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!