Have you ever picked up a claims file and scratched your head asto how the adjuster arrived at their liabilitydecision? Having run a quality assurance department for alarge multinational insurer, I can say with certainty I've been inthat position more than once.

Consider scenarios involving intersection accidents, parkinglots, lane changes, slip and falls or product defects whereliability is simply assessed at 100 percent with little to nodiscussion on duties owed and breached. Then consider thefinancial impact that improper liability assessment can have onclaim settlement accuracy or policy holder retention.

Doing some simple math in the auto market , let's say, onaverage, an insurer is assessing comparative negligence in 5percent of all cases. While seemingly a low figure, I am toldby a number of top executives that real comparative negligenceassessment is often even less.

Let's also consider that according to Jury Verdict Research, anational organization that tracks such data, rear end autoaccidents, or clear liability losses, accounted for only 45percent of auto cases adjudicated, with the remaindercomprised of intersection collisions, lane changes, chain reactionand parking lot scenarios. In other words, a lot of claims wherethere was a high probability of shared liability.

Having worked with a large number of insurers on accuracyimprovement projects, such as liability, achieving 35-percentcomparative negligence assessment in pure comparative states hasproven to be a reality. For modified comparative states, thisfigure is in the 25-percent range and contributory states drops toabout 12 percent. Further evidence of this potential opportunityarea can be derived from more formulaically driven jurisdictions,such as Japan, where comparative negligence is routinely assessedabout 35 percent of the time.

If the average assessment is 50/50 on 5 percent of all claimswith an average payment of $2800, the benefit derived is$70,000 per 1,000 claims processed. Keeping the averagecomparative assessment at 50/50, assessing comparative at anoptimal level of 35-percent increases accuracy by $490,000, or animprovement of $420,000 per 1000 claims processed. Multiplyingthis out by actual claims processed can show a tremendousopportunity for accuracy improvement, often to the tune of tens ofmillions of dollars per year.

Of course not all comparative claims will be settled at 50/50;some will be 80/20 in favor of the insured, others 60/40 in favorof the claimant. What we do know is that seeing more sharedliability is an opportunity nearly universally available to allinsurers, both domestically and in many nationsabroad.

The challenge is for carriers to identify this as an opportunityarea and then determine the best ways to seize upon improvement, asit is easier said than done. The first challenge is to measurecurrently performance. How does your carrier stack upagainst the industry? The reality is that even within one'sfour walls there may be significant disparity between regions,offices and units.

In one particular instance I was involved with, there were twooffices in California not more than twenty miles apart. Bothwere assessing comparative negligence about 3 percent of thetime. After implementing a liability assessment improvementstrategy, office A improved to 42 percent while office Bimproved to 11 percent. Why the disparity in a similargeographic area?

Much of it was driven by internal management and adjustingphilosophy. In one office, the concept of comparative faultwas embraced. If the other, then there was a fear ofincreased attorney representation and litigation, neither of whichwas occurring in either location.

Claim volume can often be an impediment to improvement, asidentifying comparative negligence and successfully arguing it cantake more time than simply paying 100 percent. After all,adjusters are busy.

To truly be effective, the concept of accurate liabilityassessment has to become part of the corporate culture. Fromthe outset of claim training, adjusters need to be indoctrinatedinto the thought process that liability is a key element of eachand every claim. After all, to effectively pursue a claim onemust prove both damages and liability

Integrating proven resources can assist in the development ofthis philosophy as they provide consistent feedback and reportingthat enables management to look for coachable moments. Theycan also provide the most effective roadmaps for successfullynegotiating liability settlements.

Considering juries across the nation assess comparative faultmore than half the time, there is no reason that our own “experts”can't move the ball closer to the goal line. The key is togive them the tools by which to effectively do so.

Christopher Tidball is an executive claims consultant andauthor of multiple books including Re-Adjusted: 20 Essential RulesTo Take Your Claims Organization From Ordinary ToExtraordinary! He is an industry veteran have worked invarious adjusting, management and executive capacities for multipletop 10 claims organizations. To learn more, visit www.christidball.com or e-mail[email protected].