August 14, 2022

Archives for November 2012

What My Trash Company Taught me About Claim Service….

After only two months in our new house, my wife and I switched our trash pickup service. We were not displeased with the incumbent service. They did not fail to pickup. They did not spill trash in our driveway. But one day I got a card in the mail from a competing trash service that offered the same kind of trash service for five dollars a month less.

Intrigued, I called their number. They explained that the service was five dollars a month less than the incumbent competitor. In addition, the first month would be free as a new customer. They had me sold pretty much at that point. Trash service is a commodity, in my view. Five dollars a month is not a huge amount, but over a year that’s $60.

But wait, there’s more. The guy on the other end of the line explained how his toter bins were larger. In addition, while my current trash service will only take two or three bags of yard waste, the new service would take 5 to 10 bags of yard waste.

But wait, there’s more. He explained that if we set up online payment of our bills, we would get another two dollars per month knocked off the price. In addition, if we referred a friend or neighbor, there would be a further discount.

Frankly, I was astounded at the number of ways the trash service found to differentiate itself from its competition. To paraphrase a line from the movie Jerry McGuire, “You had me at `Hello’.”  They had me sold long before, and the additional features were simply “cherries on top.”

What in the world does this have to do with delivering claims service?


Many people feel that claims service is a commodity. Therefore, risk managers and other buyers of claims services tend to shop around for the lowest quote. This is frustrating for insurance companies and for third-party claims administrators. The challenge is to try to find ways to add value, to render your service less of a commodity. Everybody handling claims espouses the same features.

“We Are Prompt!”

“We Are Knowledgeable!”

“We Are Customer-Focused!”

Blah, blah, blah.

Challenge yourself, your company and your Claims Department with regard to what “extras” you can add to the mix. Extras in addition to the bread-and-butter claims handling. You have to do that well. That’s simply the price of admission, though. It may be today just enough to get your foot into the door.   You also have to be priced competitively. That does not necessarily mean the lowest cost operator.

What can you offer in addition to claims services?

*  Client education seminars and tutorials?

*  Podcasts or instructional videos for clients on how to report claims and how to boost safety?

*  Free checklists or other downloadable resources from your website on how to avoid claims, boost safety or work harmoniously with your claims adjuster?

*  Opening doors and making connections for new business opportunities for your clients

*  Monitoring the news and the dockets and local courts to provide a distant early warning system of incipient litigation at an early stage

While it is trite to say, “Think outside the box,” the advice may apply here.

If you want to differentiate yourself as the lowest cost claim operator, suit yourself. Claims service is not trash service, but if a trash service can differentiate itself in multiple ways, surely claims services have the same ability.



Lessons of Hurricane Sandy: 7 Questions to Boost Preparedness

Recently, the CLM’s editorial staff at Claims Management magazine contacted me, asking me to offer some brief thoughts on the lessons of hurricane Sandy. They were looking for a sound bite on very short notice.

My initial takeaway offering: Dig your well before you’re thirsty, as the “100-year flood” seems to now arrive annually.  Sandy is another wake-up call that freakish disasters are “the new normal.” Those insurance carriers who develop financial and claims-handling capacity proactively will be best positioned to weather the storm, figuratively and literally.

We now know that black swans increasingly congregate. They are not as rare as once thought. Whether the recurring freakish weather is due to global warming, sunspots or other phenomenon, the irreducible reality seems to be that freakish and severe weather is increasing. This exacts a toll in property loss and occasional loss of human life. In turn, the reverberations from Mother Nature’s episodes of acting out have profound insurance industry and claims-handling implications.

Certainly another consequence, as Spring follows the appearance of swallows, is that there will be a secondary way of bad-faith lawsuits against insurance companies for the ways that they have allegedly handled or mishandled claims following damage inflicted by Sandy. Already, there are rumblings about the application of hurricane deductibles on property loss policies. Many homeowners policies contain hurricane deductibles. However, the National Weather Service downgraded Sandy and recategorized it as not of hurricane qualifying force when it hit landfall. Some governors and state insurance commissioners have cautioned insurance companies who might otherwise be tempted to apply hurricane deductibles.  On a macro basis in the corporate world, we know we need insurance, contingency plans and redundancy to cushion the blow of disasters.

On “micro” basis, Sandy reinforces the need for some personal risk management. It’s always best to dig your well before you’re thirsty. The best time to repairing your roof is when the sun is shining.

Likewise, the time to find and fix holes or soft spots in your insurance coverage is before a hurricane or tropical storm hits. Nobody enjoys focusing on insurance. For most people, it has to be one of the most boring topics imaginable. As one of Woody Allen’s characters says in his movie, Love and Death, “There are some things worse than death — if you’ve ever spent an evening with an insurance salesman, you know what I mean.”

As a result, they buy coverage without a clear understanding what they have bought. Best to know the contours of what the insurance coverage does and does not encompass before a loss. Then, you at least have an opportunity to either purchase additional coverage, make financial arrangements, or to be armed with realistic expectations when and if you suffer a loss.

Questions that every policyholder should be thinking about posing to their insurance agent or carrier before a loss include the following:

  1.  Do I have hurricane coverage and, if so, can I purchase more?

            2.  In the event of a hurricane, is there a hurricane deductible on my policy? Is there any way to lower that deductible?

            3.  Am I covered for flood?  If not, how much would it cost?

            4.  If strong winds lift my roof shingles and break the seal, does the insurer consider that a covered or excluded loss?

            5.  Do I have replacement cost coverage or coverage based upon actual cash value? If the latter, what would be the cost of upgrading to replacement cost coverage?

            6.  If I suffer a claim or a loss, who will be an advocate and resource for me in processing my claim? Who was the first person that I call?

