No longer can you as the agent simply sit back and await the outcome of a client’s claim, entrusting everything to the carrier. Your client relies on you to maintain a system for auditing the entire process. Without one, you risk losing business. In this document, John Beringer gives you the details of how to manage a claim, from beginning to end, with your client’s best interests in mind.
Most industry publications I read focus on two issues: the need to manage risk by purchasing insurance to limit exposures, and the increased cost of insurance due to the hardening market. Although these two issues are important, it’s also true that both insurance and the decision to purchase it are really methodologies for preserving corporate assets.
Sudden, and in some cases extreme, rate increases emphasize the need for the client to assume control of their risk. This means that the corporation, and even its directors as a due diligence issue, must maintain a program for risk abatement based on corporate conduct and sound economic decisions.
In the past, everyone perceived the insurance carrier as the party with the primary responsibility for containing claim and litigation exposures. The insured tendered the lawsuit or claim to the local claims office and was only occasionally bothered with a request for information or a response. The carrier’s interests were paramount in settling cases. If the case was delayed or wasn’t settled and the award included a larger than expected indemnity, it was just part of the process.
The problem with this approach, particularly in a hard market, is that the carrier then uses the cost figures for defending and indemnifying as a benchmark for underwriting the following year. The client pays for the carrier’s errors, and often isn’t even aware of the existence or the extent of this payment for the resolution of a relatively simple matter.
The growth of the marketplace for captives and alternative risk financing further accentuates this dynamic because the 'good' risks remove themselves from the insurance pool. This increases the costs of insurance to those remaining — the 'good' risks’ premiums balance the cost of underwriting the 'poor' risks. In the long term, carriers make a profit as long as they raise premiums to reflect incurred losses.
What’s the remedy for the client, and the opportunity for the broker? Create a check and balance with the carrier’s claims department by auditing the claims handling of your client’s cases. After all, the litigation is your client’s — not the carrier’s — and the long-term consequences will affect your clients.
Let’s look at what we should incorporate into these checks and balances:
The initial discussions with the client involve identification of an individual, or department, from whom you can acquire information to coordinate the claim or lawsuit’s defense with the interests of the corporation. Information is the most important item in your client’s defense. The case is more likely to be resolved quickly if the insurance adjuster understands the case.
The second need is for an adjuster qualified to manage your client’s account, regardless of the level of expertise needed for the handling of their cases. The experience of an adjuster is just as valuable in resolving smaller exposure cases as in larger cases. The vast majority of cases appear small before they turn into lawsuits. One of the jobs of an adjuster is to eliminate these cases before they go to litigation.
Only an experienced and talented adjuster can do this effectively. The adjuster should have the proper credentials and training to handle torts and contracts, as well as to evaluate damages under the relevant legal concepts. The adjuster should be able to effectively articulate the legal arguments for and against the position of the adverse party, and to resolve disputes with tactful commentary while still enforcing their analysis as dominant. Look for written correspondence which specifically states the facts of the loss, including a written explanation to the adverse party for the basis of the rendered opinion.
The third need is auditing by a professional claim and litigation manager who can evaluate cases from an ethical, as well as a technical, viewpoint. Your client’s image is an asset, too. The way in which you handle the case, in addition to the allegations of the lawsuit, reflects your client’s image.
The audit should address whether the handling of your client’s account reflects proper staffing, and if not, the remedies needed for the problem. Are your client’s interests the issue, or those of the insurance carrier? After all, it’s your client’s money you’re spending, at least in the long term.
This approach benefits the broker by reducing the client’s cost of risk, which allows the broker to compete on the value of their services, rather than the carrier’s price for coverage. If there’s a problem, who would you rather replace — the broker or the carrier? Is the price of coverage the issue, or is it the broker’s ability to provide service that benefits the client? After all, it’s your client, and your asset!