insurance claims

Understand the Insurance Adjustment Process

It is not unusual for the insurance company to compile values that disagree. These differences are resolved through Claim Adjusting, or if necessary through the Appraisal procedure, a simple, inexpensive form of arbitration. However, many recent changes in wording of some policies have included striking-down the Appraisal process and instead now require parties to go to court.

To adjust is to negotiate. An adjuster is a negotiator. Think about that for a moment. This simple fact seems the most difficult for policyholders to realize. The dictionary defines the word adjust: To settle or bring to a satisfactory state, so parties are agreed in the result: to adjust our differences, to bring to agreement, to determine the amount to be paid, as in settling an insurance claim.

Typically in the past, only the person representing the insurance company has been considered the adjuster. Historically, the policyholder has been considered–for lack of a better word–the adjustee, or the one receiving the adjustment. If you can’t imagine yourself as an adjuster, it is probably because of the word itself. When adjusting is foreign to your background, education and experience, it only follows that you would have difficulty assuming that role.

We are all adjusters, in all our dealings. You are an adjuster when you have bargaining power and are prepared to deal from a position of knowledge and strength. This mental image is important for all your negotiations. The winning combination in adjusting is having an organized, methodical, and self-confident approach. Actually, winning in adjusting is not the act of one party driving the other party to defeat, as some would believe. The perfect adjustment occurs when the enlightened needs of both sides are met to the satisfaction of both sides.

A company adjuster facing a knowledgeable policyholder usually realizes that the claim adjustment will be a cooperative effort. Also, this mutual respect may more likely lead to mutual agreement.

Probably the most difficult aspect of acting as one’s own adjuster is in having to enter the realm of the unknown at a time following a disaster. Psychologically, most people are not up to the task under these circumstances. It is very common to see people in a state of shock, confusion and helplessness. Those who are objective, informed and prepared are more inclined to be emotionally level and competent.

The time of a personal disaster is not the time to be thinking about all of this for the first time. Think about it now and take comfort in the knowledge that you are able to protect your interest without feeling at a loss, if the unthinkable does happen to you.

Some adjusting options to consider:

Have the insurance adjuster representing the company handle your claim.
Utilize a public adjuster. Yes they do exist, they’re few and far between, but they do exist.
Adjust the claim yourself. This means much more than just telling the company that you had a loss. This means calculating what you are entitled to, presenting it in a way that they understand you have some knowledge of what you are entitled to and knowing how to negotiate best on your own behalf.

“Drive or be Driven”! The idea that you either are going to control the business transaction (because that is what it is at this point) or you’re going to want to be taken care of and just watch to see how it turns out.

It is important at the very outset to decide how you are going to handle the matter. Once you surrender authority it’s difficult to reclaim.

Here are a list of steps to take in the event of loss (these can be adapted to conform with your business):

Property Damage

Mobilize your emergency response organization.
Protect your property from further damage.
Fix leaking pipes.
Restore fire protection.
Temporarily support collapsed or impaired structures.
Notify your insurance broker or your Insurance Company claims representative, giving the date, time, cause and location of the loss.
Board up the premises and correct unsafe conditions, if applicable.
Isolate the damaged area whenever possible.
Separate damaged from undamaged property.
Restore power to critical areas such as freezers.
Establish a loss control account to detail all expenses incurred as a result of the loss.
Retain all invoices, time sheets, etc., to ensure all costs are captured and attributable to the loss, and to prevent an overlapping of normal costs with these expenditures.
Obtain identification of all civil authorities involved such as fire, police, health department, building inspector, etc.
Retain any piece of equipment or other property that may be the cause of the loss. This should be tagged and identified as to its function and the time and date of the incident in order to establish a chain of custody.
Take photographs, if possible, prior to the removal of any debris.

