Sadly, tension often characterizes relationships between claim adjusters and underwriters. There is unfortunately a professional enmity that develops between these two departments and functional areas within an insurance company. Both need each other and must function at a high level for any insurer to succeed. A symbiotic relationship exists between adjusters and underwriters.
Adjusters often see themselves as orphaned stepchildren of the insurance hierarchy, while underwriters get all the money, prestige, and glory. They may also feel as though they inherit the boneheaded underwriting decisions made by those who decide which accounts will be written and which ones will be declined. Some adjusters bitterly quip, "Doctors bury their mistakes; underwriters simply pass theirs on to the claim department."
Underwriters have their own retorts. In their eyes, adjusters are often knuckle-draggers who would never write any risk if it wasn't totally pristine. They often see adjusters as the "bulls in a china shop" able to demolish positive relations that the underwriter has taken years to foster with key brokers, agents, and policyholders. One contentious exchange on a claim can undo months or years of good will.
As a result, many organizations' claim departments and underwriting units are at odds and are conflicting fiefdoms. Crucial risk information may not flow from claim professionals to underwriters regarding factors that could help the latter make better risk selection decisions. What are some of the reasons for this lack of information flow from the claim area back to the underwriters?
Impediments to Information Flow
First, there is the issue of caseload. Adjusters often shoulder hundreds of files. The claim unit is typically viewed as a cost center, a black hole sucking up expenses but not generating revenue. To minimize costs and head count, upper management often has a financial incentive to maximize the caseload per adjuster. This may stretch adjuster's productivity skills, but it creates a work environment where adjusters are simply paddling to keep their heads above water; putting out fires; and lacking the reflective time and intellectual bandwidth to distill nuggets of loss prevention wisdom. As a result, adjusters are spread thin and simply intent — understandably so — in getting the next file closed to trim their case count and move to the next assignment. Lingering over a file to "go the extra mile" and report to underwriting and loss control to impart some intelligence takes time. Time is the adjuster's scarcest commodity.
Second, in many — if not most — insurance organizations, this kind of feedback loop is not incentivized. There is no requirement or reward to do it. There is the management adage of "what gets measured gets done." If you don't measure it, then it won't get done. If you don't provide financial incentives to do it, then it likely won't get done. If you don't provide positive corporate recognition for doing it, then it won't get done. It is challenging but not impossible to track and capture instances where adjusters have provided bits of intelligence to underwriters and loss control professionals. Usually, adjusters are appraised on the basis of cost savings, quality of claim handling as determined by audits, case turnover, financial metrics, and perhaps some assessment regarding continuing education. It is rare for an adjuster's evaluation criteria to take into account some measure of feedback loops to underwriting and loss control.
Third, adjusters quickly get cynical. They may stop providing this intel altogether if they do it and then feel that their advice and feedback went unheeded or ignored. This need only happen once or twice for an adjuster to decide that the extra effort is simply not warranted. If an adjuster tells an underwriter that an account is an accident waiting to happen or that it is a disaster in progress and the underwriter still blithely drives through the yellow caution light (or the red light), then that adjuster may decide that there is no point in the kind of feedback loop that we have described. So cynicism sets in.
How can we remedy the situation? There is no single magic bullet strategy, but a number of ideas are described below.
Trim caseloads. I don't pretend to know the optimum caseload. This is a function of many factors, including the adjuster's expertise, efficiency, complexity of claims, amount of administrative and IT support, and so on. Nevertheless, when adjusters have reasonable caseloads, they are more likely to engage in reflective analysis and provide useful intel to underwriting and loss prevention. Tracking and limiting adjuster caseload is a responsibility of upper management, as is the need to ensure adequate staffing and to provide productivity tools to allow adjusters to have this kind of breathing room in their workdays.
Incentivize feedback. Create systems to track and capture instances of adjusters providing intel to underwriters and loss prevention personnel. Make it part of the evaluation criteria for merit increases or even spot bonus allocations. Herald, trumpet, and publicize within the company instances where adjusters have provided valuable intelligence to an underwriter or to a loss prevention professional. Through monetary and nonmonetary ways, create carrots that will provide powerful incentives to shape adjuster behavior.
Create non-bureaucratic systems that guarantee claims input on key underwriting decisions. This does not necessarily equate to veto power over renewals or the decision to write or decline certain accounts. It could mean that accounts with certain loss characteristics must have a seasoned adjuster review them with the underwriters and then offer input. Perhaps accounts with certain policy limits or at certain premium levels must be reviewed by a seasoned claim professional as one step in the underwriting assessment. It could also mean that when an adjuster has a fundamental disagreement with the underwriter about a renewal or placement decision, a higher-up serves as the tiebreaker.
The Truth about Cats and Dogs
Companies have tried other ways to break down walls and silos between underwriting units and claim departments. Some insurance companies have merged the underwriting and claim units into one mega-department. Others have formed account service teams comprised of underwriters and adjusters. Certainly tailoring underwriter compensation to not only the volume of business but also the quality of business (defined by loss ratio) may dampen any incentive to put stinky accounts on the books just to get production numbers. Other tactics are as mundane as redesigning the floor plan for a suite of offices so that the claim and underwriting departments are not separated or distant, but instead have workstations and offices interspersed and side-by-side.
Cats hate dogs, and dogs hate cats. Dallas Cowboy fans hate the Washington Redskins boosters, and vice versa. Underwriters and adjusters may never be totally bosom buddies. They may often view the world through different lenses and prisms. Nevertheless, there are ways to enhance the willingness of claim personnel to provide viable feedback to underwriters and to harmonize relationships between these two vital departments.
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