Reducing Claims Confusion amazonaws com
Focus on the Loss-Adjustment Process
By Lindsay Robison
Reducing Claims Confusion There is no question that consumer confusion is common when it comes to the insurance industry. And it seems that a lot of the confusion manifests in the claims process, simply because policyholders don’t think much about their policies until they need to use them.
14 IN Magazine Winter 2012
“P
olicyholders don’t understand the loss-adjustment process,” said Ed Roesch, claims manager for NAMIC Insurance Company, who has had a long history in the insurance industry’s claims sector. “They think ‘you have a policy, so you’re covered.’”
But after a claim is made, many policyholders assert that they were not told certain losses were not covered under their policies. So it seems that many of the claims process misunderstandings stem from a disconnect in communication between the policyholder and the insurance company. Thus, it becomes imperative that insurance companies – from independent agents to the claims department to executives and everywhere in between – reconnect that communication line. With the belief that “you have a policy, so you’re covered,” comes the question of who is responsible for making sure an insured understands what his or her policy is actually insuring him or her for. The National Association of Insurance Commissioners’ reference booklet “A Consumer’s Guide to Home Insurance” clearly states that “a homeowner’s insurance policy is a legal contract. It’s written so that your rights and responsibilities, and those of the insurance company, are clearly stated. You should read your policy and be sure you understand it.” So even the NAIC – the organization that seems to give the industry fits and starts more often than not – puts an emphasis of responsibility on the policyholder. But it’s common knowledge that the majority of consumers file away their policies almost as soon as they receive them in the mail, never getting past the first page. But “consumers cannot take the approach that the declaration page is where the policy stops,” according the Roesch. But as he also mentioned, who can really blame consumers for not wanting to delve into multiple pages of a policy that is full of terms that are second nature to only those who work in the industry? While the responsibility needs to lie with policyholders to make sure they do more than just glance at the dec page, it is also important for insurance carriers and the agents and brokers who sell policies for them to take the time to break down the coverages and the limits and exclusions included in a policy.
“Carriers can upgrade their policy forms to the simpler ones,” Roesch said, “and pull out the special coverages and sublimits and then break those down separately.” While it is preferable that all of this occur at the time the policy is written, that doesn’t always happen. If it does not, then it should be brought up at the time of the loss, before any other parts of the process get underway. This job, then, often falls to the adjuster. “It becomes the responsibility of the adjuster at the time of a loss to explain the policy coverages,” said Debra Squairs, vice president of claims for Union Mutual of Vermont Companies. The adjuster should “focus on the policy coverage that pertains to that loss and what it covers and what it does not cover and if there are any limitations and what they are in addition to explaining to the insured what they need to do.
I always tell policyholders that the most important thing you can do is be honest with your agent. Tell them what you have. Tell them what type of construction you have. Tell them if you have anything unusual.
“The adjuster needs to stay one step ahead and realize that just because it is second nature to them, it isn’t to the [policyholder],” she continued. “So the adjuster needs to take the time to explain the policy coverage, and if there isn’t coverage available, needs to explain why very clearly … not just sending a denial letter in the mail. It should be explained to them by phone or in person why there isn’t any coverage for their claim.” Squairs suggests sending out information about policies one coverage at a time. Mailing fliers with renewals or covering particulars in policyholder newsletters are easy ways to explain the coverage the company offers should a policyholder have a loss. Policyholders can also be confused about the appropriate limits within their coverages or how having or adding certain items could change a coverage and its limits. “I understand that a lot of policyholders, when they’re looking for coverage just want to hear what the lowest premium is,” said Ron Reitz, president of claim recovery company Quality Claims Management Corporation. “But that isn’t always the best for them to do. “I always tell policyholders that the most important thing you can do is be honest with your agent. Tell them what you have,” he continued. “Tell them what type of construction you have. Tell them if you have anything unusual.”
Read more about the role technology plays in the lossadjustment process in the online version of IN magazine on NAMIC.org.
