In Search of Value
There are many stakeholders in the world of insurance and self-insurance claims. As demonstrated in a recent article on Property Casualty 360, Independent Adjusting (“IA”) services play a critical and important role in the operation of the insurance and self-insurance cycle. Over time, the role played by and value of the services of IA firms has changed.
IA firms must investigate situations, communicate the results of those investigations and then bring matters to conclusion as defined by their individual client or case file relationship with the payer. Work product is a given. Far too often, work product has been approached as a commodity. Much like the Progressive Insurance ‘insurance box’ talking about his value to potential customers, many think of the work product expected of the IA to be universal, routine and consistent. However, each jurisdiction is far different from others. Each locality is different. And in some cases, neighborhoods vary greatly even within the same city. The IA is best suited to among all the stakeholders to bring their experience and local expertise to the claim situations. Work product requirements vary a great deal from one jurisdiction to another.
However, if payers believe or perceive that the work product is “all pretty much the same”, the dynamic switches for the IA. One of the primary requirements placed upon the IA industry is to show value. In the age of measurements, analytics, score cards and dashboards, the value proposition primarily resides in the area of Allocated Loss Adjustment Expense (“ALAE”). Essentially, the question becomes limited to “how much does the IA charge for the “all pretty much the same” work product?” This proposition began to influence decision makers in the industry as early as the late 1960’s. What was once a value proposition primarily grounded in how well the IA handled the insurance company’s customer and brought the claim to a successful, timely resolution has evolved over time to be one where the price charged is the primary point communicated. The soft concept of customer claim satisfaction is in fact not a part of most interactions between the insurance payer and the IA.
Some in the IA segment have acknowledged this trend and have taken action to address it proactively. They have made it a fundamental tenant of their business to demonstrate value to all with whom they interact. This includes insurance payers, self-insured organizations, the individuals and companies involved in the claims and vendor partners. Importantly, the effort to identify, create and demonstrate value has been internalized at some of the most successful IA firms.
Demonstrating value, where the question is not routinely asked nor exists as part of the dialogue, has its challenges. It must be a concept driven down to the most detailed level within the IA organization. Every person working for the IA, every report, every conversation, every bill review, every e-mail…every point of contact, become tremendously important. The successful IA recognizes that the demonstration of value takes many forms, and becomes the primary marketing tool for their organization.
Balance. Balancing competing concepts becomes greatly important. Balancing of the internal needs of the IA, its liability / E & O / cyber exposures, its financial needs and capital and return on equity requirements, its staffing needs and their desires and its reputation against the external drivers of its clients and the industry has become one of the most difficult challenges to IA organizations across the country.
IA organizations, responsible for Billions of dollars in claims annually, have been an integral part of the insurance and self-insurance claims industry for more than a century. The importance of the function of and services provided by the IA industry is higher than at any point in history.