Internalizing Claims to Strengthen the Adjusting – Safety Connection

As talented as they may be in handling claims, many claim adjusters are not tuned in to loss prevention. They handle a claim, settle a case, close their file, submit their bill, and move on to the next case. There may be any number of reasons why claims people – even very good claims people – are reluctant to offer loss control feedback. Here are three:

• They are often just too darned busy to do much beyond handling the claim. Spending time trying to pan for nuggets of loss prevention “gold” can seem like a luxury they cannot afford. Dabbling in loss control may seem like a frill or an intrusion, adding to their list of already daunting job duties. Let’s just get the case settled, close the file and move on!

• Some may feel that this is just not in their job description

• They may feel they lack the expertise: “I’m not a `safety person’ – where do I come off giving loss control advice?”

Ideally, adjusters can offer a post-mortem, advising the client on how such an accident or claim can be averted in the future. In reality, time and cost pressures militate against this type of synergy between claims adjusting and loss prevention.

Furthermore, an adjuster's familiarity with any one account is limited, so the opportunities for meaningful loss prevention insights are often lost. Cynics could also argue that loss prevention is not in the economic self-interest of the claims adjuster. When you get paid by the loss, you want more losses. Or, at least you may not work too hard to prevent them.

The in-house adjuster, however, can be an invaluable aid with regard to loss prevention. They are more familiar and up-close with the situations spawning claims. They can take a more long-term outlook than the outside adjuster, who may handle only two claims for a risk manager in any given year. The in-house adjuster, to be sure, does not want to work himself out of a job, but does have a vested interest in stemming the tide of rising claims. Thus, in-house adjusters can be counted on to a greater extent to provide "nuggets" of loss prevention wisdom which can help the risk manager improve her bottom line.

This is not to say that we are trying to remake adjusters into loss control specialists or to turn them into something that they are not. Having said that, there are many instances where adjusters can add value to a safety program by alerting management to conditions which, if corrected, can lower loss frequency or severity. In an insurance company context, adjusters might give such feedback to underwriters. In a self-insured or in-house claims context, this “intel” can go to upper manager and safety personnel.

However, when a corporation internalizes the claims function, adjusters see operations on a recurring basis and can hone their ability to spot situations that can create future claims or make such claims more expensive. In such situations, in-house adjusters can directly reach the ear of management by giving feedback such as:

• “We are saying an uptick in low back strains. Perhaps we should invest more in training workers on proper of lifting techniques or providing abdominal belt supports.”

• “We are experiencing a 20% increase in repetitive stress injuries and claims for carpal tunnel. Perhaps we need an ergonomic redesign of those employees’ workflows.”

• “While visiting our Dayton facility, I noticed debris on the floor which could create a slip and fall hazard…”

• “Four company vehicle accidents over the past year have involved distracted driving. Perhaps we need to retool corporate policy with regard to texting and cell phone use while behind the wheel of company cars…”

Having in-house adjusters may help the claim professional identify more with the ultimate client and hone specialized expertise that enables claims people to spot little problems and trends before they become BIG problems.

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.