Exec Says Insurers Must Stand Up to Bad Adjusters

NU Online News Service

LAS VEGAS --The chief claims executive for a major insurance company said the insurance industry needs to take a moral stand against adjusters who permit the payment of fraudulent claims.

George Fay, executive vice president, worldwide property and casualty claim for Chicago-based CNA Financial, said: "It is absolutely, morally wrong to pay a fraudulent claim. My company will not commit moral wrongs, nor will I permit anyone who works for me to commit a moral wrong. Is there anything that anyone does not understand about committing a moral wrong?"

His comments came during an executive's panel discussion titled "Examining Best Practices and Industry Trends," held here today during the 11th annual ACE (America's Claims Event) sponsored by the National Underwriter Company.

Mr. Fay said that some companies "are compromising and paying fraudulent claims" for fear of embarrassment instead of prosecuting the adjuster who allowed it to happen. He said he had no qualms about going ahead and prosecuting an adjuster who committed such an act and neither should anyone else in the industry.

"We need to take an absolute hard line on fraud as an industry," he said.

Mr. Fay, who is a major general in the Army National Guard and led the investigation into abuses by Army personal in Abu Ghraib prison in Iraq, said adjusters are a highly motivated group with firm ideas about right and wrong. Motivating adjusters to do the right thing is not an issue, he said.

Kevin Toth, senior vice president claims for Harleysville Insurance based in Harleysville, Pa., said that claims adjuster fraud is still an issue for the industry. Fighting it, he said, is done by identifying aberrational claims and investigating them. Insurers, too, he added, must deal with fraud rings that plant adjusters in companies.

Combating fraud at Harleysville, Mr. Toth said the company has imbedded its special investigative unit with its claims adjusters to improve efficiency in the reporting and investigation of fraud.

Vincent Armentano, senior vice president of business insurance claims for St. Paul, Minn.-based Travelers, said insurance fraud is a public relations issue. Studies show not only that insurance fraud causes great expense to the industry and the U.S. economy, but that many people do not feel compelled to report it.

He said companies like Travelers need to invest in their special investigation units and use technology to help identify fraud.

On the issue of technology, Mr. Fay said from his military and intelligence operations experience he believes there are technology applications that in the next five years will exceed anything imaginable today.

Because he knows what the future holds, Mr. Fay said he is taking serious measure of how much to upgrade today as opposed to waiting for tomorrow.

Mr. Armentano noted that technology upgrades may contradict expectations. Travelers has learned that the upgrades can initially slow down productivity while people learn the new systems. It is also a very stressful time for employees as they go through the learning curve. Bringing on new technology can also produce turnover, he said, because some employees do not want to commit to learning a new system, an issue companies need to look to reduce.

Most importantly, while the technology upgrades are taking place customers are unsympathetic to any issues this produces. They expect their questions to be answered and their claims settled. Companies, he said, need to address the customer's concerns while cleaning up legacy issues.

"We have to keep the customer happy while making our systems more efficient," he said.