| A fabulous trip to the Caribbean
How'd you like to spend three days in the Caribbean for doing your job
well? That's just what The Hartford asked its claims adjusters in the
Northeast.
The Hartford conducted a contest between
June 1, 1999, and May 31, 2000, to boost the number of crashed cars
that were sent to the insurer's direct-repair shop facilities, known as
Customer Repair Service Program (CRSP) shops. CRSP shops, like other direct-repair programs, give
The Hartford discounts on parts and labor charges in exchange for a
steady flow of crunched cars to repair, which helps reduce the overall
cost of claims. While direct-repair facilities might show aplomb in
repairing vehicles, it's possible the insurer is using those shops to
shortchange claimants. (For a discussion of the pros and cons of
direct-repair facilities, click to Inside the direct-repair process.)
The
Hartford's CRSP contest was held monthly, with claims adjusters who
showed the most improvement in referring customers to CRSP shops and
adjusters who referred the most customers to The Hartford's shops
earning cash bonuses: $500 for first place, $300 for second place, and
$200 for third place. In addition, the monthly winners automatically
qualified for a shot at the grand prize — a Caribbean cruise for two.
A company brochure advertising the contest, obtained by
Insure.com, tells adjusters, "Together, we can provide our claimants
best-in-class customer service, while positively impacting the bottom
line." Cynthia Michener, a spokesperson
for The Hartford, says the contest was a one-time program open to auto
insurance claims adjusters, conducted in order to improve customer
relations by providing claimants with better repair options. Michener
says that CRSP shops have indeed increased customer satisfaction and
policy renewals, while cutting claims expenses for The Hartford.
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Critics of claims adjusters' performance evaluations — including former
claims adjusters themselves — acknowledge that an adjuster's goal could
include more than just reduction of claims payments. Handling claims
more efficiently by improving response time to claimants is often
another goal. Claims personnel evaluations from State Farm and Allstate
obtained by Insure.com also note that
adjusters are graded on their ability to investigate claims thoroughly
and their willingness to participate in continuing education courses.
Appropriate
professional goals notwithstanding, former claims employees speak of a
corporate culture at Allstate and State Farm that breeds mistrust
between the claimant and the adjuster. Efforts such as sending more claims to the legal
department so that State Farm can fill its litigation quota, sending
more medical claims to independent medical examiners, and putting all
communication to claimants in writing, rather than speaking to them
face-to-face in a personable manner, are designed to "tighten the
screws on claims payments," the former claims rep says. And what most
claimants don't realize, other former claims personnel say, is that
steps such as these are part of companywide settlement strategies
designed to lower claim payments and maintain the company's bottom
line. "There are people taking
advantage of the system," a former State Farm claims representative who
wishes to remain anonymous says. The former claims adjuster notes that
insurance fraud is a real problem, and that "it is perfectly fair for
the insurance company to investigate claims that appear to be
suspicious. But when those efforts become so extreme as to infringe on
the rights of all claimants, that's not appropriate," he says.
The
Big Three aren't the only companies that have adopted incentive-based
programs for adjusters. Other insurers compensate their claims
personnel for a job well done, as long as that job reduces claims
payments. Progressive Insurance Co.'s 1999 annual report, for example,
outlines the Year 2000 plan for "gainsharing" and how the insurer will
measure an employee's financial performance to calculate his or her
bonus. Employee bonuses at Progressive are essentially determined
by how much that employee can bolster the company's bottom line.
Progressive employees have the opportunity to earn between 8 percent
and 135 percent of their salaries as part of the gainsharing program,
with senior executives and top managers getting a shot at the biggest
bucks. Rank-and-file employees can earn up to 8 percent of their salary
as a bonus if they can augment Progressive's profitability. And how do claims employees increase the company's
profitability? They aren't cutting back on the number of staples and
paper clips they use, sources assert. They're allegedly cutting back on
settlement checks. "The only way an adjuster can participate in
gainsharing is by cutting the claims payments," alleges Matt Sharp, a
Reno, Nev.-based attorney. Progressive vehemently denies that its adjusters are
shirking their duty to pay claims properly in order to bolster their
share of the company's wealth. "Does gainsharing influence the amount
paid on an individual claim?" asks Leslie Kolleda, a spokesperson for
Progressive. "Absolutely not." Compensating
employees for their job performance is a common business practice in
the insurance industry. But when claims adjusters are asked directly or
indirectly to reduce claim payments to unfair levels in order to boost
their employer's bottom line, a quandary develops: Can an insurer deal
with claimants fairly and in good faith if it has asked its claims
employees to reduce payments? No, says attorney Anderson. "There are
quotas insurers can impose on adjusters, but one of them can't be, 'If
you pay more than $50,000 in claims, your raise won't be as good." Return to page 1
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