Business Interruption

Estimate the period of interruption to operations due to the property damage event.
Determine the direct effect to operations or production, including any indirect or contingent effects of the shutdown.
Determine if your company can use other facilities to make up the loss.
Determine if your company can make up production through overtime or weekend work.
Determine if finished goods inventory can be utilized to offset a loss of sales.
Determine if your company has any extraordinary sales commitments.
Determine if your company has any sales contracts that can be delayed.

Still concerned about the insurance claims and adjustment process? Contact us, we are here to help.

8 Important Points When Presenting Your Loss & Claim

In the previous post Proof of Loss: The proof is in the pudding, we shared the importance of knowing how the business insurance claims process works so you can get paid what you are due if you suffer a loss. These 8 points will help you navigate the claims process successfully.

1. Familiarize yourself with lines 90 through 122 of your insurance policy or the “Duties in the Event of Loss” section. You cannot afford to violate these duties. This policy section also grants authority to file your claims as well as authority of a third-party to file a claim on your behalf.

2. Calculate your loss first before filing your claim. You have the advantage of telling the Company Adjuster you know something of what you are entitled. Compare this to just reporting an uncalculated loss and giving the Company Adjuster the authority to direct and decide how much you should claim.

3. Remember these time limits:

60-day time limit, after date of loss, to file the Proof of Loss.
20-day time limit, after Appraisal notice, to select an Appraiser.
12-month time limit, after date of loss, if you elect to file a suit.
60-day time limit, before date of loss, for certain coverage pertaining to vacant or unoccupied buildings.

4. Prove adequate insurance. If the insurance company determines that you carried too little insurance and attempts to impose a penalty, remember, you carry the burden of proof, you may still be able to eliminate penalties by proving adequate insurance. For example: if the problem involves a building structure, you may shop for a total replacement cost estimate much the same as insurance companies shop for repair estimates. You may locate a licensed building contractor who will establish that your insurance was adequate when compared to the contractor’s replacement estimate. Replacement estimates are not to be confused with repair estimates.

5. Salvage is that which is saved. By claiming only the portion of your loss that remains after deducting salvage value, you maintain ownership of that item and the salvage remains your property. Salvage bids establish salvage value.

6. Save all remains of property until you have received your settlement. The burden of proof is on you as the policyholder. Anything to help prove your loss is valuable. Photos, warranties and manuals are also helpful. If you must discard certain debris prior to settlement, it would be wise to first take photographs.

7. Understand the Appraisal Procedure. If you have differences with your insurance company, you should know of a quick, fair, inexpensive procedure called Appraisal. It is a form of arbitration with a binding award conducted by disinterested parties that is designed for “amount of loss or damage” disputes. You must first remember to file the Proof of Loss, even if not requested by the company, within 60 days from the date of loss. Make certain if you go beyond 60 days that you have been provided a written extension of time by the insurance company—similar to a tax-filing deadline. You may request the Appraisal procedure within a “reasonable” time after filing the Proof of Loss or at the time of filing the Proof of Loss. NOTE: Many recent changes in wording have included eliminating the Appraisal process and instead require parties go to court.

8. The filed Proof of Loss represents the amount of your claim and is a demand for payment. If your loss exceeds your insurance coverage you may wish to claim that portion as an income tax deduction. To protect that deduction, be sure that the Proof of Loss form states all of your loss and not only your loss covered by insurance.

Watch for the final post in this series… Understand the Insurance Adjustment Process.

Proof of Loss: The proof is in the pudding as they say

From an insurance perspective it is important to know how you can recover when your business suffers a loss. Questions to consider when filing a business insurance claim:

1. Will your insurance coverage be adequate?

2. How do you go about getting a recovery?

3. What are your responsibilities in the process?

Knowing how the claims process works, what you should be prepared for and what you can expect when you face a loss is critical to know. The proof will be getting paid what you are due and the pudding is how it all works.

Understand Insurance Claims Concepts and Procedures

The purpose of purchasing insurance is to protect company assets from suffering loss. Those assets are both tangible and intangible. The insurance policy is based on the concept known as indemnification. This means that the insurer is to make the insured whole again assuming that the proper coverage and limits were purchased. In other words the company is to be put in the same position they were in prior to the loss, no more, no less.