            7.  What resources does your company have to ensure that — in the event of a large loss like a storm or hurricane — there is adequate staff and I don’t have to wait an unreasonable amount of time to get help?

You may not like the answers to these questions. You may not get compelling answers to these questions. In some cases, you may have to pay more money to get more coverage. Paying more for higher quality product is a phenomenon that we encounter in every other realm of commerce. Insurance is not exempt from this economic reality.

Nevertheless, one of the lessons of Sandy is that we all need to do a better job of personal risk management in understanding what we are buying before the loss hits. Learning these truths amidst a disaster inflicts a double layer of tragedy.

Q:  What else do YOU see as the claim-related “lessons” of Sandy?

How to Build a Corporate Culture of Continuing Claims Education

How do insurance companies, adjusting outfits and TPA’s build a culture of continuing education within their organizations? Claim professionals must keep current on developments in law, medicine, negotiation, regulations, human relations, etc. There is a constant flow of new material to learn, to be aware of and to master.  This reality makes it imperative for companies to reinforce and so forth the notion of continuous improvement and education. Just saying it doesn’t make it so, however. How to build a culture of continuing education within a claims organization?  That is the challenge.

One key step is to make continuing education a component of annual employee performance reviews. Management gurus from Peter Drucker to Tom Peters say, “That which gets measured gets done.” Thus, if you want to get it done, measure it.  Assess the criteria used to evaluate employees. Does it include a yardstick for continuing professional education? Regardless of how much or however little weight you give it, include continuing education as one goalpost toward which employees must aim to meet acceptable performance standards or to advance.

Look at the criteria that your company uses to evaluate adjusters. Do they include a component for continuing professional education? If not, they should. Rectify this omission. In setting goals with your claims staff, include one perennial target of continuing education. This can take many forms and need not necessarily be oriented toward attaining a designation or attending an evening class. The point is that each claims staff should have an individual development plan that includes building their storehouse of subject matter knowledge and expertise.

Strive to conduct at least quarterly sit downs, one-on-one, with each of your reports. Do not leave this exchange to a once a year performance appraisal. As a claims “boss,” strive to mentor and coach your reports. This includes being a cheerleader for continuing education. More than just being a cheerleader, however, it involves holding people accountable for specific targets in the continuing education realm. Achieve consensus and buy-in with employees so that they understand the need for continuing education and they pick a means of continuing education that fits with their work demands and job content.

Once you and the employee agree on the continuing education target, follow-up periodically to assess progress and make attainment of that particular goal one component of the performance appraisal. There may be no better or quicker way to get the attention of employees than baking this criteria into the performance evaluation and review process.

Q:  What other ways have you found to be successful and effective in building a corporate culture of continuing professional education? Share your thoughts here or off-line at   

Don’t let AFA’s lull you to sleep in managing litigation!!

Alternative fee arrangements are becoming increasingly common, regardless of whether they are more or less popular with law firms. First, a brief bit of nomenclature.   AFA’s arise when something other than billable hours determine the fees for the law firm.  BUT, AFAs—especially in insurance defense — can include various arrangements other than contingent fees:

  • Fixed fees: where a firm handles a single case (or portion of it) for a pre-specified, negotiated amount.
  • Flat fees:  where a firm handles a “book” of cases (multiple similar cases, cookie-cutter types of claims or functions) for an agreed negotiated total. There may be a specific number of cases, or the agreement may be for all cases of a specific type that occur during a set time period.

With flat or fixed fees, there can be a temptation for adjusters to put litigation cost management on cruise control. The thinking can be,  “Since fees are fixed, why worry?”

This is a dangerous mindset, however. Even with fixed or flat fees, there are many components of litigation expenses that the adjuster must control that are not capped by flat fees: expert services, court reporter expense, etc.  This is not chump change! Increasingly, law firms are passing expenses along to clients. Meals, legal research, car services, photocopies, etc. Many alternative fee arrangements don’t address these.

And even if your litigation guidelines do, there must be vigilance in monitoring and managing compliance with your expense guidelines. It underscores again that AFA’s are no reason to put a case on cruise control or fall asleep at the wheel in terms of managing litigation costs.

Even with AFA’s, there are still many components to manage that impact how much or how little the claim ultimately costs. Don’t think that just because you are not paying a law firm or an attorney by the hour that you can take your eye off the expense management ball. There are still many other expenses to manage. Further, the adjuster should stay engaged in the claim in order to push for early resolution opportunities, discern Windows of opportunity with regard to possible settlement, advocate alternative dispute resolution, etc. A disengaged adjuster allowing defense counsel to turn over rocks and production around may experience case drift and forgo opportunities to resolve the case quickly.

Don’t be lulled into the stance of thinking that flat fees or alternative fee arrangements exempt claims people from aggressively managing expenses. Abandoning cases to counsel can infect other parts of file handling, leading to “drift” — cases lingering, staying open longer than they should. This can increase claims costs because claims, unlike fine line, do not improve with age.

Budgeting and planning are still crucial functions, even with AFA’s.  And, while we’re on the budgeting — maybe try to re-frame counsel’s focus from developing a litigation budget to developing instead a resolution budget!  The point is, by all means use flat fees, but don’t use them as an excuse to abdicate vigilant management of litigation costs.

Further, there is much more to litigation management then cost control. Unfortunately, litigation management has become almost synonymous with slashing litigation costs. While cost management is one component — a key component — of litigation management, it is not the end-all and be-all. It is not the entirety.

There’s still the matter of managing the service, the process and the outcome. These are vitally important as well. There’s no point in excelling at managing litigation costs if it degrades the service, process, or compromises the quality of the end result.

This is yet another reason why alternative fee arrangements are worthy, but they do not absolve adjusters of the duty or responsibility to keep their “heads in the game,” to be engaged, to be hands-on and to not take their eye off the ball in terms of litigation management.


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