November 16, 2018

Archives for December 2008

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.

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?

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.

“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!”

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”!

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.

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.

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!

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

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.

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