Winter 2012 IN Magazine 15
Focus on the Loss-Adjustment Process Policyholders also do not seem to understand that when they make new, expensive purchases when they renovate their homes, they need to make their insurance agents or carriers aware of it. If not, policyholders might find themselves without as much coverage as they actually need. “People never really know they’re underinsured until they have a loss,” Reitz said. Just as important as it is for policyholders to fully disclose everything they own and any upgrades or changes they have made, it is just as important for insurance companies and/or agents to ask the correct questions when filling out a policy form. And they need to let the policyholders know that the questions that are being asked are being asked for a reason. Roesch once worked with an insurance-company client that had an an agent recommend to a policyholder who had previously carried no liability coverage that he carry liability
insurance based on the inherent risks associated with the family’s farm operations and personal risk, which included a swimming pool. While the agent recommended a $1 million liability limit, the policyholder opted for a significantly lower one. During a party on the policyholder’s farm, a guest suffered a catastrophic injury that paralyzed most of his body and required significant medical care. The man’s injury is a prime reason why the agent wanted the policyholder to consider a larger liability limit. If the guest’s bills incurred from the injury would exceed the limit the policyholder opted for, the policyholder would become personally exposed to cover the claim’s excess. This kind of occurrence is the reason Reitz says agents need to be diligent about explaining premium costs and how a higher limit might not cost policyholders as much as they might think. “If you’re saying, ‘I think you need seven hundred thousand in
Adjusters Make Contents a Priority
coverage and there is a little pushback, you can explain to them as an example that five hundred thousand in coverage will cost you X amount in premium. “I think they will be surprised to find that the differential is pretty small,” he continued. “I think they’re thinking, ‘It’s going to cost me twice as much,’ but it isn’t anywhere near that. The amount is very small compared to the extra coverage they get.” NAMICO’s Roesch agrees that agents need to be more proactive in asking potential and existing policyholders the correct questions. “Agents need the ability to look at the writing of a policy as a way of educating people about insurance and what they need,” he said. “Communication is key.” That communication allows policyholders and agents – and subsequently carriers – to build a relationship that can carry over into the claims process, giving policyholders
According to the old adage, some people can’t see the forest for the trees. But when it comes to contents covered in their homes, it seems that people see the forest and not so much the individual trees. Policyholders and adjusters alike seem to lean more toward the big picture and less toward the smaller details within the big picture. That’s why the Property Loss Research Bureau has contents issues on its radar. Scott Powell, PLRB’s vice president of educational and technical services, says that in the past contents got pushed to the bottom of the priority list. “[Adjusters] like to measure things and buildings are more quantifiable,” Powell said. “If you look at a fire loss, debris is strewn about covered with water and soot. Who wants to go through that to start picking out things, counting the number of shirts and blouses and so forth? “Contents have never had much of an appeal,” he continued. “[Adjusters] would spend all this time on the building and pin it down to the nickel and dime. That would be very precise, but then they would turn around and hand the insured a contents worksheet [to fill out on their own].” This is where Powell says adjusters and, in turn, insurers “effectively lose control of the claim,” simply because people would list more contents than they actually had, treating it almost like a shopping list rather than an inventory, leaving some carriers to get burned. “So in recent years, many carriers have spent a lot more time on contents, assisting [insureds] with claims,” Powell said, “and they’re pinning that down better than they ever had before.” IN
16 IN Magazine Winter 2012
a better idea of what to expect. “We see all too often on the back end of a claim, when we’re trying to keep the promise that the insurer made, that the insured didn’t understand the promise,” said Mark Pollack, CEO of Affirmative Risk Management, an Arkansas-based independent adjustment and claims analysis firm. “[After a loss] we’re there and looking like we’re breaking the promise.” Even if it was the same promise all along that just got lost in translation somewhere. In the end, even if companies and their agents and adjusters want to help an insured recover, they are tied to what the policy states –regardless of what the policyholder might have to say about it or how a situation pulls at emotions of those handling the claims. “We all strive for customer satisfaction while also recognizing that they get what they pay for,” Pollack said. “Just make sure policyholders understand that.” IN
Is Technology Adding to Policyholder Confusion? For many insurance companies, call centers, websites, emails, and now mobile apps have been valuable resources in allowing policyholders to submit claims any day at any time. But they, too, seem to be a source of policyholder confusion. Alliance Claims Solutions works with many mutual insurers – NAMIC members included – to help handle the claims process. Alliance customer service representatives have direct contact with insureds, and are often the first people insureds speak with when they need to file a claim. Therefore, Alliance’s CSRs experience firsthand the confusion policyholders have when reporting losses. “So many policyholders really think the twenty-four-seven service means they’re actually going to get an adjuster at their house that night,” said Amy Stevens, Alliance’s director. Many of the people Alliance talks to, according to Stevens, believe their insurance company is responsible for much more than they really are. She also says that because policyholders can report claims quickly they also believe their insurance companies can start the claims process just as quickly. “What we hear a lot is ‘Is someone going to come out today,’ on Saturday, even though it’s Labor Day weekend?” Stevens said. “And the answer really is ‘No, this is still your home to take care of.’
