Our own experience in handling cargo losses for a number of U.S. and London insurers tends to confirm these findings.  One always troubling aspect that we seem to see increasingly is the frequent lack of interest in aggressively investigating cargo thefts by many law enforcement agencies, particularly those in large metropolitan areas.

Cargo Valuation Issues:
One of the consistently troublesome issues in handling cargo claims involves the basis for valuation of lost or damaged cargo.  Exactly what is its value?  The shipper naturally wants to be paid the full invoice price for which it had intended to sell the product, and this would include its mark up and prospective profit.  However, many cargo insurers, as well as the wording of many cargo policies, incline toward the idea that the claim should be limited to the actual value of the cargo – meaning the shipper’s actual production or acquisition cost, which arguably reimburses the claimant for its actual loss.  Courts have been inconsistent in their interpretations and rulings on the subject.

We are finding that it is becoming more common to find situations where a contract exists between the shipper, or the logistics provider/cargo broker, and the motor carrier, and in many of these cases the terms of the contract specifically address the valuation issue.  These contracts or agreements tend to be somewhat one-sided in favor of the shipper, and typically define the claim value of lost or damaged cargo as the full invoice price, or in some cases essentially “whatever we say it should be”.  Motor carriers, in their apparent eagerness to pick up new business, oftentimes seem to sign these contracts without being particularly aware of their provisions.

Cargo / Inland Marine underwriters also don’t seem to have a great deal of interest in the presence of these types of contracts, even though they can make a large difference in the costs of claims.

No More BMC-32?:
Last summer the FMCSA issued a ruling which will eliminate the mandatory financial responsibility filing and required BMC-32 policy endorsement for  most motor carriers operating in interstate commerce.  The ruling, scheduled to go into effect in March 2011, doesn’t apply to household goods carriers or household goods freight forwarders.  No one seems to be sure what effect this will have on existing filings and BMC-32 endorsements – whether they will be cancelled immediately or with the expiration of the policy, etc.

A survey by the American Transportation Research Institute in late 2009 indicated that the top two concerns of the trucking industry were the economy followed by government regulation.  It’s not surprising that these two issues are currently subject to quite a bit of attention and discussion

Economy:
Probably the biggest factor affecting the U.S. trucking business has been the general economy.  There is no question that the trucking industry has been hit hard by the economic downturn.  With consumer demand and consumption reduced significantly as a result of the recession, the amount of goods shipped by truck has dropped.  Building materials, autos, and most all manufactured goods have been affected. 

According to one study, the number of full truckload shipments fell 15% from 2008 to 2009 on a national basis, and another source reported that average revenue per mile also decreased by 15% during the same period.

The problems for truckers was further exacerbated by high fuel prices in recent years, particularly in 2008, putting yet another dent in their already slim margins. 

All this has hit the trucking world hard.  A number of firms simply parked some of their trucks, and laid off drivers.  Many independent owner-operators have struggled to keep going, and not all have been successful.  A number of people simply got out of the trucking business, and as a result the trucking industry has shrunk fairly dramatically over the past two years.  One report cited a total of 445 fleets which failed during the fourth quarter of 2009, and a total of 21,010 trucks removed from service.  Another reports that at least 4,700 to 5,000 trucking companies have gone bankrupt since 2008.

There is finally some good news on the horizon for those who managed to hang on and weather the storm.  With signs that the economy is starting to gradually improve, forecasts call for an increase in manufacturing and building.  This will mean more goods shipped by truck, with increasing demand.  As one example, Werner Enterprises (headquartered here in Omaha) has recently announced that their revenue increased by 8% in the first quarter of 2010, as compared with the same period in 2009.  While the numbers are not dramatic, there are at least indications of a turnaround. 

The trucking industry is seen by many experts as a key economic barometer, and there is hope that the increase in trucking shipments is an indicator that general business activity will gradually strengthen. 

Meanwhile, the supply of trucking firms, trucks, and drivers available has been reduced because of these various economic factors.  The growing demand for these services as the economy strengthens is anticipated to result in increased trucking rates.

