Learning from Sherlock

How wonderful would it be if a real-life Sherlock Holmes emerged to reinvigorate the field of claims management?

June 12, 2013 Photo

Sherlock Holmes would have made a superb insurance fraud investigator. That’s the conclusion I’ve drawn after finally reading the early novels and a collection of short stories relating the adventures of this master sleuth created 126 years ago by Sir Arthur Conan Doyle.

I must confess that I am shamefully late to the cult of Holmes. For some inexplicable reason, as a schoolboy I never got around to reading these classic tales and didn’t bother to catch up as an adult until many decades later. I was inspired at last to seek out the original source material by not one, but two highly entertaining TV reincarnations placing Holmes in modern times—one in New York (with a female Dr. Watson at his side) and the other in contemporary London.

Watching and reading about Holmes in action got me thinking about how wonderful it would be if a real-life Sherlock Holmes emerged to reinvigorate the field of claims management. Think of all we could learn from this fascinating “consulting detective”—putting aside, for the sake of argument, that Holmes is merely a fictional character.

“My name is Sherlock Holmes, and it is my business to know what other people don’t know,” he declares in one story, by way of introduction, stating much the same credo guiding those who investigate insurance losses. So, what words of wisdom might Sherlock have for the claims management community?

For one, there is the critical importance of attention to detail—to look beyond the superficial and take nothing for granted when examining even the most routine claim.

“I was always oppressed with a sense of my own stupidity in my dealings with Sherlock Holmes,” laments Dr. Watson at one point. “I had heard what he had heard, seen what he had seen, and yet it was evident that he saw clearly not only what had happened but also what was about to happen, while to me the whole business was still confused and grotesque.”

Nothing escapes Sherlock Holmes’ critical eye. No detail is too small or insignificant to casually discard or ignore. He is not shy about dropping down to the floor to examine a crime scene for evidence—at times with his magnifying glass but at others armed only with his natural senses of sight, smell, and even taste. He detects clues everywhere, from physical evidence, to speech patterns, to body language. Even if others notice the same elements, they fail to process all of the potential implications. “You have seen, yet you have not observed,” is a frequent Holmes admonition.

Along these lines, certainly claims investigators should share with Holmes a nose for anomalies—bits of evidence that stand out to a highly trained and keenly observant professional but which might escape the perception of a layman.

Similarly, Holmes assumes that people are not always what they seem or claim to be. He, therefore, literally never takes anyone at face value. He looks over each individual he encounters from head to toe and sizes them up accordingly. He is not shy about challenging people’s inconsistencies in speech, behavior, or appearance. 

Rather than judging a book by its cover, Holmes prefers to read between the lines. When at one point Watson complains to his companion that “You appeared to observe a good deal about [a witness] which was quite invisible to me,” Holmes retorts, “Not invisible, but unnoticed. You did not know where to look, and so you missed all that was important.”

Holmes is similarly skeptical about those who hastily make up their minds about a case, no matter how obvious a particular conclusion may appear to be at first blush. For example, he lectures, “Circumstantial evidence is a very tricky thing. It may seem to point very straight to one narrative, but if you shift your own point of view a little, you may find it pointing in an equally uncompromising manner to something entirely different.” In this vein, he warns that “there is nothing more deceptive than an obvious fact.”

In his quest for the truth, Holmes was not merely an early adopter, but also a pioneer of forensics—the collection and scientific testing of physical evidence to support or refute a hypothesis. Thus, Holmes is renowned for his focus on hard evidence, however trivial it may seem. While to lesser investigators Holmes often appears, like a magician, to be pulling his theories out of thin air, the fact is he was loath to jump to any conclusion without sufficient information—a key lesson for claims managers.

“It is a capital mistake to theorize before one has data. Insensibly, one begins to twist facts to suit theories, instead of theories to suit facts,” he cautions in one story. While attempting to build a case in another tale, he cries out his need for “Data! Data! Data! I cannot make bricks without clay.”

Given this passion, I imagine Sherlock Holmes would love today’s wider sources of “big data,” as well as the increasingly sophisticated arsenal of advanced analytics that claims investigators employ to make sense of it all so they can red flag potential frauds. “It is of the highest importance in the art of detection to be able to recognize, out of a number of facts, which are incidental and which vital,” he says. “Otherwise your energy and attention must be dissipated instead of being concentrated.”

