Culture change needed on insurance equation

by Antone P. Braga

The millions of people each year who suffer disasters such as earthquakes, hurricanes, tornadoes, floods and fires usually carry insurance, although generally they have only an idea of what to expect based on company advertising, even after asking around. How can they possibly conceive their damage claims or partake in the process in a truly informed way? It is always a good ending to a story when the interest of the policyholder has been served without having to horse trade or fight. However, much depends on an individual company adjuster’s aspirations, the adjuster’s temperament, and to what extent he or she is informed of rights and rules, to be something on which people can blindly rely.

Crucial information should reach the insuring public and adjusters alike. The insuring public should be provided disaster insurance rights and rules of recovery as a matter of course at the inception of insurance. Nearly everyone has been left out of the loop, including many adjusters. Disaster survivors in particular are in jeopardy because they lack that fundamental consumer protection when they are most vulnerable, and some adjusters unknowingly or knowingly take advantage. That is just how it is and for one reason or another there is not yet enough public pressure to right this listing ship. However, righting the ship could do wonders for the insurance industry’s public relations, notwithstanding which deciding factor prevails.

Fraud comes dressed in different clothes. It can be a padded claim, arson for profit, or insurance-fraud ring. It can also be misleading advertising, or denial of information to either or both sides. If an adjuster is trained to act according to misinformation and nonexistent authority, that adjuster can come to feel righteous in acting on that misinformation and entitled to that misguided authority. The same is true of policyholders who have abdicated authority and responsibility, and have come to feel entitled to lay their problems at the feet of insurance. Many people resort to exaggeration and outright fraud to compensate for their lack of knowledge about adjusting. Those acts provide good arguments, bargaining chips, and feathers in the cap of the company adjuster. Although the misrepresentation may be minor in scope it can result in denial of an entire claim, or at the very least, a drastic compromise. That’s regrettable. The wording in the insurance policy gives the policyholder ample authority to deal with an adjuster on an even footing from the outset, through to settlement. It is a matter of understanding one’s authority and how to implement it that often escapes notice.

We hear mostly about misrepresentation and fraud on the part of policyholders, and undoubtedly it takes place. Conspicuously missing from the insurance transaction is mention of possible fraud by the insurance company or its agents, adjusters, investigators, and experts who might participate in collusion, provide misinformation, conceal policyholder rights, conceal facts, understate policyholders’ losses, and negotiate claims in bad faith. If the system expects a party to act according to principle rather than predominant self-interest, it must hold that person to the higher standard. This inescapable equation applies to policyholders and insurers alike. Any system must have practical checks and balances or descend to self-destructive lower levels. Lack of information and misinformation are inappropriate at best and have the potential to bring the system to its knees.

Insurance reform is a catchall phrase conjuring up images of massive bureaucratic change, but it can also mean looking at what is in front of our collective nose. Fundamental rights and responsibilities must be afforded. This is an essential missing piece in the companies’ relationship with the insuring public. The new face of insurance must decree that both sides be genuinely informed and responsible. Raised standards of expectation inevitably raise standards of fulfillment that in turn bring about positive culture change.