Motivated claims adjusters need to study, improve, and be noticed for their skills and dedication. The May edition of Claims Magazine featured two stories I found interesting for different reasons. One article every adjuster should read is "Designation Envy-Why CPCU Should Matter to You." The other article, "Emerging Transformed-New Challenges Create Opportunities for Independents," should be read by claims practice attorneys and experts because it provides a glimpse into claims cultures designed to reduce amounts paid to policyholders.
Imagine you wanted to find out how insurance adjusters are supposed to do their job. Insurance company attorneys argue an adjuster’s job is a legal duty, and not for determination by the adjusters. Their argument is circular and flawed: how does the law know what an adjuster is supposed to do without knowing the standards and duties from adjusters themselves?
The American Institute for CPCU provides the most recognized and important designation for claims professionals. The Society, with materials from the American Insurance Institute, has an intense learning process dedicated to a high standard of ethical and policyholder centered claims treatment. The Claims Magazine article notes that claims professionals "are often called upon to testify in legal proceedings."
Our firm often cites to CPCU educational materials as proof of insurance industry standards and interpretation of contracts.
Virtually all recipients of the CPCU say that the designation helps further their career. I encourage all adjusters, company, independent or public, to take the courses and achieve the designation. There is no downside in doing so, and the result should make everybody aware of a commitment to being the best adjuster one can be.
The other article is written by a Senior Vice President for Crawford & Company, an independent adjusting firm. Crawford & Company has long been on our firm’s radar because they advertised about controlling "claim severity."
"Claim severity" is the average amount paid on claims. "Controlling claims severity" through targets and goals was a basis for implementing punitive damages against State Farm in the landmark case of Campbell v. State Farm. This claims management typically leads to all kinds of harsh claims practices designed to lower policyholders’ payments following a loss. Many insurance companies try to change the rhetoric of what and why they are making "targets" of claims severity. Nevertheless, everybody, especially the jury, gets the message it is a justification for paying less on claims.
This article identifies what I have often felt to be the dilemma of adjusters–providing outstanding service to the customer while, at the same time, lowering the loss ratio for the insurance company. While efficiency and innovation can theoretically save some marginal amounts for the insurer, cutting the amount paid to claimants will significantly reduce the loss ratio.
I once asked an Allstate manager if he was ethically handling claims in a year before Allstate established its "target" severity goals. Of course, he answered "yes." I then asked him exactly how Allstate intended for him to meet the next year "target" severity without taking a harder line on the customers.
If Allstate and other companies making "severity targets" were really being transparent and worthy of trust with their customers and regulators, they would publish these goals as a warning to all that have to deal with them or consider purchasing their products. Customers deserve to be paid as promptly as possible and without the hassle of dealing with a claims department that has arbitrary "targets" for the average amount paid on a claim. Such "targets" necessarily effect management’s attitudes on its field claims staff, including independent adjusting firms, since every claim is part of the average and part of the "target."
Insurance company claims executives are not dumb by any means. Knowing that these severity targets and goals are very profitable, but result in a claims culture of paying as little as possible, Allstate and its competitors have simply changed their rhetoric without changing what they do to.
Quite a few senior adjusters in the field, who truly care about getting the full amount of benefits to the policyholder, privately admit they "game" the company claims process to do what is ethical and right for the policyholder. This is not as easy as it used to be because claims processes are more closely monitored using computers. Further, insurance company vendors know the claims culture is to never over pay.
If a claims culture is focused purely on never over paying, there is only one way to go. It is no wonder I have never read or heard of an Allstate adjuster criticized by claims management for under paying a claim.