According to most sources, the problem is only getting worse.   For instance, the Insurance Information Institute studies show that “staged accidents” increased 52% in the state of Florida from 2009 to 2010.  CBS Evening News just ran a special report exposing not only the fraud, but just how easy it is to pull off.

During a recent presentation of non industry professionals, I shared some statistics related to fraud, such as Florida drivers paying $549 in additional premium specifically as the result of staged accidents.   As industry veteran’s, many of us have become attuned to the problem not recognizing that most outside the world of claims don’t know that it even exists.    My audience was shocked to hear that 32% of all billings for auto accident related injuries in the state of Florida are for services never even rendered!

Staged accidents, swoop and squats, run downs, cappers and pill mills are foreign to the average vernacular, but are a significant problem that must be dealt with. 

As discussed in Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary to Extraordinary, it is incumbent upon adjusters to not only dig, but dig deeper.   A large part of the solution to fraudsters is better trained, highly motivated staff with an insatiable curiosity for the truth. 

I began my adjusting career a number of years ago in South Central Los Angeles, which at the time, was the nation’s epicenter for insurance fraud and staged accident rings.   The  Los Angeles County District Attorney opined then that as many as 50% of local auto claims contained elements of fraud. 

The problem has only gotten worse, expanding to cities of all sizes from coast to coast.   To think that staged accidents are limited to Miami, L.A. or New York is simply not true.   While the propensity for fraud may be higher in some jurisdictions than others, the magnet of easy money is universal. 

Improving claims processes to proactively identify potential red flags is critical to reducing fraud.   At the highest level it takes insurers working with law enforcement and the courts to create effective deterrents.   The law enforcement community must have the teeth necessary to investigate, while insurers are held harmless from unscrupulous trial lawyers who use bad case law to force payments for claims that never even occurred. 

But this is all meaningless unless there is an acute focus to basic blocking and tackling by adjusters, who must have the fundamental knowledge and skills to identify, investigate and report fraud.   Far too often, these skills are missing as the cultural focus of some insurers has moved away from investigation to merely claims processing.  

You may recall the movie Double Indemnity, a 1944 thriller about Barton Keyes, a savvy, take no prisoners claims manager.    In the movie, Keyes becomes suspicious when a policyholder is killed and the wife seeks to collect on a double indemnity clause relating to an “accident death” when her husband allegedly fell off of a train.  

In the end it is the savvy of Keyes that unravels the caper with such quotes as, “Now look, Walter. A guy takes out an accident policy that’s worth $100,000 if he’s killed on the train. Then, two weeks later, he IS killed on the train. And, not from the train accident, mind you, but falling off some silly observation car. You know what the mathematical probability of that is? One out of, oh, I don’t know how many billions. And after that, the broken leg. No, it just, it just can’t be the way it looks. Something has been worked on us!”

By his own admission, Keyes was guided by his “little man” which was a reference to his heart.   This  gave him intuitive ideas, or hunches,  that helped him solve cases of insurance claims.   As discussed in Re-Adjusted, insurance claims is not a career for just anyone as it takes a unique set of skills, not the least of which is intuition, to effectively investigate and resolve claims.  

Hiring the right people is the foundation, training them how to properly investigation is a means to success, but at the end of the day it does come down to one’s ability to have the perception necessary to seek out the truth in an increasingly complex world.   

By re-emphasizing the investigative aspects of insurance claims investigations, carriers can go a long way towards not only attacking the growing problem of fraud, but towards gaining a competitive edge in the marketplace.   While once a mainstream approach to claims, this now seemingly outside the box paradigm is precisely what can take an organization from ordinary to extraordinary. 

Christopher Tidball is an executive claims consultant and the author of multiple books, including Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary To Extraordinary!  He is an industry veteran who has held multiple jobs in claims, management and executive leadership for multiple Top 10 P&C carriers.  To learn more, please visit www.christidball.com or email chris@christidball.com

Certainly, there are tasks that have to be completed.   Good adjusters, managers and executives know this and don’t need to be asked twice.   Herein lies the problem; are the myriad of metrics designed to get results or simply prod marginal staff along?   

As discussed in Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary To Extraordinary, not everyone is meant for a career in claims.  Yet, many organizations ignore this in their hiring practices.   The reality is that organizations are comprised of A, B and C players.   The key to success is to acquire as many A’s as possible, motivate the B’s and remove the C’s.  

