Then there are some people you just cannot please. To service them the way they want and expect, you would have to carry a ridiculous level of staff. If the cost of showing that the customer is always right is overpaying covered claims or paying uncovered claims, the price is too high. We are not talking about gray areas here; we are talking about black-and-white situations in which insureds did not understand what they were buying, not because anyone misled them but because they were too lazy to read the policy. I do not blame anyone if they are too lazy to read an insurance policy. It's OK not to read or understand an insurance policy, but don't complain later about what you bought when you could have checked it out up front and known (or negotiated) better.

Urban Myths: Lube Jobs at Nordstrom's

We hear legends of Nordstrom's accepting merchandise returns on car tires, even though the high-end retailer does not sell Michelins. (Too bad, because I was going to take my honkin' SUV to Nordies for a valve-stem replacement.)

Customer service in the insurance business is important. Sadly, the claim industry does not enjoy a stellar customer service reputation. Vitally important to readers of Claims is the need to deliver a high level of customer service. What the marketers sell is a promise and a piece of paper … along with a nice smile and a firm handshake. After the sales team has cashed its commission checks and swapped high-fives for closing the deal, the hard work of delivering those brave promises lies with someone back at the office, the foot soldiers of the claim department who must apply legal mumbo-jumbo to real-life situations.

Superior claim service can attract new customers. It helps retain existing customers. It captures market share and drives growth. The emphasis on customer service may prompt some in upper management to spout that mantra, “The customer is always right.”

That may be true in many or even most realms, but in claims, this is not only untrue, it can be dangerous. Let's look at some examples from real-life claim situations.

An insured wants replacement cost reimbursement for her fire-damaged household goods. However, her policy pays on an actual-cash-value basis. The customer is always right?

An insurance policy gives the insurer the right to control the defense of liability claims, and there is a competent panel of approved counsel. The insured has a “special relationship” with a Park Avenue law firm, however, and would like to use it (at your expense) on a case … venued in Portland, Ore. By the way, Park Avenue's rate is $475/hour. Get out your wallet!

A liability policy excludes coverage for punitive damages. Defense counsel says that most of the settlement value of the general liability claim flows from the punitive exposure. You invite the insured to bring his checkbook to chip in at an upcoming mandatory mediation. The policyholder goes ballistic. But you've always heard that the customer is always right.

You are handling a liability claim that you can settle for $100,000. Liability is cloudy. To take the case to trial will likely cost $200,000. If you lose at trial and the jury finds liability, defense counsel says the jury verdict exposure could be as high as $500,000. The insured is incensed that you are planning to mediate the case; he wants his day in court! Are you willing to risk that, if the jury wallops you, your boss will be consoled by the mantra, “The customer is always right”?

You reserved a claim for $100,000 based on the damages and liability, which has ballooned the insured's loss ratio, a factor the underwriter used when issuing a higher renewal quote. Right now you are on the phone with the insured's broker who, two weeks before renewal, is suddenly a reserving expert. He insists you have over evaluated the case because the insured has assured him that the case is piddling. Barry Broker wants you to drop that reserve to $50,000, against your better judgment. Your company relies heavily on insurance brokers to produce business. This does not mean that customer service is unimportant. Nor does it follow that the adjuster is always right.

Customer Service: A Hostage Situation

Common sense must temper business buzz-slogans, factoring in realities and the unique context of insurance, which sells defined promises in exchange for set sums of money. From the empyrean heights of the corner office, it is easy to issue edicts. They sound cool in marketing ad campaigns. In the long run, embracing this nostrum in insurance claims is a path to financial ruin, insolvency, and receivership. It may also nuke the morale of your claim staff, who feel that upper management “never has their backs” when they make the tough and unpopular (but correct) calls. In his book, Put the Customer Second, author Hal Rosenbluth argues that if you treat your employees well, they in turn are more likely to deliver superior customer service. Back them up, but don't let unreasonable customers back them into a corner. In fact, be prepared to “fire” difficult, unreasonable, or unprofitable customers.

Claim people owe a fiduciary duty not only to the insurer's policyholders presenting the claim, but to other policyholders without current claims who want funds to be there later to pay their claims when misfortune strikes. Insurers who adjust claims with the yardstick that “the customer is always right” may find themselves financially strapped and unable to pay downstream claims due to their profligate ways. The cost of some customer satisfaction is too high and borders on hostage-taking.

It may be impolitic to say it but in claims, the customer is not always right. Often, the customer may be right; at other times, the adjuster is right. Neither have a monopoly on rightness. Adjusters can be wrong. They can be blind to contrary facts, misguided, become emotionally tied to a certain position, or unwilling to “lose face” by conceding an error or gray area.

For the claim supervisor or manager, one “fun” job is navigating such situations, especially when a complainer has gone around or over the head of the handling adjuster and appeals to you to intervene, override the adjuster, and set things right. Your job is deciding if the adjuster is on solid ground or squishy mud. You may find that (a) the adjuster is dead-on correct, (b) the adjuster is clearly mistaken, or (c) it's a gray area where there is no bright line.

Situations (a) and (b) pose fewer challenges. In (a), you can support the adjuster. In (b), you can reverse course, explain the situation to the adjuster, and use the exchange as a coaching and mentoring opportunity. Gray areas are most challenging, because, well, they are gray areas. The supervisor may be tempted to appease the squeaky wheel by applying monetary grease. Others may support the adjuster but tactfully suggest to the claim handler that, in the future, these situations be negotiated.

Let us drink a final toast to that empty phrase, “The customer is always right.” The slogan may be a sacred cow, but sacred cows make great steaks. Fire up the grill.

Insurance claim executive and author Kevin Quinley has helped thousands of claim professionals boost their productivity. Visit his new blog, The Claims Coach, at http://claimscoach.blogspot.com. Get your FREE monthly productivity newsletter, CLAIMS CAFFEINE, by e-mailing [email protected].