Claims Workers Orphaned, Study Finds

Claims Workers Orphaned, Study Finds

Insurance companies may be ignoring one of their greatest assets–the claims staff.

It wasnt always so. In the 1970s and early 1980s, when the majority of todays experienced claims professionals began their careers in insurance, the industry offered a challenging career with a high degree of security. There was a general feeling of satisfaction, both with the company and the profession, with salary increases of 10 percent yearly not uncommon.

Now, however, the industry finds its claims operations struggling with a dearth of new talent, a severe training deficit and a badly fractured career ladder.

Problems for the claims units began in the early 1990s when, in response to a number of industry problems (real estate and record catastrophes, among others), companies often delayed salary increases and limited them to 2 or 3 percent.

Training programs were cut dramatically, if not abandoned. The mid-1990s brought a new term to the claim profession–”downsizing.” Claims staff personnel were expected to do more with less.

By the late 1990s, claim department workloads increased, but staff did not. Even though there was already a shortage of well-trained and experienced claims professionals, demands on time increased.

In a recent study, “Property-Casualty Claims Management, Adjusting to New Realities, 2001,” Conning and Company interviewed claim leaders in a broad spectrum of commercial and personal lines insurers. Averaging more than 25 years of experience, most of those interviewed worked their way up through the claims ranks and were familiar with all facets of the claims settlement process.

The interviews explored the obstacles of staffing with claims managers. Many believe that todays shortage might reach crisis proportions in the next few years.

Managers mentioned their difficulties recruiting good personnel to fill entry-level positions, providing proper training for their staff and structuring career paths for personnel.

Perhaps the greatest concern of claims management is the fact that they cannot attract young talent. The situation they face is made difficult by the fact that many colleges today have a focus on careers in technology.

New graduates, taking an entry-level job in management information systems, on average make a salary of $45,000. Compare that with a salary of about $30,000 for claims adjusters with at least two years of experience, a college degree and a professional designation.

Compounding the problem, the industry has not done a good job of “selling” itself and most colleges pay scant attention to insurance. One person interviewed expressed it best: “No one goes to college to be in insurance; they just stumble into this profession.” While this statement might not be completely accurate, it is clear that the industry cannot rely on college career counseling to send talent to its doors.

One of the most common complaints of those interviewed in connection with this study is the difficulty in finding experienced professionals in what can best be described as a “dry” market. This is true at all levels of the claims organization and is becoming more and more problematic as outside adjusters become scarcer and more expensive.

Over the past 10 years, many insurers have reduced or eliminated their in-house training programs and/or staffs. Companies lose too many people each year, leaving existing employees to pick up the slack. As a result, existing employees are too busy, even when opportunities present themselves, to train.

Knowledgeable people often switch companies, creating a different problem–along the way, they are not likely to have received the proper training and are not equipped to handle additional responsibility. These individuals often find themselves in supervisory positions without adequate job knowledge or management training.

While some of the people who Conning interviewed thought that there were plenty of experienced workers today, most agree that people possess less comprehensive experience than is desirable to achieve high performance results. For example, critical negotiation skills often are lacking or are not fully developed.

The industry has not made significant investments in training programs for a number of years. This cost-cutting measure is beginning to have an undesirable impact.

Numerous people pointed out that often there is no clearly defined career path for claims professionals and no development plans to prepare people for positions of increased responsibility to advance, both in salary and in job responsibility.

If, as many of those interviewed suggest, there is no time for claims-related training, it is even more likely that there will be little time for management training. The age and experience level of the average claim adjuster lead Conning to conclude that management ranks will be thin in the next several years.

In general, education and training constraints are driving many of the succession planning issues. Some of the people interviewed commented that senior management endorsed succession planning, but did not provide adequate resources. Even in cases in which viable succession plans existed, education and training resources appeared to be insufficient to train and develop targeted staff members.

As this troubled adjuster environment continues, insurers losses are growing. Lawsuits and jury awards have been increasing in all areas of liability insurance. Attorneys are applying a much broader definition of bad faith. Insurers cannot rely on the courts to put a cap on the size of a claim, and juries have shown a tendency to side with the claimants.

Many are looking to technology for solutions. Technology can provide the means to better claims management, customer service and cost containment, but, to be effective, technology solutions must flow from business expertise.

Insurers best defense in the claims area is maintaining a highly experienced claims department. Claims managers realize this, which is why staffing and training are major concerns. It is important that all the “i”s are dotted and all the “t”s are crossed so that they provide exceptional claim service and help educate the public as to the true benefits of insurance.

The industry needs to reinvest in its people, encouraging and supporting a range of training programs, not just the “how-to” of their jobs.

Although it is important to have a well-trained claims staff, it is equally important that claims personnel understand how to deal with people, to work effectively as members of a multi-disciplined team. They are in essence “the insurance product.”

The way the claims team performs will make the difference in whether the customer relationship is sustained when the customer becomes a claimant.

The claims unit relationship with customers might determine whether the company can retain its current client base or must continually seek new clients.

Clearly, an operation with a staff that keeps a firms policyholders is an asset to the company.

Geri L. Riley is assistant vice president for insurance research and publication for Conning and Company, an insurance company asset management and research firm in Hartford.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, November 5, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

Contact Webmaster