Companies become great because of their people and their culture.   Companies also fail for the same reason.   As a frequent flier, I typically travel on the one airline that has redefined that industry.    The reason they have succeeded is because their people do things right, in a consistent manner with processes and procedures designed to get results, not the least of which is the hiring of the right personnel. 

Whether it is an airline, a manufacturer, a professional service provider or a claims organization success occurs when there is basic execution of the fundamentals.  It is important to not forget that claims is a skill, not a job.   It takes a certain personality to effectively handle the tasks required for thorough investigations, negotiations and settlement.  

In reviewing processes throughout the industry, both here and abroad, it never ceases to amaze me how many opportunities exist.   Liability is often assessed at zero or one hundred percent despite a significant percentage of claims involving shared liability.   Injury investigations often overlook pre-existing conditions or intervening circumstances.   Scene investigations are rarely completed and witnesses often aren’t questioned.   Clinics go uninspected, patient sign in logs aren’t obtained, red flags for fraud are routinely ignored.  

It is this basic blocking and tackling that separates not only A,B and C players but entire organizations who can gain a significant competitive advantage with simple process improvement.    Fortunately, none of this is overly complex.   To the contrary, it simply involves hiring the right people, training the right knowledge, implementing the right processes and leveraging the right technology.  

By following this model, the results will come.   During my tenure overseeing claims operations we found success by transforming from the status quo.   While measuring mountains of metrics had historically given us data, it wasn’t giving us the results we sought.   By moving to one simple metric and calibrating the organization, the focus moved from chasing numbers to getting results.

In this particular case the simple metric was an all encompassing quality assurance score.   A good claim file will meet every metric that had been previously measured individually.   This focus enabled the organization to improve accuracies, reduce expenses, decrease cycle time and increase retention.   It also provided the data needed to ensure the appropriate people were in the appropriate job function.  

With a simple re-adjustment designed to leverage people, processes and technology, it is possible for any organization to go from ordinary to extraordinary.    Those who are overly ambitious will not only redefine their own organization but have the potential to redefine their industry.  

“The vision must be followed by the venture.   It is not enough to stare up the steps, we must step up the stairs.” – Vance Havne

Christopher Tidball is an executive claims consultant and the author of Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary To Extraordinary!  He is a twenty plus year industry veteran with wide ranging claims, management and executive experience at multiple Top 10 insurance carriers.   To learn more, please visit www.christidball.com or email chris@christidball.com.

To effectively address such process opportunities, there are a number of steps that can be taken to ensure that:

1)      Demands are reviewed promptly

2)      Estimates are reviewed for accuracy

3)      Historical alternative used parts availability has been verified

4)      Effective negotiations are utilized to compress cycle time and limit arbitration filings. 

In reviewing some common practices, there are two that stand out as being commonly applied.    In the first, the handling adjuster is tasked with responding to inbound subrogation demands.   In this situation the following questions should be asked to ensure that this is this process is maximizing returns:

1)      Is the adjuster sufficient trained in material damage to review the estimate for accuracy and estimatics compliance?

2)      Does the adjuster have the ability to access historical alternative parts availability?

3)      When shared fault applies, is the adjuster effectively identifying duties owed and breached so as to formulate a viable comparative negligence scenario?

4)      Does the adjuster have sufficient time to ensure that subrogation demands are reviewed and evaluated within 48 hours of receipt? 

Another common iteration of this inbound process entails utilizing a material damage team to assist in the evaluation process.  While this can be effective in estimate compliance, some critical questions are:

1)      Does the reviewer have access to historical alternative parts availability? 

2)      Could the time spent reviewing, or in some cases, rekeying an estimate be more effectively spent in other capacities?

3)      If the reviewer is not negotiating the settlement, does the handling adjuster have enough knowledge of material damage to effectively apply the reductions during negotiations? 

4)     What is the actual paid amount compared to the reviewed and reduced amount?  

The challenges of any subrogation response process arise across the P&C industry, where other priorities such as contacts, inspections and disposition often take precedence.    To determine the right solution for any organization takes a critical review of the entire end to end claims process.  

By looking for organizational workflow and process gaps, the solutions often become evident.   It is also critical to consider unintended consequences, such as increased arbitration filings, rising expenses or cycle time delays.   When these arise there is often a correlating deterioration in average severity and comparative negligence assessment. 

Often the most effective solution involves leveraging claims technology to assist in the process, freeing up internal resources for more productive redeployment while increasing accuracy in ultimate settlements.  

