Flying Under the Radar

Nevertheless, we can make some observations about the list. First, it contains a mix of P&C carriers, health insurers, and specialty niche carriers. In the personal injury bar's eyes, insurers from different industry sectors are equal opportunity offenders.

Second, claim handling figures prominently in the list. Crappy claim service is an express ticket to inclusion. Other factors earning insurers a spot on the list are poor marketing, underwriting practices, and corporate governance.

Third, a unifying theme of many case studies is the existence of strong financial incentives for adjuster claim denials. The AAJ cites incentive plans whereby adjusters receive free portable refrigerators for leading the office in claim denials. Further, it says that one insurer locks claim checks in vaults, delays paying defense attorneys for a year, and holds pizza parties to destroy documents. I find this combination of shredded cheese and shredded claim file notes to be quite interesting.

Fourth, size matters. Being a larger company often equates to being a larger complaint-magnet. Virtually all of the companies on this list are large corporations. As such, they insure thousands of policyholders and are all targets for disgruntled attorneys and consumers. Given the law of averages, one would expect there to be a sizable chunk of disgruntled customers who would make such displeasure known to their attorneys. On the other hand, it's also likely that a number of large insurance corporations would not find themselves on this list.

Three of the 10 worst had hired management gurus at McKinsey & Co. to determine how to pay fewer claims. Attorneys assert that the iconic "good hands" were replaced by boxing gloves in campaigns designed to delay, deny, and defend claims.

It will be interesting to see what, if any, industry response is forthcoming. Insurance folks often wonder why the industry does not enjoy a better public image. I have heard neither an insurance industry rebuttal to the AAJ white paper nor a company-specific rebuttal. Surely some insurance trade group can muster a response.

Staying Off the List

Admittedly, the list represents one side of the story. After all, "the flattest pancake has two sides." Perhaps each company on the list has its own response. Insurers have no monopoly on problems. When it comes to excoriating greed, the plaintiff bar often lives in its own glass house as it throws rocks (Dickie Scruggs and Bill Lerach come to mind). At least insurer CEOs have boards, regulators, and shareholders to whom they must answer.

When I first heard of the AAJ Top 10 list, I yawned. The fact that personal injury lawyers hate insurers isn't exactly a revelation. Upon reflection, claim folks — especially those in upper management — may read the report to gauge how financially driven metrics can be over-weighted to produce dubious results.

So what is the obvious way to stay off lists like this? Well, it would be easy to simply advise others to not do the things that caused these companies to get on the list. Alternatively, we can reframe negatives into positives and distill suggestions for claim managers to consider. Some practices to keep in mind are listed below:

• Beware of adjuster pay schemes tied inordinately to cost savings. Much better are performance pay schemes linked to a spectrum of criteria that include but are not limited to outcomes like reduction in claim payments, lower settlements, drops in reserves, and so forth. Balance such factors with other categories, such as customer satisfaction ratings and audited adherence to written client service standards.
• Pay defense attorneys promptly. Do not play cash-flow games by dragging your feet when paying legal bills. Quickly communicate any complaints regarding a bill to the defense lawyer and try to resolve the issue. Otherwise, be a prompt bill-payer to law firms and other vendors. Becoming known as a "slow pay" is no way to attract top-notch service.
• When claims settle, issue checks promptly. Likewise, once a claim is settled, do not drag out issuance of the settlement check. Some companies have labyrinthine procedures for signing off on high-dollar value settlement payments. Early on, get out in front of this process to minimize the amount of time that will be required to issue a check.
• Hire consultants to show how to improve claim service. I rarely hear of an insurer hiring management consultants to come in and devise better ways of serving policyholders. By contrast, we often see the McKinseys of the world retained to help figure out ways to slash costs or improve financials. Nothing is wrong with this practice per se. However, another way to trim costs and improve financial performance is use superior claim service to retain customers and attract new ones. In short, treat customers well, and maybe the financial issues will take care of themselves.
• You'll want to be on some lists and avoid others altogether. Personally, I'm waiting for People to call when the magazine assembles its next "10 Sexiest Men" registry. It is more likely that the casting director of The Learning Channel's TV show, What Not to Wear will contact me. By focusing on the fundamentals of customer service and avoiding hot zones of trouble, claim departments and insurers can position themselves on the preferred ranks of strong performers. Remember that good claim service isn't listless.

Kevin Quinley is an insurance claim expert and author. He can be reached at kquinley@cox.net. Visit his blog, The Claims Coach, at http://claimscoach.blogspot.com.