State Farm Agrees With Chip Merlin Regarding Claims Handling Obligations
I have been in a networking seminar regarding Safeco and Liberty Mutual insurance companies all day. One of my colleagues provided me some materials from State Farm. I am posting a couple of them for your review.
The important aspect of these internal documents is how close State Farm comes to complete agreement with me regarding the obligations of good faith claims conduct. Susan Hood, the top claims official for State Farm indicated in part:
• Explaining coverages. It's such an important part of our job in Claims to explain to our policyholders all coverages available to them. This can be complex sometimes, but we must take time to thoroughly review the policy and circumstances of the loss in order to ensure our policyholders receive the full benefits of their coverages according to the terms of their policy. This is just the right thing to do. When a claim is not covered, we must promptly and courteously explain why.
• Investigation and evaluation. Thorough investigation, evaluation, and timely resolution of a claim also are critical parts of what we do. By knowing the facts of the loss and understanding the terms of the policy, we are able to make sure our customers receive the benefits available to them. Our evaluations must be objective, and each claim must be evaluated on its own merits.
State Farm should be congratulated for teaching its adjusters these ethical practices. It is important for attorneys, judges and the public to appreciate that insurers recognize they owe these good faith obligations to their customers.
My personal experience handling claims with State Farm has been mostly positive. Have I had individual claims where I found them to stubbornly wrong in their coverage interpetation - certainly. They are not one of the bad players out there.
One thing I do doubt though is that they train their claims handlers to explain all coverages available to a policyholder up front. While that was something that was done regularly by most carriers when I first got into the claims profession I find that it is not the case anymore. In fact I truly believe that jobs would be in jeopardy if management discovered a staff claims person or independent adjuster were counseling an insured about all of the coverages available to them when a claim is made.
State Farm is only acknowledging the true problem. They do not practice what they preach or put in their claim manuals. We all know the ten commandments, but not all follow them or at least most tell a different version of the truth.
Durng a storm in NC (1997), they provided an Xactimate download disk that was every bit 30-40% less than what we had been paying for the same scope on the West Coast just days before. It was presented to us by the VP claims at the time. It comes back to knowing what is right, but then doing a different version of the right thing.
The staff wants merit raises, which means the auditors will reward those who keep pricing and scopes under what is really owed. Its always been that way for decades.You dont get promotions for paying what is owed, anyone can do that, the real skill and value to a carrier is learning to juggle the books and convincing the insured they got a good deal.Most of us were well trained to deliver upon the promise to the carrier, not the promise to the insured to make them whole.
Just reflecting back my 40 years in corporate claims.
Don and RL,
I appreciate your views. Both of you have significant experience from the insurer's perspective.
Wait until tomorrow's post where I outline a number of other claims handling requiremments taught by State Farm which reflect the basic traininng given to claims adjusters.
RL,
I'm not sure if I understand your comment correctly so please excuse me if I misinterpret.
Why should West Coast (I assume California, Oregon, Washington) pricing be the same as North Carolina pricing? The economy's are totally different, cost of labor is different, regulatory requirements are VERY different, etc...
A $225,000 home in North Carolina, my home state for 8 years, would average $800,000 to $900,000 if it was located in many parts of California. There is no reliable way to compare apples to apples that I'm aware of.
I work out of DFW these days and I know for a fact that State Farm is the ONLY insurer that is paying higher than Xactimate's listed price for a residential roof replacement. Where Xactimate allows $164.10 for 30yr replace-only, State Farm consistently pays it's insureds over $180.00. It varies from month to month as local conditions fluctuate.
Prior to Katrina I couldn't find many good things to say about SF but I believe they learned a lesson there. I see the results every time I get a copy of settlement paperwork.
My humble opinion
Excuse me, Chip, but did you say:
"...State Farm should be congratulated for teaching its adjusters these ethical practices..."
Yes, I just re-read it and you did. They should be "congratulated" for "Explaining coverages" and conducting "Investigation[s] and Evaluation[s]" of claims/policies? Well, if they need a pat on the back for doing what they're paid to do, ok, CONGRATULATIONS - STATE FARM!
Problem is they don't do enough of it - they give good lip service and that's the extent of it. Seen enough of it for over 2 decades to say that in full earnest - and, of course, THEY ARE NOT ALONE!!
SHIRLEY HEFLIN
This is a great post.
It's good to see what they're being trained to do as opposed to what they sometimes do.
Thanks Chip.
I find your congratulations to State Farm an extreme INSULT! You must aware of the number of outstanding lawsuits in the aftermath of Hurricane Ike.
I am one of many that are still "fighting" to get a claim settled. I had at least 7 different adjusters, and did not get ANY explanation of my policy benefits. In fact, my coverage changed with each adjuster!
It took 16 months before I could get a "resolution team" to explain my coverage, and this only involved much deception.
In addition, they have no intention of ever honoring certain policy coverage, i.e. ALE. They drop coverage anytime it is in their best interest.
I could write a book about "Bad Faith" and State Farm.
CONGRATULATIONS State Farm for not practicing what you teach!
I question why you would now make these positive comments about State Farm??
Marie,
I appreciate your comment and understand it. Thank you for sharing your story
I do not think we have ever met, so I do not think you are in a position to question me. But, since insurers get upset when I try to tell the truth about matters they do not like to hear, I can appreciate somebody harmed by an insurer reading something I write that indicates anything positive.
Some just cannot believe the truth that there are written guidelines that State Farm has which require the utmost of good faith. And, there are many occasions when State Farm adjusters adhere to those. That is the truth.
The problem is that it leaves those like you wondering why you have such rotten treatment. There is a whole other story about that. And, I have written quite a bit about that as well. It is just not bad luck that you got the bad treatment.
If it is of any help, I am certain that some at State Farm wonder why I do pay them truthful compliments even though we continue to be adversaries--we have active cases against them. The answer is that the truth is important. Why would anybody believe what I wrote if I did not acknowledge reality and truth.
My impression is that many get themselves in trouble because they are so caught up in thinking that they are right, that they never give the other person or idea a chance. Closed minds lead to bad decisions based on self inflicted false premise.
With that, my hope is that those at State Farm have an open enough mind that their wrong decisions about your claim and situation will be changed upon further reflection. If not voluntary, we will gladly share whatever information we have with your counsel so you can force a change of denial and defend, to payment.
Good luck.