The Insurance Claims Process – The Great Unknown

Insurance is something a company buys with the hope that they will never have to use it. Of course when they do have a claim, they expect the process to go smoothly. The expectation is that legitimate claims get paid, and bogus claims don’t. The majority of claims are handled without incident; but, unfortunately, we don’t hear a lot about those claims. It’s the difficult claims that get all the press because those are the claims that create the most sensationalism.

The focus of this article will be on the claim’s process, specifically, workers compensation, general liability, auto and property claims. In the interest of brevity, I’ll only elaborate on workers compensation and automobile claims. It is important to note that no two claims are exactly alike, and that each and every claim has its own set of circumstances.

The claims adjuster is the central figure in any claim. Simply stated, their job is to apply the applicable policy provisions and to make sure the claim is handled promptly and without prejudice. Claims departments are a highly specialized business unit of every insurance company. Auto claims are handled by auto adjusters, workers compensation claims are handled by workers compensation adjusters, etc.

Let’s run through a workers compensation claim. First, the insured calls in the claim and the adjuster takes all of the information. Second, the adjuster contacts the injured employee to get his/her story (on tape), and they corroborate their story with any witnesses to the accident. Thirdly, if needed, the adjuster will contact the medical provider to get an idea on the extent of injuries. Next, the adjuster will coordinate care and act as a liaison between the injured employee and the insured. Lastly, if it appears that the claim is questionable, they will do everything in their power to fight the claim. Usually, by this stage, the injured employee has hired an attorney.

In an automobile claim, you could have four different people handling the claim. Depending on the damage/injuries, you could have a front line adjuster, an appraiser, a PIP adjuster and a bodily injury adjuster. It’s the front line adjusters’ job to act as the quarterback and to coordinate the claim with all of the other adjusters. The adjusters and appraisers are highly trained in their specific area of expertise. I only mention this because, as we know, there are people out there who put in fraudulent claims. Trust me, if the claims looks as though it’s fraudulent, they will know, and the repercussions are severe.

When it comes to claims, speed is of the essence. The quicker the insurer gets the claim, the better the claim will be handled. Insurance companies want to be the first to contact the injured party (or parties). I always recommend that the insured report all claims, no matter how small or seemingly insignificant. The insured isn’t the one to make the determination as to whether the claim is legitimate or not, the insurer is. It’s important to note the policy provisions when a claim occurs. Ideally, you would have read the policy before a loss occurs, but I know that’s not always the case. Among other things, it states: “Give us prompt notice of the loss or damage.” So, not only is it wise to report claims promptly, it’s a condition in your policy to do so.

In addition to prompt reporting of claims, you must “take all reasonable steps to protect the covered property from further damage, and keep a record of your expenses necessary to protect the covered property.” For instance, if a tree falls on your building and exposes your personal property to the elements, the insurer expects you to minimize further damage by any means possible. This could include moving your property to another location, or having the building damage temporarily fixed to prevent further damage until the adjuster can make a determination of damages.

It is the adjuster’s job to set the reserve. A reserve is the probable ultimate exposure. In other words, it’s the amount the carrier expects to pay for the claim. The better the information they get, the more accurate the reserve. Reserves do change from time to time that is why it’s imperative to pay close attention to your loss runs. For the difficult claims, your agent should be scheduling (and attending) claims reviews with you and the adjuster. This gives you the opportunity to question how the claim is being handled and have the adjuster justify the reserve.

Hopefully you’ve done your best to prevent claims from happening, but we know they do occur. It’s what you do when a claim occurs that determines the final payout. It all starts with reporting all claims in a timely manner. A good agent, and insurance company, will guide you through the process, and do all they can to make sure the process goes smoothly. If they can’t, find someone who can.

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