As a society, we sure can be quick to jump to conclusions. On the surface, these conclusions may seem to make sense, but are they always right? Perhaps nowhere is this more evident than when it comes to comparative negligence and its application in resolving insurance claims.
Consider the typical rear-end accident and the presumption that the person in the rear is always at fault. However, what if the person who got hit from behind had intentionally slammed on their brakes, had a defective brake lamp or was in the process of backing up? Compounding matters, consider claims scenarios involving intersections, parking lots, slip and falls, product defect, or liquor liability.
When considering that Americans have been conditioned by a never ending barrage of attorney ads promising to find fault with someone other than the victim, even if they were at fault, it’s no wonder this has become such a contentious negotiation issue. The reality is that fault is a complex component of any claim. Rarely are issues black and white. Rather, they are comprised of a myriad of minor details that all play a pivotal role in the proper outcome.
Having managed claims organizations across the country and being responsible for claims process improvement initiatives, including software applications that promised to improve results, I will be the first to attest that driving the right outcomes is no simple process.
It is estimated that 15 percent of all claims are closed with a missed subrogation opportunity. Frequently this is due to adjusters making erroneous liability calls. In multiple Six Sigma projects that I have managed, the results were actually much higher, often approaching 30 percent. This is a tremendous financial burden that has been placed upon an industry already faced with increasingly tight margins.
The reality is that far more accidents than most people realize have elements of comparative negligence. According to Jury Verdict Research, a national organization that tracks such data, rear end auto accidents accounted for only 45 percent of auto cases adjudicated, with the remainder comprised of intersection collisions, lane changes, chain reactions, and parking lot scenarios. In other words, a lot of claims where there was shared liability. These are claims that need a SecondLook.
As an insurer, you certainly shouldn’t expect to set a benchmark that high, as very few claims actually make it to trial. What you can do, however, is bank on the fact that many of your claims are closed with a missed subrogation opportunity and can benefit from a closed file audit or missed opportunity review.
So what can carriers do to drive these results? The process I utilized was to bring in SecondLook, an organization with over 600 years of claims expertise and proprietary Chameleon technology, to review closed inventory. What I liked was that there was never a charge to do this, but they always found missed subrogation. Often to the tune of millions of dollars!
It may be tempting to go it alone, which can yield results. But the time commitment and costs associated with getting it right the first time can hamstring any lean organization. This is compounded by everything from staffing shortages, inadequate training, lax management oversight and even staff reallocation due to Covid.
To really nail down the successful path to recovery on a consistent basis, claims organizations have to focus on claims. The carriers that do get it right optimize claims performance by instilling an ethic of “investigate, evaluate, and negotiate.” These form the foundation for quality claim files containing accurate settlements yet are increasingly overlooked in a never ending quest to chase other metrics of dubious distinction.
Investigate, investigate, investigate! This can’t be said enough. Are statements taken from all parties? Has all damaged property been inspected, photographed and preserved? Was there a scene investigation? Were primary and secondary liability factors or mitigating factors considered? Which duties were owed; which ones were breached? By taking the steps to complete a thorough investigation, not only will quality improve but so will results.
Evaluations are the critical byproduct of a thorough investigation. If the latter is incomplete, then how can the former be conducted at the level expected of a fiduciary? From the time the claim is reported, it is incumbent upon all involved to secure the necessary documentation to enable a fair and accurate assessment of coverage, liability and damages which are all of equal importance.
There is no question that evaluations take time; a necessity if one is to achieve accuracy. A detailed evaluation necessitates not only looking at all of the facts presented to date, but thinking outside the box. If an injury doesn’t seem plausibly related, then perhaps running background checks, hospital searches, index reviews, or simply knocking on a neighbor or ex-spouses door will provide missing pieces to the puzzle.
One aspect of the claims process that many adjusters struggle with is negotiation. There is no question that this can be a contentious and adversarial part of the process. Complicating matters is an economy struggling through the covid recovery that has resulted in an uptick of insurance opportunism. Whether a claim is legitimate, inflated, or an outright fraud, it seems that everyone is trying to haggle for as much as they possibly can.
