Insurers can and must improve their claims-handling and un- derwriting practices in several key areas. That’s the message
market conduct regulators are sending to both life and health and property and casualty (p&c) insurers.
When the regulatory experts at
Wolters Kluwer Financial Services reviewed and analyzed the results of last
year’s state market conduct exams, two
criticisms were cited most frequently:
p&c insurers’ failure to handle claims
within specified time frames and their
use of unapproved forms and rates.
The Waltham, Mass.-based compliance
and risk management services provider
condensed the findings of its annual report
to a “top 10” list in order to create an easy
reference to assist insurers seeking to mini-
mize their compliance risk exposure. When
asked to explain what may be prevent-
ing insurers from staying compliant,
Kathy Donovan, senior compliance
counsel of insurance at Wolters Kluwer
Financial Services, had this to say:
“The regulatory landscape is getting
more complex as industry require-
ments and laws change constantly un-
der the direction of government and
industry oversight,” she explained.
“[This makes] it extremely challeng-
ing to embed regulatory requirements
into claims, underwriting, and distri-
bution processes. [However] strong
regulatory change management pro-
cesses and frequent self-audits are ex-
tremely effective in helping [insurers]
Undoubtedly, most claims ex- ecutives will readily tell you that they have a strong claims management program, which
is a crucial component of any claims department. They will point to policies,
procedures, guidelines, and claims audits.
They would also point to stringent litigation and billing guidelines for attorneys.
But do they fully consider the intersection
between their claims management program and bad faith? I’m not so sure, given
my recent experience.
In one case, the manager responsible for
claims and litigation management relied
solely upon the adjuster’s summary of the
investigation in supporting a denial for a
claim worth well over $1 million. Had that
manager only briefly reviewed the file, he
would have seen that the adjuster’s “in-
vestigation” was woefully inadequate and
violated not only claims best practices, but
also the company’s own claims procedures.
In another, the claims manager failed to
take an active role in managing an uninsured
motorist claim until over 18 months after a
demand for the policy limits had been made.
However, by then, the bad faith had been
committed, and the damage was done. In
both cases, the policyholders have filed suit
against the insurer for breach of contract and
bad faith. Both suits could have been avoided
through active claims management.
Three Impediments To Action
Given the intersection between claims
management in bad faith claim, why aren’t
carriers engaging in active claims management? I have some theories:
1. Lack of time and resources. Just as
claims adjusters have a legitimate complaint about unreasonable case loads, so
do claims managers, who often are managing the caseloads of multiple adjusters.
Now add those duties to those associated
with employee management and other
management duties, and it becomes easy
Prevent Bad Faith and Unnecessary Litigation
with Active Claims Management
By Suzanne M. Ganier
Ganier has more
than 19 years
in the insurance
such as counsel,
and director of
Regulators Share Top 10
Gripes About P&C Insurers
Claims Handling, Underwriting Dominate List
By Christina Bramlet