Enservio Contents Claims Index for 2011 The top categories as compiled from claims filed with insurers in 2011. Ranked by dollar value as a percent of total claims. Jewelry Electronics Apparel Furniture Home Goods Tools Appliances Sporting Goods Books and Magazines Beds and Mattresses
17% 13% 11% 11% 9% 4% 4% 3% 3% 2%
For a comparison with the previous year’s CCI, visit http://bit.ly/JXR44h.
“So how do you give them a little bit of control?” she continued. “We let them know what is going to happen next and give them advice [to mitigate what they can on their own]. To let them know that they will be okay, but that they’re probably not going to hear from an adjuster until the next day at least.” Union Mutual of Vermont Companies is one of many insurers that is implementing a website to allow policyholders to submit claims. Debra Squairs, the company’s vice president of claims, understands the benefits of this feature, but she also sees the confusion it causes policyholders and the subsequent pressure it puts on the claims department. When she first started in the insurance industry, notices of loss were still sent through the mail – the U.S. Postal Service – from the agent to the carrier. The claim would then be set up and assigned to an adjuster. If it was an independent adjuster, it would be mailed – again, U.S. Postal Service – to the adjuster, who would than contact the insured. The whole process could take anywhere from a few days up to a week before the policyholder heard from an adjuster. “That was acceptable to people,” Squairs said. “But now with all the new technology, the expectation of the insured is that if they get online and file a claim, they will hear from an adjuster immediately. Sometimes they will call a half hour later saying, ‘I just filed a claim, but I haven’t heard anything yet.’” So she says it is the responsibility of insurance companies to stay on top of this technology and constantly try to better the availability of it to consumers – something Union Mutual strives to do – so that companies can provide as quickly as possible the immediate service policyholders have come to expect … even if that expectation is a little misguided. IN
Winter 2012 IN Magazine 17
By Lindsay Robison
Reducing Claims Confusion There is no question that consumer confusion is common when it comes to the insurance industry. And it seems that a lot of the confusion manifests in the claims process, simply because policyholders don’t think much about their policies until they need to use them.
14 IN Magazine Winter 2012
“P
olicyholders don’t understand the loss-adjustment process,” said Ed Roesch, claims manager for NAMIC Insurance Company, who has had a long history in the insurance industry’s claims sector. “They think ‘you have a policy, so you’re covered.’”
But after a claim is made, many policyholders assert that they were not told certain losses were not covered under their policies. So it seems that many of the claims process misunderstandings stem from a disconnect in communication between the policyholder and the insurance company. Thus, it becomes imperative that insurance companies – from independent agents to the claims department to executives and everywhere in between – reconnect that communication line. With the belief that “you have a policy, so you’re covered,” comes the question of who is responsible for making sure an insured understands what his or her policy is actually insuring him or her for. The National Association of Insurance Commissioners’ reference booklet “A Consumer’s Guide to Home Insurance” clearly states that “a homeowner’s insurance policy is a legal contract. It’s written so that your rights and responsibilities, and those of the insurance company, are clearly stated. You should read your policy and be sure you understand it.” So even the NAIC – the organization that seems to give the industry fits and starts more often than not – puts an emphasis of responsibility on the policyholder. But it’s common knowledge that the majority of consumers file away their policies almost as soon as they receive them in the mail, never getting past the first page. But “consumers cannot take the approach that the declaration page is where the policy stops,” according the Roesch. But as he also mentioned, who can really blame consumers for not wanting to delve into multiple pages of a policy that is full of terms that are second nature to only those who work in the industry? While the responsibility needs to lie with policyholders to make sure they do more than just glance at the dec page, it is also important for insurance carriers and the agents and brokers who sell policies for them to take the time to break down the coverages and the limits and exclusions included in a policy.
