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21 Brief 55 (1991-1992)
Understanding Insurance Adjusters

handle is hein.journals/tbrief21 and id is 117 raw text is: IPS Understanding Insurance Adjusters John Doe John Doe is the pseudonym of an insurance adjuster who wishes to remain on good terms with the insurance industry. Negotiating and settling a case with an insurance company can be a time-consuming and mysterious process. Why do some companies consistently settle at higher values than others when the cases are sim- ilar? Why do some companies push for settlements at year-end, raising the offers that they have not budged from for six months? Why does an adjuster seem eager to settle one day, then refuse to return your phone calls the next? This article will give you insights into the mysterious internal workings of a claims office and suggest ways to deal with adjusters and their managers. Claim settlement not a science Insurance companies do not have a secret formula locked up in their corporate vaults that reveals the exact worth of bodily injury claims. What they do have is a great deal of collective experience among the adjusters, managers, and defense attorneys, but past performance is no guarantee of future awards. Pain and suffering are not quantifiable items-es- pecially given unpredictable juries and the rising value of verdicts. And just as you remember the high ranges, the insurance company remembers the lows. When you are negotiating a case with an adjuster, remember that you know your client better than your opponent does. What are your client's strengths and weaknesses that will influence a jury's decision? How does your client look and act? Is he or she believable? The adjuster usually does not know these important intangibles and will base the valuation primarily on historical precedent, making your client a statistic, not a real person. Knowledge is power; this is es- pecially so in negotiations. Quotas Adjusters usually have quotas to meet. These quo- tas vary between companies. Often they are based on closure ratios, calculated by dividing the number of incoming cases by the number of closed cases. Closures can refer to new cases or to the adjuster's pending files. If a monthly system is used, adjusters are held accountable for achieving a 100% closure ratio; in other words, they must close the same num- ber of cases as they receive. Most likely, the closures will come from older cases. Adjusters on a quota system face both internal and external pressure to settle cases, so the end of a month may bring higher offers if they are below quota. Alternatively, the adjuster's performance might be based on severity. Simply put, severity refers to the average payout on claims. This percentage is watched closely; claim values usually rise in a consistent fash- ion, and adjusters may be tempted to make a high settlement to get rid of a case. They are not working on a percentage basis, so occasional high settlements do not affect their pay. However, if an adjuster's severity average is consistently high, his or her per- formance may be subject to review. Knowing a com- pany's quota system can help you understand the adjuster's position and assess its weaknesses. Financial goals Many companies have quarterly and year-end fi- nancial goals to meet. Settling cases can actually im- prove a company's balance sheet, even if the company pays out more than it anticipated. Insur- ance companies are required to set aside reserves, estimated payouts for unsettled cases, to ensure that the company has enough funds on hand to pay all outstanding claims. They represent an educated guess of a claim's value. Usually they are set on the basis of what the adjuster considers a high-end settle- ment. Insurance companies can get into trouble by underreserving cases, so most would rather have claim values overestimated. (On more quantifiable claims, like property damage, the reserves may be set automatically by computer.) Also, the adjuster looks better if he or she settles the case below the reserved amount. Anticipated defense costs are reserved separately. WINTER 92 55 LP)TECNOCT

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