Comment:  According to the U.S. Census Bureau trucks move over 70% of the total value of commodities shipped, and the American Trucking Association states that the trucking industry employs some 8.9 million people.  This is obviously a huge industry which is vital to the nation’s commerce.  All of us directly or indirectly involved with transportation, and particularly trucking, are anxious to see signs of a turnaround. 

One downside of the increasing demand for trucking is that the industry is likely to again face a shortage of qualified drivers.  It appears that recruiting and retaining qualified drivers, which was a critical issue up until the last year or so, will again become a problem.

Regulatory Changes:
Much attention has been focused on regulations affecting the transportation industry, and some of the changes being implemented or planned.  Much of the new regulatory activity comes from the Federal Motor Carrier Safety Administration (FMCSA), which was established in 2000 under the U.S. Department of Transportation to seek ways to improve the safe operation of large trucks and buses.

At the end of 2009 FMCSA announced stricter safety requirements for newly registered truck and bus companies, along with tighter rules for       addressing safety issues discovered during roadside inspections and safety audits. (Note: A safety report issued last year by the Government Accounting Office pointed out that so called unsafe “rogue” carriers regularly continue to operate under different names in order to avoid being placed out of service). 

A high priority for FMCSA has been accidents caused by distracted driving.  Early this year the agency announced a ban on hand-held texting by drivers of large commercial vehicles, subject to stiff fines for violations.  (Note: According to a study by The Virginia Tech Transportation Institute, truckers who text are 23 more time likely to be involved in an accident.)

The FMCSA is also planning to issue rules which will restrict the use of cell phones by drivers of trucks and buses.

The FMCSA is also looking into a widespread crackdown on medically unfit drivers, and there has been discussion of tightening up the rules for mandatory drug testing of drivers.

Driver logs have drawn more attention.  The FMCSA has issued a new rule requiring motor carriers and bus companies with serious hours of service violation patterns to install electronic on-board recorders in all their vehicles for a minimum of two years.  These recorders will track how long drivers are at the wheel.

At least one state is considering penalties for drivers who use GPS devices to guide them to lesser used back roads, with jail time and confiscation of trucks being suggested.  A couple of states have discussed penalties for ice or snow coming from tractors and trailers.

Possibly the most far reaching regulatory change may be the decision by FMCSA to implement a new program called CSA 2010 (Comprehensive Safety Analysis).  It is intended to be a more comprehensive safety measurement system than the one currently in place (SafeStat).  While all the details are not yet completely clear, it appears that the new program will assess safety fitness ratings not just of motor carriers, but also of individual drivers.  It also calls for increasingly severe penalties for those carriers found to have safety issues.  The new system is planned to be phased in during 2010, and to be completely in place in early 2011.

Under CSA 2010, each holder of a CDL will be given a “score” in several different safety categories, and it’s not yet clear who might have access to those scores, or how they might be used.  Part of the idea is that the safety scores will stay with the driver regardless of who he or she works for or contracts with.  In theory, a poor score could ultimately cause a driver to be declared unfit to continue to operate.  Some industry analysts also suggest that carriers will give more consideration to a driver’s safety scores when hiring and firing.  One projection indicates that more than 100,000 drivers could be found to have unsatisfactory scores when the system is fully implemented, and carriers may be forced to terminate them.

Comment:  With all the increased emphasis on improving trucking safety, it is somewhat ironic that the fatality rate for truck accidents declined in 2008 for the fifth year in a row, to a rate of 1.86 per 100 million miles driven.  The rate for injuries arising from accidents involving large trucks also declined to 39.6 per 100 million miles driven.

The number of overall traffic fatalities involving vehicles of all types in 2009 reached what is thought to be its lowest level ever recorded.

The anticipated loss of 100,000 drivers because of safety ratings once CSA 2010 is implemented will be something of a double edged sword.  While removing a large number of unsafe drivers from the road will no doubt further improve accident statistics, it will also make it even more difficult for trucking firms to find enough qualified drivers.

Insurance:
In what has been good news for trucking firms and correspondingly bad news for their insurers, insurance rates have continued to remain relatively low during the current “soft” insurance market conditions.  From all appearances there is still excess capacity in the overall insurance world, with no immediate pressure for rates to increase.  As usual, experts tend to differ in their projections, but many anticipate that insurance rates may begin to rise by late 2010 or in 2011.  If there are larger than expected losses from natural disasters such as hurricanes, these are projected to affect the reinsurance markets and help nudge rates upward.

