CLAIMS HEART AND SOUL OF INSURANCE TRANSACTION, BUT INSURANCE INDUSTRY MISSES THE POINT.
Herb Denenberg Column for Week of December 17, 2001.
HOW THE U.S. TRADE PRESS DISTORTS REALITY BY ITS ONE-SIDED COVERAGE OF INSURANCE NEWS. WHAT THAT MEANS FOR THE CONSUMER, AND HOW WE HAVE TO TRAVEL ALL THE WAY TO INDIA FOR A BETTER EXAMPLE.
The insurance trade press in the U.S. plays an important role in communicating information and raising issues for resolution in the insurance marketplace. The importance of the trade press is magnified because the mass media often lacks the expertise, the resources, and the willingness to cover the complex issues relating to the insurance marketplace. So if the insurance trade press doesn't get it, maybe no one will.
Having made that point, it must also be said that the trade press in the U.S. cannot be relied on to cover the issues. It is too subservient to its advertisers and the industry it covers. It typically tells the industry what the industry wants to hear, not what it ought to hear. It often behaves too much like a copyrighter producing publicity and advertising instead of a journalist producing reality and all sides of an issue.
This point came home to me again when I considered a key insurance issue, what I call the other face of insurance fraud. There is a constant stream of reports and advertisements relating to insurance fraud committed by policyholders. That stream is always rolling along in the insurance trade press and in the mass media. But there is almost total neglect of the other face of insurance fraud: the failure of a large segment of the insurance industry to pay meritorious claims promptly and failure. This is the kind of insurance fraud committed by insurance companies and their claims adjusters, their lawyers, their claims examiners, and their other personnel when they deny a meritorious claim, or needlessly delay payment, or ask for unnecessary substantiation or do anything else to intentionally or negligently thwart a fair and efficient claims consideration or other insurer decision.
The importance of paying claims cannot be overstated. After all, the claim is the heart and soul of the insurance transaction. It is the very purpose of insurance, its raison d'etre. It is the guts of the insurance business. Yet, the legal, ethical, and moral responsibilities of the process of adjusting claims are neglected by the U.S. trade press, and most certainly the failures on the claims front are also almost totally neglected.
So where do you find a discussion of these issues if you are looking to the trade press. As far as I can tell, you may have to go all the way to India. In an editorial in the November 2001 issue of the Insurance Chronicle, a monthly insurance digest published in Hyderabad, India for the Institute of Financial Analysts of India, the lead perspective article is entitled, "Ethics: A Business Strategy for Insurers."
The article starts out by noting, "The foundation of insurance at the time of its inception was based on integrity and trust." It notes this integrity and trust has to be and in many ways is still central to the operation of the industry. But then the author, Abhishek Agarwal, makes his central argument: "By being ethical here I mean, not taking undue advantage of the customer and being just, proper and right when it comes to claims settlement...But when it comes to claims settlement, they (the insurers) have not been able to do so (gain trust). A common activity practiced by the insurers worldwide is to procrastinate when it comes to claims processing."
The remedy, according to the article is simple: "Such practices do not bode well for any insurer, of course exception apart. In fact this is the area where insurers should focus upon and gain confidence of the customers, since this is the ultimate objective of insurance and the only area where the insurer gets the opportunity of proving the customer responsiveness in a real sense. Insurance is a very delicate business since it involves the emotions of customers, which if handled properly can do wonders. The whole operation of the employees of any insurer should be towards better services while doing the real business of settling claims."
To achieve that goal, the article concludes there may have to be changes in the organization culture, "which should be oriented towards this concept of fast claims settlement." The article stresses that the mission, vision, and values statement of the companies have to stress that insurance is more than a business, but is also a social service. Only then is this change likely to come about. This broader public interest approach, the article finds, would lead to long run profitability and regaining the trust and confidence of the policyholder.
One other point can be made with certainly back here in the U.S. Whatever the solution to the claims problem (a.k.a. the other insurance fraud problem), the industry and its trade press must recognize the reality of the problem, start to discuss it and report on it, and look for solutions.
The U.S. insurance trade press ought to follow the example set in India by the Insurance Chronicle. The U.S. insurance industry and its trade press ought to recognize that you often learn more from your critics than from your friends. The U.S. insurance trade press has to be more than a propaganda voice and a cheerleader for the industry, and ought to recognize the reality of diverse opinions and of critics.
That's one reason the Insurance Chronicle impressed me. When I looked at the first two issues of the monthly that I have ever seen, I immediately realized that the publication covered the waterfront, and was not interested in playing the role of lapdog of the industry. Its pages are filled with all viewpoints, something lacking in the U.S trade press. If the U.S. industry spent more time listening to all viewpoints, including its critics, it would be more competitive, more progressive, and as the article in the Insurance Chronicle suggests, more profitable.
The insurance industry and the trade press have to take seriously the nature of the insurance relationship. It is a contract of utmost good faith; it creates a fiduciary relationship; and it requires trust and confidence on both sides. The industry has to remember that claims are the heart and soul of the insurance transaction, and that is a matter of law, morality, and law.
(Herb Denenberg is a former Pennsylvania Insurance Commissioner and consumer advocate.)