Christopher Tidball is a claims consultant, specializing in process,  workflow and is the author of Re-Adjusted: 20 Essential Rules To Take Your Organization From Ordinary To Extraordinary.   To learn more, please visit www.christidball.com or e-mail chris@christidball.com. 

To better understand the dynamics of the problems facing Floridians, it is important to recognize that Florida is just one of thirteen states to mandate no fault coverage.   In fact, since the advent of no fault in the early 1970’s, multiple states including Georgia, Connecticut and Colorado have abolished this costly mandate.   Another state, Pennsylvania, gives customers the choice of purchasing auto no fault or having the right to sue.  

Conceptually, no fault looked good on paper.   When a party is hurt in an accident they go after their own coverage instead of fighting with the tortfeasor’s insurance company.   The underlying premise was that costs would go down as the result of decreased litigation.  Sadly, this is not the case in Florida where frivolous litigation abounds as the result of “soft tissue” injuries. 

In the United States there is only one no fault state that remotely resembles the founding premise of this first party coverage. Michigan provides unlimited benefits to injured parties while limiting the right to sue to only the most serious cases, such as death, and only after getting approval from a judge rather than a much less informed jury.   Of course, Michiganders pay dearly for their no fault with some of the highest premiums in the nation. 

The problem in Florida is substantial.   First, the threshold for determining whether a party may sue has been watered down by the courts over the years meaning that virtually any injury, irrespective of how minor it actually is, can be adjudicated.   While this is appropriate in states without a no fault statute, it is inappropriate in Florida where such determinations should be made by judges rather than juries.   This should be done with a strict interpretation of the statutory language that allows for pain and suffering only the event of death, permanent disfigurement or permanent impairment of a body function.  

Secondly, Florida is considerate a pure comparative negligence state.   This means that a person is able to sue for any percentage of damage for which they were not at fault.   Even if a person is 99.9% at fault, they are able to sue for damages.  A more sensible approach, such as the one Michigan adopted during their tort reform, would be the modified comparative negligence law followed by the majority of states which bars a person from suing if they are more than 50% at fault.  

Next, there is the element of fraud that is costing Florida policy holders billions of dollars annually.   According to the Insurance Information Institute, the “fraud tax” levied on Florida drivers was $549 million dollars in 2010 was expected to double in 2011.   This fraud comes in all shapes and sizes from staged accidents to burying deductibles to claiming injuries that are nothing more than pre-existing conditions.   

Florida has become a national hotbed for staged accidents. PIP costs associated with staged accidents increased 77 percent from 2009 to 2010, while billings for services not rendered increased 32 percent, according to Insurance Information Institute estimates.

In a purely staged accident, a “capper” will organize the scenario and give each of the “victims” a “script” of what to say to the insurance company. The “case” is then sold to an attorney who works in conjunction with a doctor to create falsified bills that are submitted to an insurance carrier.  

Florida is also one of a just handful of states that doesn’t require bodily injury liability coverage which pays for the personal injury caused to others.   This is nonsensical in a state that defines an automobile as a dangerous instrumentality.   As a result, responsible Floridians pay a significant amount for uninsured motorist coverage to cover them in the event of an accident with drivers who carry no liability coverage, or  worse yet no coverage at all.

In Florida, the latter comprise 23% of all drivers on the road.  Despite their breaking the law, these people are still allowed to sue in the event of an accident.  A common sense approach taken by a number of states is to bar the uninsured from having the right to sue.   It is important to remember that driving is not a right, it is a privilege. 

It is time for the legislature to enact meaningful tort form, including capping attorney fees and damages.   There should also be careful deliberation to abolishing no fault, as was done in Colorado or making the coverage optional, as was done in Pennsylvania.  

Another option is to keep no fault but strictly enforce the law so that only those who are truly killed or maimed in accidents have the right to sue for pain and suffering.    Consideration to having caps, such as those associated with Medicare and worker’s compensation, on treatment for soft tissue injuries which comprise the vast majority of cases clogging our courts.

Finally, law enforcement needs to have the teeth necessary to take a bite out of crime, insurers need to be held harmless while investigating these crimes and the criminals need to spend time in jail, a rare occurrence today.

The Florida legislature has spent years trying to fix these problems, to no avail.   It is time to look at steps being taken by other states where successful reform has mean a corresponding reduction in premiums, litigation and fraud.     