On another issue, trial attorneys have renewed their demand that required insurance limits for truckers be increased.  They point out that the minimum of $750,000.00 established in 1980 is now worth just $292,000.00 when adjusted for inflation.

Comment:  While no one in the trucking business likes the idea of having to buy more insurance, there is no question that the current limits don’t go nearly as far as they used to.  It is not unusual to see claim awards and judgments for deaths and severe injuries in the tens of millions of dollars, and that trend shows no signs of changing.  To complicate matters, many fewer trucking firms these days seem to be willing or able to purchase excess liability insurance to protect them from huge claims.

With the prevailing economic conditions, there doesn’t seem to be much interest in raising mandatory insurance limits right now, but it does appear to be an issue that will continue to receive attention. 

Size:

TPA’s come in all shapes and sizes.  Some large national companies have multiple locations and hundreds of employees.  There are small family owned TPA’s with a staff of only a couple people.  This can be a very significant factor in the decision making process when selecting a TPA.  Yes, size does matter.

A small TPA with two or three adjusters might be the perfect fit for a Program Manager writing a small book of physical damage business which generates only a handful of claims each month.  Each claim will probably get close attention, and more than likely there will be consistency, with each claim being handled by the same several people.  That same TPA would probably not be a good fit at all for an insurer writing a large multistate personal auto program, for example, which generates a huge volume of relatively low severity claims.  The small TPA simply may not have the resources required to do a good job.

Some insurance or self-insured organizations have acknowledged that it can be preferable to work with a smaller TPA for the simple reason that they may have better access to its top management, who will probably tend to be more open to addressing any concerns or changes.

On the other hand, a large TPA might be ideal in some situations.  Some of the older, well established TPA firms are particularly geared toward handling high volume claim programs, and this is especially true for Workers Compensation claims.

There can be problems when the TPA’s adjusters are handling claims for a variety of different programs.  Will they be as consistent in following the specific guidelines for each?  Will a particular program, specifically a smaller one, tend to get “lost in the shuffle” with a large TPA?

Ownership:

Another factor to consider is the ownership of the TPA.  Some insurers, brokers, general agents, and others, both large and small, have developed what amount to in-house TPA’s to handle claims, including those generated by their own parent company’s programs as well as those from “outside” clients.  This might be a good fit for some, but not necessarily a great idea for others.  A company may have legitimate concerns about contracting with a claims firm owned by a competitor, for example.

It can be very important to determine whether a TPA being considered is owned by or affiliated with another insurer or reinsurer, etc.  The level of corporate support for the TPA operation can ebb and flow with overall company profitability; there have been instances in the past when the parent company has pressured its claims operation to increase revenue and decrease expenses, which can have a detrimental effect on the level of service.

Some large independent adjusting firms have also formed or acquired TPA divisions.  While this may be a logical extension of the company’s claim business, in certain cases the primary goal might be to generate claims for their various local “adjusting” offices to handle, without regard to whether those offices always have the appropriate expertise needed for a particular type of claim.  When considering a prospective TPA it can be important to identify whether the TPA operation is designed, in whole or in part, to be a “feeder program” to provide claims assignments for the adjusting company’s local offices, and a source of business and revenue for its core business operations.

Background:

The background and origins of the TPA can also be important factors to consider.  Workers’ Compensation and medical disability claims for many years constituted the bulk of outsourced claims, and a number of large and very successful firms have been built to handle those claims.  Some of these firms, in looking to expand their opportunities, have also taken on other types of claims, with sometimes mixed results.  A claim administration firm designed and built to handle a large volume of a particular type of claim may not always make the transition to other types of claims smoothly.

The background of the TPA’s claims staff can also be a factor which is often overlooked.  A TPA whose staff consists exclusively or primarily of people with a background in independent adjusting may take a somewhat different approach to claims than one whose staff came from an insurance company.  As a very general rule, the “company people” tend to have worked with and be more familiar with policy elements and coverage issues, while the independent adjusting people more frequently have an outside claim investigation background.