Policyholders have a responsibility to act with consideration, demanding what they clearly are entitled to but not asking for things they believe are unlikely to be insurable. This includes creative claim theories, acting with a sense of fairness on valuation issues, and being transparent. Remember, insurance is a vehicle for financing fortuitous risk and not a means of becoming an occasional profit center. In order for insurance to work, a pooling of losses and premiums is required. In most years, an insurer is using your premium to pay for losses of others.

It is extremely important to remember there is a time limit of 60 days after the date of loss, in which you must file the form, Proof of Loss with the insurance company. Just reporting that you had a loss is not enough. You may lose your rights and leverage if this form is not filed within the time limit. Think of this deadline the same as you would for a tax-filing deadline–with a timely filing or written extension.

Some tips for a well-received claim:

A typewritten claim has a neat, more acceptable appearance
List all items separately
Try not to group items into categories
It is best to list property building-by-building and room-by-room in order to relate back to its physical placement

The depreciation shown varies according to condition and quality of property and only represents a general method of calculation. Your own calculation would largely depend on the life expectancy of your property.

Original or duplicate receipts are an important way to prove a loss. If no receipts are available, verification of ownership can be proven by affidavit. An affidavit should list the property in question and be signed by disinterested parties who thereby verify ownership and possession. Also, pictures are worth a 1,000 words – when there is a fire loss for example, many items in a room become unrecognizable – so it is a benefit to take pictures of rooms to document what exactly was in them to help you remember.

But before you can present your claim in the proper fashion, there are some duties that you must be familiar with so as not to jeopardize your recovery.

Watch for our next post which will cover 8 important things to keep in mind when presenting your loss and claim.

Experience Modification: 5 Steps to Control Your Own Destiny

Many times when a client engages us to become their Outsourced Risk Manager, in the interview stage we often discover that their workman’s compensation costs are high relative to the employee population and work functions. Typically we discover that the experience modification factor is high (which is commonly referred to as a “debit mod”, over 1.0 and beyond) and in many cases the client thinks their experience modification is a consequence they can’t influence. What we find when we investigate the root cause is that their program has been neglected and they don’t have proper procedures in place to mitigate claims. This means that when claims occur they are reported, sometimes improperly, and then left to the insurance company to handle with no follow up whatsoever.

You CAN effect and control your experience modification by following a few strategies.

Here are 5 things you can do to help reduce your workers compensation experience modification:

Report all claims to carrier immediately. Use a phone call to alert carrier to any serious, potentially serious, or suspect claims.
Investigate accidents immediately and thoroughly. Take corrective action to eliminate hazards.
Take an aggressive approach to providing light duty to all injured employees upon their release from treatment. Supervise light duty employees to assure their conformance with restrictions.
In serious cases that involve lost time, communicate with the claims adjuster so that they recognize your interest in returning the injured employee back to gainful employment.
Set safety performance goals for persons with supervisory responsibility. Success in achieving safety goals should be used as one measure during performance appraisals.

Review and analyze the root cause of the elevated experience modification, create a plan to address the issues head on and then work the plan. Be aggressive and be in control.

The Life of an Insurance Policy

A few weeks ago I participated in a panel discussion regarding insurance issues. The first part of the discussion was to center around “the life of an insurance policy” – I thought to myself what exactly is the life of an insurance policy and trying to have a little fun with it, I came up with this poem. I am sure many of you can relate.

The Life of an Insurance Policy

Mine is somewhat of a lonely life.

I am born from an insurance company to satisfy a need,

a need for peace of mind and financial protection against many worldly risks.

I am courted by, and eventually partner with, individual consumers and businesses alike.