“Carriers can upgrade their policy forms to the simpler ones,” Roesch said, “and pull out the special coverages and sublimits and then break those down separately.” While it is preferable that all of this occur at the time the policy is written, that doesn’t always happen. If it does not, then it should be brought up at the time of the loss, before any other parts of the process get underway. This job, then, often falls to the adjuster. “It becomes the responsibility of the adjuster at the time of a loss to explain the policy coverages,” said Debra Squairs, vice president of claims for Union Mutual of Vermont Companies. The adjuster should “focus on the policy coverage that pertains to that loss and what it covers and what it does not cover and if there are any limitations and what they are in addition to explaining to the insured what they need to do.
I always tell policyholders that the most important thing you can do is be honest with your agent. Tell them what you have. Tell them what type of construction you have. Tell them if you have anything unusual.
“The adjuster needs to stay one step ahead and realize that just because it is second nature to them, it isn’t to the [policyholder],” she continued. “So the adjuster needs to take the time to explain the policy coverage, and if there isn’t coverage available, needs to explain why very clearly … not just sending a denial letter in the mail. It should be explained to them by phone or in person why there isn’t any coverage for their claim.” Squairs suggests sending out information about policies one coverage at a time. Mailing fliers with renewals or covering particulars in policyholder newsletters are easy ways to explain the coverage the company offers should a policyholder have a loss. Policyholders can also be confused about the appropriate limits within their coverages or how having or adding certain items could change a coverage and its limits. “I understand that a lot of policyholders, when they’re looking for coverage just want to hear what the lowest premium is,” said Ron Reitz, president of claim recovery company Quality Claims Management Corporation. “But that isn’t always the best for them to do. “I always tell policyholders that the most important thing you can do is be honest with your agent. Tell them what you have,” he continued. “Tell them what type of construction you have. Tell them if you have anything unusual.”
Read more about the role technology plays in the lossadjustment process in the online version of IN magazine on NAMIC.org.
Winter 2012 IN Magazine 15
Focus on the Loss-Adjustment Process Policyholders also do not seem to understand that when they make new, expensive purchases when they renovate their homes, they need to make their insurance agents or carriers aware of it. If not, policyholders might find themselves without as much coverage as they actually need. “People never really know they’re underinsured until they have a loss,” Reitz said. Just as important as it is for policyholders to fully disclose everything they own and any upgrades or changes they have made, it is just as important for insurance companies and/or agents to ask the correct questions when filling out a policy form. And they need to let the policyholders know that the questions that are being asked are being asked for a reason. Roesch once worked with an insurance-company client that had an an agent recommend to a policyholder who had previously carried no liability coverage that he carry liability
insurance based on the inherent risks associated with the family’s farm operations and personal risk, which included a swimming pool. While the agent recommended a $1 million liability limit, the policyholder opted for a significantly lower one. During a party on the policyholder’s farm, a guest suffered a catastrophic injury that paralyzed most of his body and required significant medical care. The man’s injury is a prime reason why the agent wanted the policyholder to consider a larger liability limit. If the guest’s bills incurred from the injury would exceed the limit the policyholder opted for, the policyholder would become personally exposed to cover the claim’s excess. This kind of occurrence is the reason Reitz says agents need to be diligent about explaining premium costs and how a higher limit might not cost policyholders as much as they might think. “If you’re saying, ‘I think you need seven hundred thousand in
Adjusters Make Contents a Priority
coverage and there is a little pushback, you can explain to them as an example that five hundred thousand in coverage will cost you X amount in premium. “I think they will be surprised to find that the differential is pretty small,” he continued. “I think they’re thinking, ‘It’s going to cost me twice as much,’ but it isn’t anywhere near that. The amount is very small compared to the extra coverage they get.” NAMICO’s Roesch agrees that agents need to be more proactive in asking potential and existing policyholders the correct questions. “Agents need the ability to look at the writing of a policy as a way of educating people about insurance and what they need,” he said. “Communication is key.” That communication allows policyholders and agents – and subsequently carriers – to build a relationship that can carry over into the claims process, giving policyholders