Christopher Tidball is an executive claims consultant and author of Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary To Extraordinary!   He is a twenty plus year industry veteran and a contributing writer for Claims Magazine.  To learn more please visit www.christidball.com or e-mail chris@christidball.com.

Better yet, what about picking resolutions that are guaranteed to make money without costing you any new money?   While this may sound too good to be true, the reality is that these simple resolutions are guaranteed to have a BIG impact on your bottom line. 

With 2011 behind us, both businesses and individuals will be busy closing out their books only to find that they are owed money.  According to government records, there is $35 BILLION in unclaimed funds owed to individuals.   You can search for your own personal goldmine at www.unclaimed.org.   Even more telling is the estimated $200 billion owed to businesses and if unpaid judgments are factored in this figure rises to nearly $300 billion!

A significant percentage of these funds are owed to insurers who have tasked their claims departments with recovery.  As they have come to find out, collecting this money can be a challenge in a nation where 82% of all judgments go unpaid.   Simply stated, getting judgments is easy but collection is the true test of ability.  Don’t let that money lie around; make a resolution to work with an expert to track it down who won’t charge a fee unless there is a recovery. 

In addition to improving receivables and outbound subrogation, many carriers overlook a significant opportunity when it comes to adverse or inbound subrogation demands.   Given the industry leakage rate on estimatics, loss of use and diminished value a great resolution would be the implementation of a proven method for reviewing inbound subrogation that can reduce amounts owed by five to fifteen percent. 

While inbound and outbound subrogation is a great place to start, the reality is that potential resolutions to improve blocking and tackling in the claims process abound.   From first notice of loss and investigation to negotiation and settlement, there is plenty of room for improvement with solutions proven to give carriers a competitive edge in the marketplace.  Most importantly, many of these resolutions can be done with little to no financial commitment!

By taking simple steps to change an organizational paradigm from “what we do right” to “where can we improve” it is possible to quickly gain a competitive edge in the marketplace.  By simply benchmarking existing results against both internal and external measures, an organization can identify weaknesses.   Whether it is fraud recognition, subrogation, salvage, liability assessment or BI negotiations, significant lost economic opportunities are sure to exist.  Identifying them is critical, but it is taking the steps towards improvement that will separate the ordinary from the extraordinary. 

Whatever your business resolution, 2012 is shaping up to be a great year to improve quality, accuracy, cost containment and retention of both staff and policyholders.  As Vince Lombardi once said, “perfection is not attainable, but if we chase perfection we catch excellence.”

*****

Chris Tidball is the author of  Re-Adjusted: 20 Essential Rules to Take Your Claims Organization From Ordinary to Extraordinary, as well as Kicked to the Curb, which combines the spiritual journey of The Secret and The Power of Positive Thinking with the insight gained during his twenty years on the inside of multiple Fortune 100 companies.  He has been featured in a variety of media, including MSNBC and CBS Market Watch with innovative solutions to assist businesses in finding new revenue streams in today’s difficult economic times.  For more information please visit www.christidball.com or email at chris@christidball.com.

In my experience overseeing a large organizational claims and subrogation processes, this actually strikes me as low, as it may not fully encompass cases where the adjuster settlement was based upon total liability as opposed to properly identifying comparative negligence. 

When considering benchmarks, there are time bound and results oriented metrics which all have an impact on an organizational bottom line.  The most commonly used benchmark, which dates back to the original Ward studies in the 1990’s measures Total Dollars of Net Subrogation Recoveries as a % of Total Indemnity Paid Losses for Personal Auto Collision.  This is probably the most common benchmark but is only as accurate as subrogation identification, which often lacks within carriers resulting in collectible files being closed with no recovery.   After the original study, it was concluded that high performing carriers collect about 23.7% while the total universe is at 11.6%.

In the years since, there has been some focus by carriers on improving their subrogation process which has led to an increase in recovered dollars.   Perhaps the best source of the most current and accurate data is the most recent NASP benchmarking study reflecting an even higher percentage of net recoveries to total paid collision.   

A potential flaw with the current benchmarking methodology is its heavy reliance on collisions.  While 72% of recoveries are indeed related to collision, it is shortsighted to not give consideration to all line coverage’s where subrogation is a viable option, in particular UM, UIM, UMPD, PIP and Medical Payment’s.   In addition, there are even more overlooked opportunities for health, worker’s compensation and property insurance. 

