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.