Being a Claims Advocate while not Breaking your Company Contracts
Updated: Aug 25, 2020
Virtually every company/agency contract has the same clause regarding agents advising clients on claims. It states something like this, "Agent shall notify Company immediately of all claims or potential claims."
It goes, or should go, without saying, this implies (and other provisions are often explicit) the agency is not to advise clients claims will or will not be paid. Most agents get this part clearly.
What most agents in my experience have difficulty understanding is how the agent is not to advise clients they have the option of turning in the claim after the insured has already told the agent of the claim! The agent is to turn in ALL claims as soon as reasonably possible. The carrier contracts require agents do this.
Why do agencies forego reporting claims when clients ask them not to?
The ostrich: "I have never read the agency/company contract or at least not informed my employees so these clauses do not apply to my agency. We are free to tell clients claims can be reported to us and we won't report them unless the client tells us to."
Sgt. Schultz: A few readers may remember this character from the old "Hogan's Heroes" television show. He was famous for his line repeated in most episodes, "I hear nothing. I see nothing. I know nothing." I do not "know" a claim happened because it cannot be a claim unless the loss is turned in and besides, I do not know really the details of the claim so I do not have anything to turn in.
Some agents take the hard opposite position of not giving any advice whatsoever to clients but still know nothing. They stick to their interpretation of the contract and advise, "I do not have any idea and cannot give you any idea of, if, when, how much will or will not be paid no matter what. I am turning in this claim, about which I know nothing, no matter what." If that perspective was 100% true, the agency person is likely quite new or ignorant or so risk adverse they really should find another occupation. Another example of this attitude is, "So, you have a claim and you want to know if you should turn it in. You say it is a small property claim. I would not turn it in but then again, I never heard you say you actually had a real claim."
The professional agency would capitalize on this opportunity foregone by its lesser competitors. They would:
Educate clients upfront about claims and deductibles. This is only a partial solution but progress. Then, fewer clients will call asking if they should turn claims in and agents would not be squeezed between a rock and a cliff.
Have procedures for those insureds who call and have a clear claim that must be turned in. The procedures should dictate the claim be turned in and include how to talk to insureds regarding why they have to turn it in, why it is likely in the insured’s best interest, and what the insured should expect in the claims process.
For those clients who call with a claim in the grey area of whether they truly need to turn it in, a compromise between true, small, developed strictly property losses (not property claims per se because a property loss and a property claim are not necessarily synonymous) and all other claims is required. This is the middle ground many agents try to manage. For example, someone calls with a windshield claim and it is a true windshield claim where a rock from an unknown vehicle cracks the insured's windshield (as opposed to the claim I saw where the insured reported a windshield claim but failed to report the rest of the vehicle was totaled -- it truly pays agents to ask many questions about "simple" claims). In these cases with the fully developed data, maybe an option can exist at times. I know this is not the textbook answer, not a straight answer, but it is more aligned with reality. So many insurance companies are taking, without question, unrealistic underwriting positions relative to reported incidents. They have forced the creation of a grey area in many minds.
Most of the time, the agency and the insured simply did not believe much of a claim existed. The examples I have are mostly of innocence and naivety. A few are, in my head at least, pure fraud on the part of the insured or the third party. Either way, the professional agency will develop the information upfront. For example, the simple bumper claim. Find out what they actually hit. The bumper might not have all that much damage but the light pole that crashed probably did have considerable damage. Or the broken window caused by the neighbor kids that turned out to have been caused by a burglar who stole considerable expensive jewelry that was only discovered later. In other words, a professional agency will not just take the insured’s simple explanation at face value. Another reason to turn in the claims is because if an agency does not turn in a claim after learning about it, some insurance companies may take the position of paying the claim and then subrogating against their own agency for violation of the contract. I have many examples of where they have done this.
Professional agents will be true advocates when claims are turned in. Being an advocate may not offset situations where companies take unfair positions, but having an agency advocate at least partially offsets the pain. By "advocating" I mean the agency will explain to the client what to expect. They will explain that they will follow the claim and if they see the adjuster is not responding timely, they will contact the company to learn what is happening. If they think the adjuster is interpreting the policy incorrectly, they will discuss the interpretation with the company without indicating to the insured the agency’s opinion of whether the adjuster is correct.
Professional agents earn their money when a client incurs a claim. It is important to adhere to the company contract without using it as cover to abandon the client when they need you the most. Be an advocate for helping them through the painful claim process.
NOTE: The information provided herein is intended for educational and informational purposes only and it represents only the views of the authors. It is not a recommendation that a particular course of action be followed. Burand & Associates, LLC and Chris Burand assume, and will have, no responsibility for liability or damage which may result from the use of any of this information.