Insureds should involve their insurance broker in the management of their insurance claims.
Why? Because an effective claims advocate will maximize return on insurance investment and minimize the impact of poorly managed claims and negotiated settlements on insurance pricing.
Risk is inescapable. Rather than crossing our fingers and hoping for the best, or ceasing all activity in an ill-conceived effort to avoid risk, policyholders acknowledge the ubiquity of risk while seeking to manage it by transferring it to insurance products.
When a peril covered by an insurance policy occurs, either the insured or the broker representing the insured will file an insurance claim. Once the claim has been made, the insurance company reviews the claim for its validity and then submits payment to the insured or broker following approval.
Claims can be complicated, time consuming and financially burdensome. Most business executives lack the time, experience and expertise to monitor, control or question an insurance carrier's handling of claims. Mismanagement of claims affects deductibles, historical loss experience and eventually a company's bottom line. All of these factors make it difficult to build an effective claims management system.
Insureds must be proactive about their insurance claims – asking questions and tracking the information they receive from the insurer. (Photo: Shutterstock)
|Why insureds should actively manage their claims
The uninsured portion of claims and deductible payouts will impact a company's profitability. Carriers use historical loss experience to determine a company's insurance price. Mismanaged claims with higher than necessary payouts will adversely affect company profits.
Most policyholders have not previously filed an insurance claim, and when the issue arises, are unsure of how to proceed. Here are seven tips to develop an effective insurance claim and a better claims management system.
1. Obtain a description of the circumstances that created the claim. Everyone should have a clear understanding of how the claim occurred. Effective accident investigation programs aid in identifying future preventative measures and will help keep everyone honest about what body part or property should be involved in the claim. Discrepancies in a story will raise red flags and compromise opportunities to defend the company's position.
2. Everyone should understand the value of the claim and agree on its accuracy. Insurance companies place reserves on claims which are their estimates of the claim's ultimate valued after it is paid.
3. Reserves are important because they are used to evaluate a company's loss performance and future insurance pricing. If a company is self insured, there are liabilities which should be recognized in a company's financial statement. Reserves are estimates and subject to debate. It is important to understand the insurance company's rationale behind the reserves and establish a consensus among all parties. Your broker's claims advocate should have a process and ability to challenge and lower reserves. The process of reviewing workers' compensation reserves prior to the carrier reporting losses for an experience modification rate is also critical. One mistake or over-reserved claim can lead to a higher than accurate experience rate and premium.
4. A sound strategy should be detailed with explicit target dates guaranteeing progress towards resolution. It should define who is responsible for the next step and when it will be completed. The strategy should be re-evaluated often to maintain focus and accuracy. Remind the carrier to pursue subrogation opportunities to lower the claims experience rate.
5. Target dates for resolution keep everyone focused on expectations for closure. As changes cannot always be prevented, target dates should be re-evaluated based on present circumstances.
6. Insureds can offer valuable information to assist in claims resolution. Often, the insured is the eyes and ears on the ground level and the first to know of changing situations. The insured also provides information needed to adjust the claim, such as wages.
7. Insurance adjusters obtain information through the investigation of the claim that could aid in the prevention of future claims. Without being asked, this valuable information can be lost.
Utilizing these steps can help get a claim off to the right start and mitigate problems later on in the process.
Jenean Meier ([email protected]) is a claims advocate at KMRD Partners, Inc., a nationally recognized risk and human capital management consulting and insurance brokerage firm.
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