Extreme Makeover was an ABC television series that depicted ordinary men and women undergoing drastic physical changes in diet, hairstyle, and wardrobe. At the show's conclusion, the "subjects" were reintroduced to their families, most of whom were astonished by the physical transformation. Insurance and claim departments may never be featured on TV, but many may be due for some version of an extreme makeover. As one indicator, a recent study by Wolters Kluwer Financial Services lists the top 10 reasons that property and casualty insurers fail to achieve market conduct compliance. What is striking is that half of the top 10 transgressions involve claim-handling lapses. The five claim-related market conduct violations are:

• Failure to acknowledge, pay, or deny claims within specified time frames.
• Failure to pay claims properly (sales, tax, loss of use).
• Improper claim file documentation.
• Failure to communicate in writing a delay in a claim settlement.
• Using unlicensed claim adjusters or appraisers.

One positive emerges from the Wolters Kluwer study: it offers a template for building a compliance culture within an insurance company and claim department. Staying off the radar screens of state insurance departments may be as straightforward as embracing good-faith claim practices, avoiding bad-faith hot spots, training staff, keeping customers happy, and complying with the areas state regulators see as claim-handling targets. These steps will not guarantee immunity from market conduct audits, but they heighten the odds of passing muster in such examinations.

Compliance Culture

Building a compliance culture is a claim management challenge, not a flavor-of-the-month initiative. Lip service does not work. There must be an ongoing, recurring, and sustained commitment from top management all the way through the organization. One way to reinforce market conduct compliance is to incorporate key criteria into annual and interim performance evaluations. Stronger still is to link compliance with sound practices to compensation. As management guru Tom Peters says, "That which gets measured gets done." If hitting or not hitting targets tied to good claim practices has no impact on adjuster raises or bonuses, then adjusters may be indifferent to best-practice criteria.