If you were to ask a risk manager the reason they purchase insurance, the vast majority would say for protection, peace of mind and or claims handling. Thus insurance offers a service for its customers. That service is to handle and pay covered claims to which the insured becomes exposed, thereby reducing the financial liability for the insured.
In many insurance companies the claims department is not given its just recognition. The claims department is not normally viewed as a profit center, and therefore is tolerated as a necessary though unwanted expense.
Financial requests from claim department management are reduced, and the claims department is, in most cases, understaffed, with poorly paid adjusters.
Workloads become excessive, morale declines and an increase in turnover causes productivity to suffer. This aggravates your ultimate customers who are now dealing with different adjusters that are not up to speed.
Underwriting is considered a major profit center, and rightly so. However, if poor underwriting or incompetent managing general agents write poor risks, the insurance carrier is going to sustain significant losses in the program.
The insurance carrier needs to retain its customers. Thus, claim adjusters should receive recognition for customer retention. It takes years of experience to handle complex claims and avoid costly mistakes.
Many insurers have decided not to pay for this expertise, and quite often experience costly mistakes. The claims adjuster is, after all, trying to save the insurance company’s assets and at the same time retain the business. The claims adjuster’s expertise is the service that you are selling your customers.
Claim adjusters are on the forefront in dealing with your ultimate customers. They can make or break your revenue stream. If the claim handler is unprofessional, doesn’t attend to the insured’s claim fast enough, and/or wrongly denies the claim, the customer can take their business elsewhere–or, in a worst-case scenario, file a declaratory judgment action.
It can take the insurance company years in premiums to recover a paid claim. A poor attitude or unprofessional conduct can result in customer dissatisfaction or defection, which results in the loss of the additional premiums from your customer that are needed to help make up that loss.
Insurance company management needs to take a hard look at how they manage their claims departments. Claim adjusters need to be treated substantially better than how the industry currently treats them. Many adjusters will put in long hours for little appreciation. Remember your ultimate customers are purchasing protection and claim services. If they are not happy with your claim department they may choose to go elsewhere.
A new mindset for the claims department needs to be developed–one of customer retention as a profit center. While it is true that most insureds do not file claims–and thereby their premiums plus investment income go to paying the claims of other insureds (the law of large numbers)–the insureds who do file claims expect to be treated fairly. If an insurer is known in the industry as not paying claims, word will spread.
Retaining competent professional adjusters can be accomplished without difficulty, if there is the right management frame of mind.
o First and foremost, respect your overworked adjusters.
If adjusters are not happy, your customer base may suffer. I have had an adjuster ask why I was still with the same insurance carrier for my homeowners program after I previously had trouble with them in paying a covered claim. This type of attitude from an adjuster does not fare well with your ultimate customers.
One area where insurers need to pay close attention is personal lines. Today, if a homeowner files one or two small claims, many companies will drop them and the homeowner will have a difficult time trying to get coverage from another carrier.
A homeowner could have paid over $15,000 in premiums over several years, and in the last three-year period filed two claims for a total of $5,000, and now they are notified that their coverage is not renewed.
The insurance company has made a profit but now has lost a good customer. This customer will not be happy and will tell many people about their experience. This creates bad publicity for carriers, and insurance executives wonder why juries are awarding such high verdicts!
o Keep your adjusters informed on what is happening in the department.
A senior adjuster would like to know what is happening in their department–after all, it affects their livelihood. Periodic open sessions with a give-and-take can be useful to management, and it helps the adjuster feel good that their concerns are being addressed.
o Seek the recommendations of your adjusters when you are looking to hire.
Offer a bonus to employees who suggest individuals that are hired. Your adjusters usually know who is good and available. Give them the opportunity to recommend knowledgeable adjusters.
In summation, your claims department needs to be viewed as a customer retention center. If its employees are treated with respect, and listened to, the insurance company will reap significant rewards.
However, failure to properly provide for your claim department can be disastrous to your bottom line.
Kevin R. Gallagher is a vice president at Chiltington International Inc. in Holmdel, N.J. He is a licensed attorney and licensed insurance consultant who holds the ARM and CPCU designations. He may be reached at firstname.lastname@example.org.
Flag: Claims Tips
How Can Insurers Show
Appreciation For Adjusters?
There are many ways to show appreciation and encourage good claims handling. The following are just some examples which should help:
o Treat the claims department as an integral part of your business–a profit-retention center.
o Increase funding to the claims department for additional adjusters and competitive salaries.
o Provide quality workstations for adjusters–let them feel like professionals.
o Supply appropriate support personnel so that adjusters can spend more time handling claims.
o Consider a claims department incentive program for retained business.
o Keep adjuster workloads to manageable levels.
o Allow senior adjusters access to bonus programs based on the profitability of the company as a whole.
o Offer professional, relevant training to adjusters.