Innovative Conflict Resolution

Third in the series, starting here.

In my last post, I introduced the concept of the Shared Goal: The claims person and you both have a common goal, which is to resolve the claim by having the insurance company pay you money.  I also introduced the concept that to achieve your goal, you should help the adjuster meet his or her goal, by making it easier for them to pay you money.  That’s called a “win-win” scenario.  The antithesis of this is commonly referred to as a “zero-sum” scenario, where only one side “wins.” (This latter scenario is often romanticized in books and movies, often involving a dramatic courtroom battle; however, this is largely mythological.)

The Claims Person’s Job(s)

The claims adjuster’s main job is not to save the insurance company’s money, although it can’t be denied – nor should be be – that keeping settlements and other expenses are a factor.  The claims person’s main job is to settle a claim on behalf of his or her policyholder (aka “the insured”).  We all buy insurance policies specifically so we don’t have to pay claims ourselves. Looking at it from the standpoint of the policyholder, if someone files a claim against me, I expect the insurance company to protect me, once and for all.  When the claim is over, I don’t want to ever be bothered by that person (“the claimant”) again.  This will mean that the insurance company – besides paying the claim – must get a release from the claimant, releasing me from all liability.

I also would expect that the claims person would not overpay the claim; simple logic tells me that if claims are overpaid, my premiums are going to go up.  In fact, I may prefer that the claimant get nothing at all, especially if I don’t feel if I am not liable to the claimant.  However, there are laws to protect claimants from being treated unfairly, often called “fair claims practices.”  So, the adjuster now has yet another responsibility: to pay claimants fairly.

So, the adjuster now has these responsibilities:

1. Securing a Release of the Insured
2. Controlling costs and claims payments
3. Making sure that claims are not overpaid or paid in error
4. Acting fairly to the Claimant

As you can see, the adjuster has to find the balance between these often conflicting goals; that’s where the word adjuster comes from.  In order to justify what is paid for a claim, the adjuster must do a number of things:

1. Confirm that the insurance policy provides coverage for the particular claim.  This is done by reviewing the policy, the facts of the loss, and the damages claimed.  Until coverage is confirmed, no claims settlements can be paid.
2. Establish that the Insured is legally liable for the damages claimed, by investigating the facts of the loss and determining whether the Insured owed a Duty, whether the Duty was Breached, whether the Breach was the Cause of any damages, and finally, whether the Damages claimed resulted from the Breach.
3. Provided the results of 1 and 2 resulted in a decision that the claim should be paid, establish how much the claim is worth.  This is done by reviewing all applicable records (medical records, financial records, etc.), talking to the claimant, and at times hiring experts to provide opinions on various issues. This could include retaining a doctor to examine the claimant to provide any missing information.
4. Negotiate a settlement, once the value of the claim has been reached.

A lot of time and effort goes in to evaluating a personal injury claim, and everything must be well-documented.  Once the investigation is complete, the adjuster may be required (depending upon his or her experience and the requirements of the company) to confer with a manager to get the authority to offer a certain sum of money.  Generally, a settlement range is agreed to, and the adjuster is only able to resolve a claim for an amount within that range.

Even though from your point of view it might seem like the adjuster is sitting by the phone spinning a large “wheel of fortune,” by the time the claims person is ready to negotiate your claim, a lot of thought has gone into evaluating your claim.

Next:  Tips and Tricks of Claims Negotiation

In my last post, I introduced the topic of how to negotiate your own insurance claim.  In this post, I’ll talk specifically about a personal/bodily injury claim, which is where some negotiation skills really come in handy.

First, a word about people

As I mentioned in the prior post, I learned to approach negotiating with the theory that both the claims adjuster and you really share the same goal: to arrive at a fair and equitable settlement.  Seriously.  I’m sure that’s your goal, right?   Most people – claimants and adjusters – are decent, honest people trying to do the right thing.  There are, of course, those folks who think their claim is their chance to get rich. There are also those who fake or exaggerate their injuries. And on the flip side, there are also a small percentage of adjusters who really are jerks, as well as those who have simply become jaded from years of dealing with fraud.

I know (because I’ve done it) that if you do a web search on negotiating with insurance companies, you’ll run into many people who will tell you how evil insurance adjusters are and tell you not to trust them and to not give them any information.  You can use this approach if you like, but what you’ll do is make your claim much harder to resolve. Being difficult will give the adjuster the impression that you are trying to hide something (which, in fact, you are).  He/she will not trust you, will start to doubt anything you say, and in general your claims experience will be miserable.  While being evasive raises red flags for the adjuster, so does being too demanding.  As it turns out, many people with fraudulent claims are overly demanding.  Just try being pleasant – it could even soften up that old, jaded adjuster.

The truth is, the vast majority of adjusters are just regular people with the very tough job of evaluating your claim, based largely on the information you give them.  You can make their job easier, or more difficult (or impossible).  Many, many people make their job difficult (unfortunately, this sometimes includes their bosses); so, most adjusters will sincerely appreciate someone who tries to make their job easier.  And remember, their job is to give you money.