Of course, Holmes is famous for employing the power of deduction, which he essentially defines as reasoning in reverse. During “A Study in Scarlett,” Holmes notes that “in solving a problem…the grand thing is to be able to reason backwards,” explaining that “most people, if you describe a train of events to them, will tell you what the result would be. They can put those events together in their minds, and argue from them that something will come to pass. There are few people, however, who, if you told them a result, would be able to evolve from their own inner consciousness what the steps were that led up to that result.”

Is that not the challenge facing many adjusters, fraud investigators, and claims managers? They see the result—a loss—and must then go backwards to confirm the cause so they can determine whether there is coverage under the insurance policy’s terms and conditions.

“The ideal [investigator] would, when he had once been shown a single fact in all its bearings, deduce from it not only all of the chain of events that led up to it, but also all of the results that would follow from it,” Holmes says. Like an archeologist who could extrapolate and correctly describe a whole dinosaur by the contemplation of a single bone, “so the observer who has thoroughly understood one link in a series of incidents should be able to accurately state all the other ones, both before and after.”

However, Holmes continues, “to carry the art [of deduction] to its highest pitch…it is necessary that the [investigator] should be able to utilize all of the facts that have come to his knowledge. This in itself implies…a possession of all knowledge, which even in these days of free education and encyclopedias is a somewhat rare accomplishment.”

Not so rare, perhaps, in these days of the Internet and mobile devices! Indeed, the naturally keen deductive powers of the original Sherlock Holmes likely would have been exponentially enhanced with the Internet, a tablet, and some advanced predictive modeling software at his disposal.

However, data and technology are not necessarily all-encompassing when it comes to an investigation. Human intuition still has its place. Therefore, claims handlers should follow Holmes’ lead in never allowing themselves to be lulled into a false sense of security by seemingly mundane circumstances.

“There is nothing so unnatural as the commonplace,” he often warns. “The larger crimes are apt to be the simpler, for the bigger the crime, the more obvious, as a rule, is the motive. It is usually in unimportant matters that there is a field for observation, and for the quick analysis of cause and effect, which gives the charm to an investigation.”

On another occasion, he observes that “as a rule, the more bizarre a thing is, the less mysterious it proves to be. It is your commonplace, featureless crimes that are really puzzling, just as a commonplace face is the most difficult to identify.” Claims investigators can certainly sympathize with those sentiments.

Like Holmes, a good claims investigator should relish getting to the bottom of mysteries, as well as exposing the truth—wherever that may lead. Watson observed that Holmes “was never so truly formidable as when…the lust of the chase would suddenly come upon him, and his brilliant reasoning power would rise to the level of intuition, until those who were unacquainted with his methods would look askance at him as on a man whose knowledge was not that of other mortals.”

But while these insights and skills appeared to come naturally to Sherlock—part of his DNA, if you would—even Holmes admits that training is essential in becoming a seasoned investigator.

“Like all other arts, the science of deduction and analysis is one that can only be acquired by long and patient study, nor is life long enough to allow any mortal to attain the highest possible perfection in it,” Holmes concedes during “A Study in Scarlett.”

Last but not least, much like claims investigators who have pretty much seen it all during the course of their careers, Holmes marvels at how “life is infinitely stranger than anything the mind of man could invent.”

He says that “if we could fly out the window hand in hand, hover over this great city, gently remove the roofs, and peep in at the queer things that are going on, the strange coincidences, the plannings, the cross-purposes, the wonderful chains of events, working through generations and leading to the most outré results, it would make all fiction with its conventionalities and foreseen conclusions most stale and unprofitable.”

In other words, truth is indeed stranger than fiction. Regardless of the irony of hearing this from a fictional character, it is yet another valuable lesson for claims managers.  

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About The Authors
Sam Friedman

Sam Friedman is insurance research leader with Deloitte’s Center for Financial Services in New York. He has been a Fellow with CLM since 2011, and can be reached at samfriedman@deloitte.com. 

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