So
you got an Attorney
I am jumping out of my chapter and verse musings on basic claims issues for
a moment to take up the issue of attorney's and the claims process. The
reason is several comments I have seen on one of my lists regarding why
claimants get attorneys.
Mikes Rule: Claims people
really do not care if an attorney shows up.
Now that I have said that let me muse a moment about attorneys and claims.
The first issue is that an adjuster today as far as I can tell really does
not care if an insured or a claimant gets an attorney, reason why, it simply
slows up the process, this helps the adjuster get the file of his or her
desk or on a longer diary. If they file suit it is even better, most
likely can get the file of my pending and to the litigation unit. Take
this to heart, the inside game is geared to deal with law firms, the claims
process can be equated to a litigation machine, they know how to do it and
it well.
Some may now ask about Allstates program to discourage attorney
representation, keep in mind the senior management wants this to lower
average costs, but the line adjuster with a pending of 200 files really does
not care a lot. Granted it is true that represented claims can
increase your average settlement size, but in balance with the new programs
such as MIST I am beginning to wonder if it really is true of the run of the
mill cases.?
I may get mixed feedback on this issue, but what I have observed of late is
that granted there is a lot out there about efforts to lower rates of
representation, but with the pending loads adjusters have and the geographic
spread, most really do not care a lot when an attorney shows up, this attitude
may in fact lead to more representation.
Mikes Rule : The inside game is focused on lowering average settlement size
for cases that are as a general rule $25,000 and under and you can really do
it well with a plaintiff law firm.
Note very clearly, that if your case is worth $25,000 and your are offered
$20,000 take it or leave it, most plaintiff's and law firms take the
$20,000. Now what has occurred is that the carrier has now saved $5,000.
If you are a large personal lines carrier and have a 10 to 13 state region,
with a large auto liability book, and have 10,000 of these cases a year,
think about the savings.
Most plaintiff law firms will not litigate a case for $5,000, is not cost
effective and the client gets less. Now there are cases where they will
fold, when the case is worth more than $25,000, but if it is not, the
carrier has the upper hand. Is this right? Of course not, but that is
how the inside game works in reality. It is not about what is right or
just, it is about what is reality and how it works. It is not a zero sum
game; your gains do not equal your losses.
It used to be the focus was on the 80/20 rule, i.e. 20% of your case load
drives 80% of your value, however if you look at some of the issues now with
the larger personal lines carriers that is not the case, the focus it to
drive down value on the lower value cases, since they represent a high count
on your book, i.e., you have a lot more of these type of cases. There
are a lot of represented lower value cases, and my thought is that the focus
on those cases is just make an offer under true value and see what happens
very few go to suit, the almost all settle and at a cost savings on the top
end for the carrier. Granted the average settlement size may be higher
but it under mid range to high range on average.
Just look at MYST cases and
what happens.
Mikes Rule: The reason people
get attorney's who do not start off with one is because the adjuster does
not provide up front a set of expectations for the insured or claimant.
I, once when I was an officer at a large carrier, (actually a claims vice
president) had management consultants descend upon my operation and the company
as a whole. They had what I consider to be a sound observation, if you
do not set expectations up front with claimants or insured they set their
own. By this I mean with first contact, the adjuster must be able to
tell the claimant you can expect the following from me:
(1) I will
provide my liability decision in (x) days,
(2) I will put you in a
rental car in (y) days,
(3) my appraiser will
see your car in (z) days,
In essence, the
adjuster must set the expectation of what he or she is going to do, when it
will be done and why it will be done.
What transpires if you do not set expectations then people set their own,
then when you do not deliver, they most likely will seek the advise of
counsel.
Now the worst part is what happens so much today, expectations are set, but
not lived up to, this is the worst thing that can occur, the role of the
adjuster is to ensure the expectations are meet, one note the expectations
of both parties must be reasonable.
All in all we always ask ourselves in this process is it such that
attorney's are required on the majority of claims that occur, the answer to
that question is in the abstract, no. Assuming proper training,
staffing, pending loads, adjusters can delivery the promise of the policy
and solve the problems of the insured.
What to often occurs as others have noted in various lists is that we do not
often see, prompt investigation, adequate disclosure of coverage, meaningful
offers for claims that are owed, delay for the sake of no reasons other than
delay, poor evaluation of damages, lack of understanding of the law, etc.
One other point we must make is that the legal profession is not the enemy.
The insurance carrier who in essence is a quasi public institution, who must
ensure they live up to a public trust, lawyers to have an obligation, that
is to best represent their clients, all to often the attitude prevails that
they are in it just to take our money, but the point is that is exactly
right, they are there to ensure their clients receive adequate compensation.
These two obligations are not as
some would like to say at opposition to a large extent they are similar.
In closing we must keep in mind: The claims process must be a process
that ensures that the actions of the claims representative be objective,
thorough, timely, fair and delivered with a sense that is why the claims
representative is there, to deliver a promise made when you as an insured
entered into a transaction for a sum of money for an uncertain event in the
future, that being a claim.
Mike Cerf
Expert Witness Insurance Claims
Sherwood, Oregon
503-925-1937
mcerf@teleport.com