The way I get matched up is sort of like a blind date, if I look good on the outside then I can’t be too bad on the inside

Once I am with my new-found customer I sit on a shelf, stuck in a file cabinet or I’m in a PDF file somewhere…

No one touches me, reads me, caresses me or understands me – a lonely life

But they know I’m there…somewhere…

Ah, but when there is a loss and claim – that’s when the fun begins.

Then I have so many friends…claims adjusters, agents, attorneys

Everyone is interested in what I have to say…they want to understand me better.

I feel fulfilled – everybody’s reading me when there is a loss, even fighting over me – I’m feeling loved.

Although, sometimes people get mad with me…I didn’t provide what they thought they had

And to them I say…you really didn’t get to know me, with all of the good and all of my flaws.

All I wanted in life was a little peace, love and understanding.

R. Scott Wolff, CIC, CRIS

Approaches to Risk Management: Part 1 The Basic Concepts

To get a flavor of where to start in the analysis of how to save time and money on an insurance program, a basic understanding of a few concepts is necessary. The first is the idea of “Risk Management”.

Risk Management is the practice of protecting an organization from financial harm by identifying, analyzing, and controlling risk at the lowest possible cost.

To begin, ask yourself 3 basic questions:

1) What can go wrong?
2) What will we do (both to prevent the harm from occurring and in the aftermath of an “incident”)?
3) If something happens, how will we pay for it?

This is obviously a very simplistic approach, however it is a very practical place to start. When an attempt is made to answer these questions more and more questions result. There is virtually no way a company can begin to reduce insurance-related and risk-management related costs without recognizing and evaluating what the company’s true risks and exposures are.

Below are some of the major components we would recommend being addressed as part of the risk management process.

Identify and measure all exposures to loss – this is the single most important function and the one most often slighted or only paid lip service. Without this step, there is no rational way to put in place a meaningful insurance risk management program.

Develop risk management strategies – this requires top level buy-in – it is indispensable for consistency and helpful to establish the extent of the risk management program and what it is that you want to accomplish. This provides the framework for the company’s goals.

Choose risk finance alternatives – through knowledge of the company’s financial structure, organization and risk appetite, the risk manager (you) selects methods of funding risk. Funding includes an appropriate mix of expensing, reserving, transferring by contract, setting up lines of credit, using a captive insurer, pooling with others, and insuring.

Negotiate insurance – the term “purchase” when referring to insurance is antiquated and not the recommended approach. Today we say “negotiate” and “buy” as it more aptly describes what should be done. This involves, first of all, deciding what insurance is needed, and then going to the insurance marketplace to obtain the best conditions of coverage and cost. In most cases, this involves working with one or more brokers. However, the key to purchasing insurance is being well informed regarding coverage availability and appetite of insurers, limits and pricing options available as well as creating a competitive atmosphere via a well thought out process and strategy.

Adjust and monitor claims – reporting procedure should be instituted, and tracking methods developed, to ensure timely closure of claims. This is a very important function. If claims are left unmanaged then the loss experience will not have true meaning. If there is not true meaning relative to loss experience, then the purchase of insurance will always be skewed.

Keep & Analyze records – a very important tool is a complete, well organized record of insured and self-insured losses and all other risk related correspondence and information. This serves to document the plan, problem areas and what is working. It also goes a long way to help mitigate any potential future problem that may arise. In this way, should things change you are ready to adjust at the drop of a dime.

Oversee loss preventative activities – this involves the selection of the most appropriate loss prevention support services designed to reduce exposure to loss. Overall employee safety plans, ergonomic studies, driver safety plan, fleet safety plans are some of the types of programs that should be investigated. An important aspect here is to be proactive about loss control…stay ahead of the curve and plan to utilize various services in advance of losses.

While the above are all steps in a process none of these independently will satisfy an overall approach to addressing risk. All the above steps overlap and are inter-related. They tell a story about your company and how it approaches risk and insurance needs. My advice would be to learn to tell a good story about how your company approaches risk and protecting its assets…. ultimately doing so will go a long way to reduce your insurance costs. In our next post we will dig a little deeper into areas of risk to be addressed.