This makes the job even more challenging, as carriers must take steps to ensure that they have not only the best and brightest in their ranks, but provide them with the negotiation tools and strategies that have been proven to work. Far too often people will take the path of least resistance, failing to negotiate the shared liability or pre-existing conditions. This not only costs the carrier, but alas violates the fiduciary duties between the insurer and the insured.
Calibrating Your Organization
During my tenure as quality assurance director for a large multi-national carrier, our team was tasked with providing the necessary feedback to enable the organization to improve the entire claims process. From loss intake and investigation to evaluation, settlement, and recoveries, a myriad of opportunities existed.
Perhaps one of the greatest challenged faced across the insurance industry is consistency, such as liability assessment. While consistency in any process is a challenge, it becomes even more so when there is an element of subjectivity. After all, who’s to say if the accident was 50/50 or 60/40?
Herein lies the challenge, as a 10 percent differential in liability assessments is not necessarily the concern, but having clear comparative losses settled as absolute is. When reviewing internal data, it is critical to not only identify the frequency by which comparative is assessed, but to conduct calibration exercises to ensure that staff understands and uniformly applies the proper application of jurisdictional laws and general duties owed.
Calibration, defined as a set of gradations to show positions or values, brings into alignment what previously was out of sync. In the world of insurance claims, it accomplishes the ever-elusive goal of organizational consistency.
This process can be used to benchmark both current results and internal knowledge. Once this has been established, internal processes can be designed to achieve a variety of metrics to gauge results.
While many aspects of the claims process should be calibrated, liability is often a key issue that can serve as a foundation for organizational improvement can be based. Proper liability assessment will ultimately lead to improved negotiations, more accurate settlements, better recovery identification and ultimately an improved bottom line.
In the end, it isn’t the bells and whistles that will improve results, but rather a keen focus on blocking and tackling the very basic elements of insurance claims. While there are certainly claims in which one person bears sole responsibility, they do not comprise the majority.
To the contrary, there are many more opportunities where shared liability exists. From product defects and dram shop claims to homeowner’s, commercial, and auto insurance, there are often multiple parties that share culpability. From points of impact to statement inconsistencies, it is incumbent upon the investigating claims team to identify those opportunities. But beyond the identification comes the effective negotiation. It is one thing to determine shared fault, but another to effectively educate a person as to why they bear some of the responsibility.
To take advantage of the opportunities that exist, it is critical to evaluate current results, both internally and against the industry. But even then, if 15 percent of all claims across the industry are closed with a missed subrogation opportunity, is that benchmarking enough?
A good solution is a three-pronged program that begins with the recognition that opportunities exist, and certainly can serve as a foundation from which to gain a competitive edge. By recognizing that money is being left on the table, there should be a tremendous cross-functional incentive to collaborate on effective solutions that have been proven to work.
Next, identifying an organization’s gaps can serve as an invaluable exercise to identify glaring openings like a football coach reviewing game day film. Simply asking process related questions isn’t enough. Sit down and plot out every single action taken from the inception of a claim through its final disposition. For carriers with multiple physical locations, or even multiple teams, this can prove to be an eye-opening experience.
Lastly, calibrating the audience to ensure consistency of purpose is the only way to create an exceptional organization. As Vince Lombardi once said, “perfection isn’t attainable, but if we chase perfection we can catch excellence,” which should be everyone’s ultimate goal.
Chris Tidball is an executive claims consultant with SecondLook, an industry leading subrogation firm and spent more than 20 years in various claims capacities with multiple top 10 P&C carriers. He is the author of multiple books including Re-Adjusted: Taking Your Claims Organization From Ordinary To Extraordinary as well as the acclaimed fictional thriller Deep State: A Jake McFarland Thriller. To learn more contact firstname.lastname@example.org or on LinkedIn @SecondLook.