Some key metrics that can be considered by carriers include the following:

• Recognition percentage – dollars identified as recoverable from paid dollars by claims adjusters.  The key here is having a pool of adjusters who understand the concept of subrogation, local jurisdictional knowledge and having the ability to negotiate shared liability settlements.  In industry benchmarking studies, subrogation recognition generally ranges from a high of 45 files to a low of 5 for every 100 new claims.   Specific to my experience, the optimal collision referral rate, while dependent upon negligence laws, should be around 35% in a pure comparative state, 25% in a modified comparative state and 15% in a contributory state.
•  Recovery Rate – dollars actually recovered from total paid dollars.  Measure this in terms of both gross recovery as well as costs after factoring in expenses.  When factoring comparative negligence and improper referrals, the recovery rate should be somewhere in the range of 85-90%.   This requires adjusters properly identifying subrogation, assessing comparative negligence and pursuing only what they are entitled to.  
•  Recovery Rate per FTE. Include in this both the gross dollars as well as net dollars and expenses incurred.  There is a wide variance among adjusters, but a good target would be $1,000,000 per subrogation adjuster.  
•  Cycle Time- time from subrogation identification to recovery.   The industry average is about 200 days, yet the average time to issue final payment is about 10 days.   With the ability to fast track arbitrations and leverage technology, this could be compressed to well less than 100 days.   Each day that the money sits on the table there is a quantifiable impact to the actuarial triangles.  
•  Subrogation Allocated Loss Expenses (ALE) – file related expense dollars paid to recover subrogation dollars.  It makes no sense to spend $500 dollars in overhead to recover $400.  The following model exemplifies when it may make more financial sense to outsource more complex portions of recovery operations. 
•   Subrogation Unallocated Expenses – non-file related expense dollars paid to recover subrogation.
•  Recovery Multiple – ratio of recovery dollars to expense dollars
•  Files closed with no Recovery-Percentage of files referred to subrogation that are closed with no recovery.   While there can be legitimate reasons, carriers invariably tend to close files prematurely particularly in cases involving uninsured tortfeasors who tend to be a challenge for carrier subrogation adjusters. 

Some benchmarks that carriers could utilize to most effectively gauge their subrogation performance could also include a formula that divides total staff into total recoveries for a recovery amount per FTE.   This should be used in conjunction with disposition numbers such as total closures and cases closed with no recovery.  

When looking at the percentage of files closed with no recovery, it is critical to understand the carrier’s workflow.  Many carriers use internal adjusters, often with little debt collection experience, to pursue uninsured tortfeasors.   A good barometer of how much money is being left on the table is the frequency by which second, third or even fourth looks are sent out to the open market where a vendor will review it, often at no charge.    

While not an insurer, AT&T uses one of the most robust and effective collection strategies available.  They don’t rely on one vendor, but rather upwards of 27 vendors, that are used for secondary, tertiary and quaternary reviews.  They post all results daily, creating a climate of competition.   What carriers need to realize is that on a third review, they may recoup another 1-3%, while a quaternary review may yield an additional percentage point on top of that which is critical in a market with tight margins.  At the end of the day, what remains uncollected is sold on the open market. 

One key aspect that is not often considered in subrogation benchmarking is that of claims.   To truly understand the end to end process, the following metrics can be very beneficial in identifying opportunities to maximize recoveries. 

• Percentage of files referred to subrogation by line coverage. 
•  Percentage of files where collision was paid but no PD was paid with no associated referral to subrogation.
•  Percentage of claims where liability was assessed at either 0% or 100% or similar moniker in claims system such as insured not at fault/insured at fault. 
•  Referral of supplementals and rental invoices to subrogation.

Many carriers will look at just a fraction of the available metrics, often focusing on those that are easily obtainable, such as bottom line recoveries or percentage of collision referrals.   This approach can have unintended consequences, such as adjusters referring to meet a number rather than doing their investigation.   The challenge with any metric is to ensure that there is quality control in place, as policing adjusters is often required to make sure that they are doing the right thing.   

Christopher Tidball is a claims and subrogation consultant and the author of Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary to Extraordinary.   His career in claims spans two decades as a Claims Adjuster, Manager, Quality Assurance Director and Claims Process Leader.   His discussion on auto claims benchmarking will be featured at the upcoming Auto Subrogation Execusummit in February, 2012.  For more information, please visist www.christidball.com or email chris@christidball.com

In a sense, knock for knock agreements bare some resemblance to true no-fault laws, such as those found in Michigan, whereby responsibility for reparations falls to individual insurers regardless of fault and type of loss.   

