies counteract that trend to salvage acceptable levels of expertise?

JM: There are carriers that do a great job of training incoming recruits. They also weed-out recruits that will not make it in the adjusting world. Liberty Mutual has an outstanding training program. Training and screening will fight the brain drain.

What are employers’ biggest complaints about workers compensation claim service?

JM: It is poor communications. They often do not know what is happening on their files. I always tell employers to request online claim access as they can follow the files without having to disturb the very busy adjusters.

What is the ideal caseload for an adjuster handling lost-time workers compensation files?

JM: Oh, this is a loaded question. It depends on the state, but I would say 100 for a claims trainee, 150 – 175 for an experienced adjuster, and 200-225 for a Senior Adjuster. In my career, I have had to handle 250 files in 7 jurisdictions/states. I juggled it very well until I burned out from fighting fires.