The Golden Key of negotiating

I’ve just revealed the Golden Key of negotiating an insurance claim: Make it easy for the adjuster to give you money.  What a concept!  It seems so simple that most people just miss it. They are so busy trying not to be taken advantage of, they throw up barrier after barrier to their own goal.  Again, the adjuster’s goal is your goal: to arrive at a fair and equitable settlement.  In other words, the shared goal is for them to give you money.

What makes a personal injury claim different?

A personal injury claim – typically a physical injury, but this can also include things like defamation – is a unique type of claim in that there are no defined values for what is typically called “pain and suffering,” or General Damages.  Medical bills are what they are (unless they are fraudulent, which companies occasionally see), and lost earnings are usually pretty cut and dried, too, unless you are self-employed.  But emotional distress, loss of enjoyment, and other types of general damages are hard to put a dollar figure on.

This, then, becomes the problem that both you and the adjuster need to work together to resolve: how much is fair to resolve your specific claim.  And, there really are no guidelines to use, as everyone’s claim is unique.  Six months of back pain is not worth the same to everyone; people are different, and people’s pain is different.  A small facial scar is not a big deal to a longshoreman, but it is to a model.  A shoulder injury would perhaps be worth more to a tennis player than to an accountant, although without more details, you really can’t tell.  There are no books (not in the U.S., anyway) where you can look up “sprained ankle” and get a dollar value.

Attorneys, revisited

The ordinary person – you – will always be at somewhat of a disadvantage when it comes to establishing a value for general damages, because you have no frame of reference, whereas the insurance adjuster can draw on their experience plus the experience of others they work with to come up with a settlement range.

Here is one of the areas where the involvement of an attorney may have value. Experienced attorneys may also have an adequate frame of reference for judging what a claim might be worth.  If you decide to interview attorneys, make sure you ask how much experience he has representing people with your type of injury.

Next

In the next post, I will give you some idea of the adjuster’s process in evaluating general damages and preparing to negotiate your claim. This should be helpful – whether you retain an attorney or handle your claim on your own – in your own evaluation of your claim.

Americans don’t really have much of an opportunity to negotiate anymore.  When I was a kid, it was still possible to dicker over the price of many items, but good luck today trying to bargain down the price of a TV at your local electronics chain.  It’s still possible to negotiate the price of a house or car, but these aren’t exactly daily purchases; the typical American is simply inexperienced in the fine art of bargaining. Negotiation is, for most people, venturing into unknown territory and a logical source of fear and anxiety.

It’s even worse when you have to negotiate with a professional; insurance claims adjusters are, among other things, professional negotiators. Depending on the types of claims they handle, they may negotiate anywhere from one or two claims a week to several a day. This can make negotiating an insurance claim quite intimidating, as adjusters clearly have the advantage of experience. However, there are things you can do to level out the playing field a bit. While some people are more natural negotiators than others, negotiation is a skill that can be learned.  And as with most things, the more you understand about the process the better.

The Attorney Factor

The fear of dealing with an insurance company drives many people to hire attorneys.  Depending on the type of claim you have, this might be a wise decision, but it shouldn’t necessarily be your first option. Attorneys can be helpful, but they are expensive, usually charging 25-30% of your gross settlement (stop a moment and do some math.) Also, attorneys are not always great negotiators.  Some attorneys operate on what I call the Wal-Mart principle: low profit, high volume.  They don’t count on getting the “top dollar” for all of their cases, as they make their profit on settling as many cases as they can.  However, there are also very good, ethical attorneys who handle every case like it was their only one.  If you’re planning on hiring an attorney, interview more than one, and among other things, find out how many cases they personally handle.

Now I’ll tell you a little secret:  While many people assume that insurance companies are intimidated by attorneys and therefore pay larger settlements if an attorney does the negotiating, the truth is that most insurance adjusters prefer dealing with attorneys than with unrepresented claimants (what I used to call “real people”). This is because attorneys understand the process, they have a better idea about the dollar value of a claim, and they are more objective. Even more importantly, it usually turns out to be less work for the adjusters in the long run. (Another little secret: “Less work” is a key factor for insurance adjusters, who are typically over-worked.  More on this later.)

Unless you are having some specific difficulties negotiating your claim, it usually doesn’t pay to hire an attorney for property damage claims, such as an auto total loss, or a home fire loss.  The reason for this is because insurance companies will not pay you enough to cover the additional cost of your attorney.  In most if not all jurisdictions, you can’t get general damages (i.e. “pain and suffering”) for a property loss. So, if it costs $75,000 to repair your home, that’s typically all you can expect to get in settlement, with nothing left over to pay your attorney (or, leaving you 30% short of what you need to repair your home).  It’s up to you to research what types of damages are available to you in your jurisdiction, and to decide whether hiring an attorney is cost-effective.

In Part 2 of this article, I will focus on negotiating personal injury claims, providing insights into the issues driving insurance companies and adjusters, which will help you better understand the negotiation process.  I will also give you some tips to make handling your insurance claim smoother.  My theory of conflict resolution and settling claims – how I approached things for twenty-two years – is that the insurance adjuster has the same goal you do: to resolve your claim in a fair and equitable manner.  By being wise, you can help the adjuster reach his goal, and reach yours at the same time.