My friend and fellow CPCU, George Wallace, one of the good guys in insurance defense work, just returned from a trip to the CPCU Annual Meeting. The annual meeting is always a fun place to go, meet new people, see old friends, and learn some insights from others in the insurance business.
George attended a program on the Top 10 Mistakes that Insurers Continue to Make. It seems like the more things change, the more they stay the same, especially in the insurance industry. Here is the top 10 list, as written about by George:
10. Failure to write in clear language.
9. Failure to investigate a claim promptly.
8. Failure to read the policy when making coverage determinations.
7. Failure to understand the relevant law of the relevant jurisdiction.
6. Failure to monitor litigation activities of outside counsel.
5. Unnecessarily ‘nitpicking’ a claim before settling (especially in 1st party [e.g., property loss] claims).
4. Taking inconsistent positions in coverage litigation (e.g., insisting that identical policy language means x in Case A and y in Case B).
3, Claims handlers treating policyholders as “the enemy.”
2. Attempted overuse of the extreme remedy of rescission of the policy. (It’s one thing to deny a single claim, quite another to accuse the insured of deception or dishonesty so as to cancel the entire policy.)
1. Taking positions that result in the purchase of more insurance yielding less coverage.
Lets see if I can take these in reverse order:
10 – When I was at CIGNA they tried this. Unfortunately, they wrote a policy in English. It was easy for people to read, but, if you haven’t checked lately, they atre no longer selling property or liability insurance.
9 – This is the bane of my existence. Adjusters have not handled claims promptly since long before I was handling claims. There does not seem to be any urgency for adjusters. However, when you are the one who suffered the loss, everything is urgent. If more adjusters had claims, more adjusters would handle claims promptly.
8 – Not reading the policy? No, that cant happen? Yes, it happens all the time. I recently had an adjuster assure me that something was in a policy. Of course, she could not tell me where it was in the policy, and I am still looking for it. (Its not there!)
7 – Some adjusters like to think they are attorneys. Unfortunately, unlike attorneys, a lot of adjusters have not been to law school. Adjusters are updated on the law when a firm brings them lunch and talks to them for 30 minutes. Its too bad that more insurance companies do not care about providing continuing education.
6 – CIGNA monitored litigation activities carefully. Did I mention they are no longer in this business? But, this is one thing that they did right. I haven’t seen an insurance company try to monitor it this way since!
5 – Nitpicking? I just had an adjuster argue with me over whether the client should have been in her rental car for 30 days or 22 days, because the adjuster used a formula to calculate 22 days. I used real life and came up with 30. They want to argue over 8 days at $20 per day?
4 – Inconsistent positions are common. I had an attorney argue that there was coverage, but it was limited. Then, when I filed suit, they argued that there was no coverage at all. Huh?
3 – A lot of adjusters think that anyone who files a claim is a fraud. I am not sure where this attitude came from. I know someone who had a water damage claim and then, 7 years later, had another water damage claim in a different house. The adjuster thought this required a fraud investigation.
2 – In almost 9 years, I was involved in one recission. That seems about right. Today, it seems like there is one recission per month, based on the calls I get.
1 – Insurance companies do take positions that result in the purchase of more insurance for less coverage. Ask anyone who bought CIGNA’s technology policy about 6 years ago!
Thanks to George for his article. I encourage everyone to go read his blog – even if he is a defense attorney!