A blog, Overpaying Insurance Claims, caught my attention. The premise was described as follows:
I recently began questioning how much money insurers hand out needlessly because their adjusters don’t have enough training or are so overloaded with work that they can’t possibly handle all of the files they are assigned due in part to a claim a family member recently made.
A few months back, my sister’s dishwasher piping burst, which flooded her finished basement and the kitchen sub floor. She filed a claim and received immediate action because the loss was deemed an "emergency" by her insurance company’s claims triage unit. The field adjuster came out, estimated the damage, and made arrangement for repairs under the company’s preferred contractor program.
The glitch arose when she decided to replace the floor in the basement bath/laundry room with ceramic tile instead of the linoleum that existed before. Being the most honest person on the face of the earth, she was willing to pay the difference on the upgrade.
That’s where the insurance company lost out.
The repairs were made to everyone’s satisfaction and the contractor was paid. My sister called the adjuster and the claims office a number of times to ask how much she had to repay. After a number of excuses — waiting for paper work, too many other emergencies, “we’ll get back to you,” the adjuster is over booked — she resigned herself to accepting more than she felt entitled to.
A comment to that post was interesting as well:
This is not an uncommon situation. You are correct when you say "under trained and over worked".
The upper management of the carriers do not care about the overpayments occurring. They are indemnity payments and can be used as evidence for a rate increase. Besides, people are a cost against the bottom line and the ivory tower wants as low a cost as possible. The line folks have always said bottom line is more important than doing the job right.
Only when the state department of insurance can staff up to verify if a payment is proper and begin to allow the actual costs involved to be included in the rate proposal will carriers maybe start increasing staff to make sure. payments are proper. Still not sure if even then would the carriers upper management staff up properly the needed underwriters and claims staff.
Insurance companies have an obligation to provide a sufficient number of competent and motivated adjusters to promptly and thoroughly investigate coverage, evaluate damages and pay the full benefits available for losses. The example and the comment point to a recurrent claims practice which is not often discussed–many insurance companies do not have a sufficient number of adjusters. This situation creates a number of problems if not corrected.
First, claims payments will be delayed. Without a sufficient number of adjusters, proper adjusting cannot be accomplished. The steps leading to payment–investigation and evaluation– are protracted. Money is usually not provided to the policyholder promptly.
Second, not only can claims be overpaid, they can be underpaid. Adjusters are supposed to explain all benefits available to the policyholder. Policyholders may make decisions to their detriment if they do not understand all their options and all of the benefits the product was designed to provide.
Third, oversight by an adjuster actively working on a claim makes it more likely that that fraud will be caught. Good adjusters usually have good communications with customers, so that customers do not feel they need to pad their claims to get the full amount of benefits they purchased. Without good communication between the adjuster and policyholder, many policyholders believe that an adjustment is a bargaining process and that that they have to make a claim higher than what is fairly owed because an adjuster will simply bargain the amount down.
Fourth, factors affecting the coverage and amount of loss are likely to be overlooked. Without a sufficient amount of time to properly investigate the damage and review the policy, adjusters will not be able to get the job done correctly. Determinations of coverage and damages may be inaccurate. As a result, claims are over-paid or under-paid. Both results are bad for the business and its customers.
My impression is those in the insurance industry acknowledge this is a recurrent problem. The question is what the industry is doing to correct it.