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.