According to the old adage, some people can’t see the forest for the trees. But when it comes to contents covered in their homes, it seems that people see the forest and not so much the individual trees. Policyholders and adjusters alike seem to lean more toward the big picture and less toward the smaller details within the big picture. That’s why the Property Loss Research Bureau has contents issues on its radar. Scott Powell, PLRB’s vice president of educational and technical services, says that in the past contents got pushed to the bottom of the priority list. “[Adjusters] like to measure things and buildings are more quantifiable,” Powell said. “If you look at a fire loss, debris is strewn about covered with water and soot. Who wants to go through that to start picking out things, counting the number of shirts and blouses and so forth? “Contents have never had much of an appeal,” he continued. “[Adjusters] would spend all this time on the building and pin it down to the nickel and dime. That would be very precise, but then they would turn around and hand the insured a contents worksheet [to fill out on their own].” This is where Powell says adjusters and, in turn, insurers “effectively lose control of the claim,” simply because people would list more contents than they actually had, treating it almost like a shopping list rather than an inventory, leaving some carriers to get burned. “So in recent years, many carriers have spent a lot more time on contents, assisting [insureds] with claims,” Powell said, “and they’re pinning that down better than they ever had before.” IN
16 IN Magazine Winter 2012
a better idea of what to expect. “We see all too often on the back end of a claim, when we’re trying to keep the promise that the insurer made, that the insured didn’t understand the promise,” said Mark Pollack, CEO of Affirmative Risk Management, an Arkansas-based independent adjustment and claims analysis firm. “[After a loss] we’re there and looking like we’re breaking the promise.” Even if it was the same promise all along that just got lost in translation somewhere. In the end, even if companies and their agents and adjusters want to help an insured recover, they are tied to what the policy states –regardless of what the policyholder might have to say about it or how a situation pulls at emotions of those handling the claims. “We all strive for customer satisfaction while also recognizing that they get what they pay for,” Pollack said. “Just make sure policyholders understand that.” IN
Is Technology Adding to Policyholder Confusion? For many insurance companies, call centers, websites, emails, and now mobile apps have been valuable resources in allowing policyholders to submit claims any day at any time. But they, too, seem to be a source of policyholder confusion. Alliance Claims Solutions works with many mutual insurers – NAMIC members included – to help handle the claims process. Alliance customer service representatives have direct contact with insureds, and are often the first people insureds speak with when they need to file a claim. Therefore, Alliance’s CSRs experience firsthand the confusion policyholders have when reporting losses. “So many policyholders really think the twenty-four-seven service means they’re actually going to get an adjuster at their house that night,” said Amy Stevens, Alliance’s director. Many of the people Alliance talks to, according to Stevens, believe their insurance company is responsible for much more than they really are. She also says that because policyholders can report claims quickly they also believe their insurance companies can start the claims process just as quickly. “What we hear a lot is ‘Is someone going to come out today,’ on Saturday, even though it’s Labor Day weekend?” Stevens said. “And the answer really is ‘No, this is still your home to take care of.’
Enservio Contents Claims Index for 2011 The top categories as compiled from claims filed with insurers in 2011. Ranked by dollar value as a percent of total claims. Jewelry Electronics Apparel Furniture Home Goods Tools Appliances Sporting Goods Books and Magazines Beds and Mattresses
17% 13% 11% 11% 9% 4% 4% 3% 3% 2%
For a comparison with the previous year’s CCI, visit http://bit.ly/JXR44h.
“So how do you give them a little bit of control?” she continued. “We let them know what is going to happen next and give them advice [to mitigate what they can on their own]. To let them know that they will be okay, but that they’re probably not going to hear from an adjuster until the next day at least.” Union Mutual of Vermont Companies is one of many insurers that is implementing a website to allow policyholders to submit claims. Debra Squairs, the company’s vice president of claims, understands the benefits of this feature, but she also sees the confusion it causes policyholders and the subsequent pressure it puts on the claims department. When she first started in the insurance industry, notices of loss were still sent through the mail – the U.S. Postal Service – from the agent to the carrier. The claim would then be set up and assigned to an adjuster. If it was an independent adjuster, it would be mailed – again, U.S. Postal Service – to the adjuster, who would than contact the insured. The whole process could take anywhere from a few days up to a week before the policyholder heard from an adjuster. “That was acceptable to people,” Squairs said. “But now with all the new technology, the expectation of the insured is that if they get online and file a claim, they will hear from an adjuster immediately. Sometimes they will call a half hour later saying, ‘I just filed a claim, but I haven’t heard anything yet.’” So she says it is the responsibility of insurance companies to stay on top of this technology and constantly try to better the availability of it to consumers – something Union Mutual strives to do – so that companies can provide as quickly as possible the immediate service policyholders have come to expect … even if that expectation is a little misguided. IN
Winter 2012 IN Magazine 17
