The insurance claims industry can improve its negative public perception and reputation through clear communication, adequate training, and policyholder education, according to CLM members and fellows. CLM Magazine recently covered the Insurance Information Institute’s (Triple-I’s) response to the Wall Street Journal’s article stating that nearly half of all property claims result in no payout. WSJ suggests that, according to its own analysis, the issue of claims being closed without payment is worsening. Triple-I, however, notes in its response that “treating all claims closed without payment as evidence of insurer failure to pay covered losses creates a misleading picture of how claims are handled and resolved,” and that claims closed without payment should not be confused with claim denials.
Sean Kevelighan, CEO, Triple-I, told CLM Magazine that “Claims closed without payment should not be confused with claim denials. The data analyzed by WSJ measure a broad category of claims that can be closed without payment for many legitimate reasons, including losses that fall below a policy deductible, claims that are withdrawn by policyholders, duplicate claims, inquiry-only claims, or losses that are not covered under the policy.”
The dispute over the issue, however, sheds light on a persistent industry-wide challenge: reputation. It is no secret that the insurance industry suffers from reputational problems among insureds. The fact is, insurance companies do need to deny claims sometimes, for many different reasons—and these instances lead to displeasure among insureds.
CLM approached some of its members and fellows to ask about the drivers behind its negative perception among insureds and what the industry can do to improve its reputation.
Drivers Behind Negative Public Perception
“There are a few drivers that feed the perception that every insurer is out to deny claims and minimize payments while increasing premiums to maximize stockholder returns,” says James H. Cole, attorney and director, professional liability department, Marshall Dennehey. “As someone who started in the industry 35 years ago as a field property adjuster, this is just not the case. Instead, the industry’s mantra has been, while there is a contract and premiums charged are based on that contract, one should always err on the side of the policyholder. Always look to find coverage if you can. The truth is, if every single imaginable loss is covered, insurance would be unaffordable.”
Cole notes that for the system to work, there are certain losses that are not going to trigger insurance coverage; however, in the age of social media, bad experiences drive views. Most insureds who encounter positive experiences with property and casualty (P&C) claims do not post about their experience.
Cole also believes that “consumers are looking for pricing and may ignore the benefits of quality service and a long-term brand relationship. The ease of direct-to-consumer online sales and the ability to instantly compare prices across multiple carriers can understandably incentivize companies to emphasize pricing at the expense of service, which could have the result of further eroding the [policyholder’s] trust. After all, you only care about service when you have a claim, and most people do not have regular claims.”
Dwight E. Geddes, owner, Metro Claims & Risk Management, has over 25 years of experience as a claims professional and has been a licensed broker for over a decade. In his experience, “most people, regardless of education or socio-economic background, are unaware of what their insurance policy actually covers. Some know the basics, but, generally speaking, most policyholders are unaware of the coverages, what applies when, and—just as important, if not more important—what exclusions are in the policy. This lack of awareness drives a lot of the negative public perception of insurance.”
Pat Milone, property claims manager, Program Brokerage Corporation, notes that there are several reasons, some of which are not the fault of the insurance industry. However, he opines, “the one fault of the industry is the failure to train [its] adjusters properly, which can have an extreme effect on how a claim is handled.” However, he views the primary reason as a “lack of training of both the insured and broker. Does the broker explain the policy they sell? Does the insured read the policy? Do they ask questions, or wait for the adjuster to tell them the loss is not covered?” The lack of training, Milone suggests, leads to the insurer becoming the “fall guy” because they issued the policy. He also emphasizes that adjusters must be “cordial and sympathetic” to the policyholder, “as they just experienced a bad situation and need guidance.”
How Insurers Can Best Explain Claims Decisions to Insureds
“The key is communication,” says Cole. “The goal must be that an insured understands the basis of a claims decision even if they do not agree with it. Rote reference to policy language or generalities captured by form letters are not going to move the needle. Instead, a clear recitation of facts and a clear explanation of why those facts do not give rise to coverage should always be key.”
Geddes adds that “insureds never interact with their company until a loss occurs, and when a loss happens, the point person tasked with helping these insureds recover is a claims adjuster. As such, it is incumbent on carriers to emphasize ongoing coverage training with their frontline adjusters.”
According to Milone, “All claims should be closed by payment or a letter explaining the reason for closure…[whether it is] lack of coverage, loss below deductible, or lack of response. In cases of denials, the writer should identify themselves first, followed by a description of the coverage provided, what they understand, what was being claimed, [and] the reason for the denial.” He adds that any expert opinions should be quoted, and the specific policy language referred to in making the decision should be clearly outlined. Lastly, “denial letters should close with an opportunity to submit any information or documents to support otherwise and should they wish to file a complaint, the name and address to the parties that complaint should be referred to.”
How the Industry Can Improve Its Reputation
“This is a business where you are dealing with people who suffered a loss and a business where some insureds will be unhappy given the necessity of a contract that must limit coverage,” explains Cole. “By providing exceptional service, taking an empathetic approach, personalizing the claims experience, and communicating clearly, the industry can help push back on the unfair perception that it exists to collect money and deny claims.”
Geddes notes that, for many years, “insurance leadership has emphasized the ‘profit making’ centers of insurance organizations to the detriment of claims operations,” which is “fundamentally problematic, because claims is the public-facing segment of an insurance operation.”
Milone suggests sending newsletters to policyholders on major issues causing denials, such as poor maintenance or wear and tear, as well as “advising how they can best avoid having coverage denied. A smart [policyholder] is a valued [policyholder].”
Kevelighan advises that the industry should “continue to focus on transparency, communication, and [policyholder] education. Insurance can be complex, and [insureds] benefit when insurers clearly explain coverage, deductibles, exclusions, and the claims process before a loss occurs.
“The industry also has an opportunity to better communicate the value it provides,” Kevelighan continues. “Insurers serve as financial first responders, helping families, businesses, and communities recover after disasters and other unexpected losses. Highlighting the millions of claims paid each year, while continuing to improve the policyholder experience and claims communication, can help build trust and foster a better understanding of the role insurance plays in financial resilience.”