Claims Ethics

How do ethics apply to claims management?

The claims department may be a client's first and only contact with the insurer or third-party administrator (TPA), so the claims organization not only has the responsibility to act ethically and responsibly on obvious matters, but must also maintain the appearance of integrity and honesty in all dealings. Policyholders, whether purchasers of commercial lines or personal lines insurance policies, typically have no dealings with anyone in the insurance industry other than the agent or broker until a loss occurs. They do not interact with underwriting or with other departments except perhaps loss control, which may inspect the property or business premises to confirm that the exposure and risk match the information provided on the policy application.

There are often many parties involved in claims management activities, and this sometimes makes decisions more complicated, but we need to ensure that we make our policyholders our highest priority.

For example, a liability claim may involve insurers, policyholders, claimants, reinsurers, attorneys, appraisers, and many other professionals. We must ensure that all of these parties perform their duties in the best interest of the policyholder, and that any potential or perceived conflicts of interest are identified and properly managed to achieve an objective outcome. Transparency is a desirable trait and has become an increasingly important characteristic in the business world, and it certainly applies to claims management.

We must also recognize that in some cases we must tell clients or policyholders what they do not want to hear, which may lead to unpleasant conversations with those we have given the highest priority. Even in these circumstances we should ensure that our clients and policyholders hear objective expertise from us rather than our acquiescing to the client's every requirement.

For example, some policyholders or clients may insist that we obtain their approval before increasing reserves beyond a predetermined value. While clients certainly have the right to be informed of reserve increases based on our professional knowledge and expertise, we should resist agreeing to obtain their approval. Our clients, or a particular client representative may decide to inappropriately depress reserve values, which almost always comes back to haunt the client and us at some later point. When that occurs, not only will our client appear to have manipulated reserves, but that same shadow will fall on us as claims professionals.

You can find additional information and examples on this reserving issue in the February 2010 issue of Claims magazine in an article titled "Under Pressure: The Temptation to Reduce Reserves Can Increase in a Poor Economy."

As claims professionals, we should always strive to provide the highest level of service. Inherent in this goal is to:

• Develop and maintain a high degree of knowledge and expertise in areas of concentration.

• Rely upon others, such as supervisors, attorneys, and other specialists, when their expertise will augment ours. After all, it impossible for anyone to be an expert in all fields of insurance claims.

• Have well-documented procedures for the claims programs so that the claims staff is consistent and thorough in its work.

• Keep clients informed throughout the lives of the claims, which will necessarily require more information-sharing if the claims are more complex or severe.

• Protect clients from themselves when it is needed, using your expertise and objective findings to present an accurate assessment to your client.

• Resist instructions from clients or policyholders that may lead to inappropriate pressures and direction, or even the appearance of inappropriate pressure.

These guidelines, along with strict adherence to state requirements and actions to be avoided based on the "Unfair Claims Settlement Practices," will help claims professionals render service that represents the utmost in strong ethics.