Unlike laws in true no-fault jurisdictions, these agreements generally aren’t statutory and often do more harm than good.   The rationale is economic and administrative efficiency.  While an insurer may be able to pursue a recovery from the party responsible for an accident or from its policy-holder, this is perceived to be a costly administrative procedure. The knock-for-knock agreement simplifies recovery claims among insurers and, over time, theoretically attributes costs fairly among insurers.

However, knock-for-knock agreements between insurers have been criticized as unfair on the party not responsible for an accident. If, for the sake of administrative ease, an insurer pays out to repair damage done to its policy-holder’s own car instead of pursuing the party responsible for the accident for all relevant costs, an effective claim is recorded against that policy-holder’s insurance record. In this way, knock-for-knock agreements can result in policy-holders’ finding unexpectedly, when they come to renew their insurance, that they face higher premiums regardless of responsibility for an accident in which they were involved.

In many foreign countries, market segmentation isn’t nearly as defined as it is in the United States.   For example, a knock for knock agreement in America between a non standard and standard insurance carrier would be very detrimental to the latter.   Given the disproportionate number of accidents by non standard risks, the standard drivers would sustain increased out of pocket losses, such as deductibles and higher premiums.   As market segmentation evolves overseas, this is likely to expose significant flaws in knock for knock agreements.  

Arguably a better model would entail a fundamental understanding of the subrogation process.   By developing a claims organization that utilizes  cutting edge workflows and processes, carriers who opt out of knock for knock agreements stand to gain a significant competitive edge in the marketplace.  

Santam, a leading South African insurance carrier, terminated their participation in the Knock for Knock Agreement in that nation.   In their news release, the carrier stated,  “With increased emphasis on profitability and cost containment, the debate regarding the excess has become fiercer and has often frustrated policyholders.  Santam’s decision was based on the fact that the Knock-for-Knock Agreement is outdated and did not stay abreast of developments in the insurance industry.  Our view is that Santam can serve its clients better without this agreement.”

While these types of agreements still abound in many nations, the reality is that carrier’s looking to improve profitability, increase retention and gain market share will likely to the same conclusion as Santam.  As discussed in my book, Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary to Extraordinary,  a far better road to success is that of implementing an end to end process that is second to none will serve as the springboard to handle claims better, faster and more accurately than the competion.    

 *****

Christopher Tidball is a claims consultant and author of Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary to Extraordinary.   He spent more than than twenty years in various claims, process and executive roles with multiple leading insurance carriers, developing innovative solutions to improve all aspects of the claims process.  To learn more, please visit www.christidball.com or e-mail chris@christidball.com. 

There was much speculation that the kid who brought a state championship to Saint Johns (Florida) County and a national championship to Gainesville, couldn’t make it in the NFL.  Sure, he could work in Urban Meyer’s spread offense, but could he transition to Denver’s offensive style?  They said his mechanics were off, his technique needed polishing and that he would  be nothing more than a flash in the pan.  

So how does this translate to your claims organization?  Simple; aside from Tebow being an inspiration and a positive role model, he shows that there isn’t one way to do things.  After all, his unorthodox style has been media fodder since the day he was drafted.   But now, with a 6-1 record as a starting quarterback for the division leading Denver Broncos he is giving people reason to pause. 

Far too often in claims we are muddled in the minutiae of processes and procedures without recognizing that the best results come from those who think outside the box.   We have a tendency to live in a world where benchmarking is all that matters and results must fall within the parameters of the proscribed metrics without recognizing the potential unintended consequences. 

Make no mistake, numbers do matter.   Just as Tebow’s job security depends on numbers, in particular winning, so to does ours.   Files have to be closed, profits have to be made, policyholders must return and customers must be satisfied.  But are those achieved by simply looking at the numbers? 

If claim disposition is 100%, does that mean that they were settled accurately?  If monthly reports show that 100% of all customers were contacted within 24 hours of loss report does that mean that the right questions were asked?  If supplement rates are dramatically reduced, does that mean that better estimates are being written?  Herein lies the problem when numbers are chased instead of results being attained.  

What Tebow shows is that winning can come in all shapes and forms.   The same can be said for claims, where ultimate outcomes can be reached in a variety of ways, some good and some bad.   Chasing numbers for the sake of chasing numbers is bad.  Getting results in a never ending quest to provide winning outcomes is good.  

In Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary To Extraordinary, it is said that perfection is hard to attain, but striving for it is an achievable goal.   In 1972, the Miami Dolphins seemingly set the bar for perfection in the NFL, running the table on their way to winning the Super Bowl.   While impressive, it was not perfect.   That would be the 1933 Providence Huskies who not only went undefeated but never gave up a point.

The best way to measure a claims organization is by establishing a solid quality assurance program.   Not the kind of program where a manager randomly reviews a file, but one of impartiality where total file quality is measured, benchmarked and improved upon.  Like the ’33 Huskies and  ’72 Dolphins the quest for perfection needs to be bred throughout the organization.   A culture of transformative change and innovation needs to be embraced. 

Playing following the leader is easy.   But, across the business universe, the true success stories come from those who have bucked the trend, defied the odds and came up with new and better ways to do things.  Southwest Airlines changed the way we fly; Amazon changed the way we shop and Apple changed the way we communicate.   Herb Kelleher, Jeff Bezos and Steve Jobs were not followers; they were innovators who did things differently. 

Whether or not this changes the way your organization conducts business remains to be seen, but the one certainty is that those who take the lead in fostering change will gain a competitive edge in the marketplace.   Tim Tebow may not be John Elway but, as football fanatics are finding out, he can win.   The Broncos have just had to adapt to his style, instead of forcing him into theirs.  Maybe, just maybe, they are on to something. 

Perfection is not attainable, but if we chase perfection we catch excellence- Vince Lombardi

Christopher Tidball is an executive claims consultant and the author of multiple books, including Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary To Extraordinary!  He is a twenty year industry veteran who has held multiple leadership roles for various Top 10 P&C carriers.  To learn more please visit www.christidball.com or e-mail chris@christidball.com.

Diminution of value can be one of the more complex aspects of the claims process.  While determining a fair market value for property in good times is challenging enough, consider the implications of the “great recession” and collapse of the housing, collectibles and commodity markets in recent years.  Another challenge is that there are very few governing state statutes, and even when present, they often are focused on automobiles. 

Diminution of  value is a legal term used when calculating damages in a legal dispute, and describes a measure of value lost due to a circumstance or set of circumstances that caused the loss. Specifically, it measures the value of something before and after the causative act or omission creating the lost value in order to calculate compensatory damages.

Herein lies the challenge; what was the property really worth before the loss?   When dealing with an automobile, the value is readily available in resources such as NADA.   That said, if a vehicle is repaired back to pre-accident condition, has it sustained any diminished value.  My position is generally that is may have, but only to the extent that the owner sells the vehicle, discloses the loss and accepts a reduced sum when selling the car as a direct result of the disclosure of the prior damage.  

But what about property, such as a home?  Given the state of the housing market, it is not uncommon for homes to be insured for more than they are worth.   But is this what the insurer owes?  Generally speaking, the insurer will owe the fair market value or cost of replacement, depending on the terms of the insuring agreement.  

As a Floridian, I can attest firsthand to the “upside down” housing market.  Homes that were worth a half million dollars in 2007 are often worth less than half today.   This creates not only animosity between insurer and insured, but presents potential legal challenges.   The reality is that a damaged home is worth what it would have brought in its pre-claim condition, not at the peak of the market. 

This concept is certainly not limited to homes and cars.   Many commodities and collectibles including art, jewelry and boats have seen significant erosion of value over the past two years.   So how can an insurer obtain a fair market value?

Arguably, the best way to obtain fair market values is through reputable appraisers.   They need to also be wary of the few states, such as Georgia, that have statutorily weighed in on diminished value claims in certain instances and follow appropriate protocol in those jurisdictions.   Adjusters should also be cognizant of the precedent case law in the loss and/or contract state, which often precludes or limits the right to recover diminution of value.  

Ideally, an insurer will take all the necessary steps to properly evaluate a claim and provide those seeking coverage with voluminous documentation of the fair market value.  In the event of a dispute, many policies provide for an appraisal option, whereby the carrier and the insured obtain separate appraisals and any differences are mediated or arbitrated with an impartial third party. 

As discussed in Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary to Extraordinary, many conflicts between insurers and insured’s arise as the results of shortcomings in the negotiation and settlement process.  To effectively resolve claims, it is incumbent upon the adjuster to educate all parties to the claim, be they a policyholder, claimant or attorney.  

Simply making an offer isn’t always enough.  That offer needs to have backup documentation that erases any questions about the value of the claim. 

In my dealings with those making claims over the years, the biggest challenge was often emotions, whereby someone thought that something was worth more than it truly was worth.  While these negotiations can be tricky, the key to success is in the delivery.   By empathizing with the customer, a positive outcome is far more likely than taking an adversarial approach. 

As many of my dealings over the years were in Florida, it was not uncommon for me to cite the case of Siegle v. Progressive Consumers Ins. Co., 819 So.2d 732 (Fla. 2002), whereby the Florida Supreme Court ruled against the concept of diminution of value provided the insurer complete a first-rate repair which returns the vehicle to its pre-accident level of performance, appearance, and function.”  Again, having a firm grasp of the diminished value case law in each state can be a tremendous advantage when negotiating these types of  claims. 

Diminished value aside, getting to the true value can be a tricky proposition in a down economy where there may be a temptation for those making claims to recover lost market value in addition to actual covered losses.   Absent proof that the loss of value was covered by the policy AND related to the loss, these claims don’t seem to warrant consideration.   Rather, focus on the basic blocking and tackling skills necessary to identify what is covered and document why, which provides the foundation for an effective resolution. 

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Christopher Tidball is a claims consultant and the author of Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary To Extraordinary!  To learn more, please visit www.christidball.com or e-mail chris@christidball.com. 

The simple answer to the question is that it depends;  but the first answer is never base staffing on pending.  It is a self fulfilling prophecy as there is little incentive to close files.   “Hey, if I get to 500 then I won’t get any new.”  Rather focus on new with an emphasis on disposition and quality. 

Other critical questions that need to be answered are:

• What type of subrogation is being pursued? Auto, Property, health and workers’ compensation will have different models.  
• What is the average tenure of the adjuster? 
• What is the complexity of the claims?
• What percentage is insured versus uninsured?
• Consider jurisdiction, both domestically and internationally.
• What is the average time of referral from date of claim payment?

These are just a few of the factors that play into effectively staffing an organization.   In my experience  as a claims process leader in multiple claims organizations, and now consulting a variety of insurance carriers, the best results are obtained with the following 9 box model and several critical questions (click the box to enlarge).

1. Staff subrogation adjusters obtain the best results when limited to claims where insurance has been identified and the claimant carrier is a member of inter-company   arbitration.   In this subset, claims with no dispute should be placed into a Fast Track unit where at least 10/day should be no problem.  

2. Claims with disputes should be placed into a more tenured unit, such as an arbitration unit, so that attempts to settle can be made and if unsuccessful the arbitration contentions can be filed.  Typically, these cases are more complex and assignments may be half of what Fast Track can effectively handle.

3.  Claims identified as uninsured, or as non Arbitration Forums members, are often best handled by business partners with an expertise in tougher collections who have the resources to effectively recover in this challenging environment.  During my tenure as a claims manager I found that keeping tougher collections in house simply doesn’t work as they are recognized by adjusters as impediments to other goals and often find their way off diary or to the bottom of the workbasket.   Getting these claims out the door on day one increases recovery exponentially and actually is cheaper for the carrier than handling them in house. 

4.  Push for a 100 percent disposition ratio without sacrificing quality and pending doesn’t become an issue.  If you get 100 new, then you should close 100.  Provide rewards and incentives for better results.  A properly calibrated organization will increase both disposition and quality. 

5.  Measure closed with no recovery to balance out disposition metrics, which when taken alone,  can drive bad behavior.   In post mortem audits it is not uncommon to find 15 to 20% of files closed prematurely and with a missed opportunity.  

6.  Focus on quality over quantity.   Yes, production is important but it is equally important to have staff in place that can effectively investigate and aggressively negotiate settlements.  By having a solid QA process in your organization you are assured of substantially increasing your bottom line and the QA results should definitely be part of the annual PE, with each stakeholder being held accountable for results. 

7. Implement a solid adverse subrogation process.  While often overlooked, it can be a formidable driver of results.   Utilizing processes that can provide historic parts prices in combination with internal and industry rules adjustments for labor, loss of use, storage of diminshed  value can have a significant impact on the bottom line. 

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Christopher Tidball is a claims consultant and the author of Re-Adjusted: 20 Essential Rules To Take Your Claims Organization From Ordinary To Extraordinary.   He spent more than than twenty years in various claims, process and executive roles with multiple leading insurance carriers.  His proven success combines dynamic experience with Six Sigma methodologies to identify opportunities, optimize workflows, gain efficiencies and boost results.  To learn  more, please visit www.christidball.com or e-mail chris@christidball.com.