Specialization:

The types of claims in which a particular TPA specializes can obviously be an important factor.  It is critical to examine whether the TPA has the staff and experience for the type, complexity, and volume of claims under consideration, and to match the program with the appropriate expertise.

A firm whose background lies exclusively in handling personal auto claims may not be a great match when it comes to handling a program of commercial general liability claims.  By the same token, a TPA which does an excellent job handling transportation claims may not be quite as successful taking over a program of construction defect or medical malpractice claims.  Some TPA’s have specific areas of specialization, such as Workers Compensation claims, Commercial Property claims, Personal Auto claims, or Transportation claims.  Be wary of someone who claims to be an expert in everything.

A TPA specializing in a particular type of claim will generally have developed a certain expertise.   In addition to the specific knowledge and abilities in that particular area, there may also be other related advantages.  For example, a TPA with a strong background in handling W.C. claims will likely have strengths and available resources in areas such medical bill review processes or individual medical case management.  A TPA which focuses on handling truck or heavy equipment physical damage claims will likely have a network of local appraisers and experts to call upon in the handing of those claims, while a TPA new to that line of business will probably face a learning curve to some extent.

There are examples in the industry of a claims organization with a focus on handling personal auto losses trying to make the leap to long haul trucking risks, and approaching liability and physical damage claims involving large over the road tractor-trailers as if they were nothing more than “big cars”.  This has sometimes revealed a poor understanding of some of the unique issues involved, and poor results.

The same factors can apply to litigation management.  A Workers Compensation or Health Benefits TPA will probably have identified and established relationships with attorneys who specialize in dealing with those types of claims.  But that same TPA could very well run into issues when it has to find an attorney to deal with a Motor Truck Cargo claim, or a coverage issue involving a completely different type of exposure.

Infrastructure:

It is important to look at how a TPA operates.  Does in make appropriate investments in areas such as ongoing education and training of its staff?  Has it spent the necessary time and expenses for licensing of its claim handling staff in various states?  These costs can be considerable, and potentially an area where a TPA can cut corners.

Another important issue involves staffing.  Has the TPA experienced a high rate of claim staff turnover?  How will it “staff up” for a large new program?  Are the experience levels of the claim handlers appropriate?  Is there clear evidence of good hands-on supervision?

One important element to consider is the adjusters’ caseloads.  Many industry experts suggest that an adjuster can reasonably handle a caseload of 100 to 150 claims.  This statistic can obviously be affected by the type of claims involved, the extent of the adjuster’s involvement, and how they are counted.  Nevertheless, an adjuster handling 200 claims or more will often not have the time to devote the attention needed, and may be spread too thin.  Fewer claims on an adjuster’s plate mean more time and attention paid to each one, and this can typically result in more hands-on handling, more timely settlements, and quicker turnaround of claims.

Another key element in some situations can be the “back room” resources of a particular TPA.  Does it have the data systems and support, accounting, claim fund management, and other services required?  Can it provide the specific claim data elements and report formats needed by the client?  Is the management, front line supervision, and staffing stable?  Are the adjusters properly licensed?  Is there appropriate emphasis on recovery of salvage and subrogation?

A fairly recent trend has been for some TPA’s to abandon their “brick and mortar” offices, and have employees work from their homes.  While there may be cost benefits, this  approach can have its own set of potential issues, depending on the type of claims involved, the structure and supervision in place, etc.

Price:

Pricing models for providing claim administration can vary widely, from a “flat fee” per claim, to an hourly time and expense rate, to a “cost plus” basis, to a percentage of premium, and others.  Regardless of how the price is determined, in too many cases a company considering outsourcing of claims may select a TPA largely, or wholly, on the basis of price.  A large TPA organization may have considerably greater overhead, with correspondingly higher prices, but may also potentially have more resources to bring to the table.

One common pitfall involves a quoted hourly fee for claim services.  One firm may charge less per hour, but simply inflate the number of hours billed for a particular task.  The quoted hourly rate may not include some common overhead items such as telephone costs, copies, postage, etc., and these “hidden” costs can inflate the actual rate.

In addition to comparing fees alone, it can be important to consider whether the TPA can save additional money through claim handling efficiencies, through such key processes as litigation management and recovery of salvage or subrogation.

Intangibles:

A couple other issues to be considered include such intangibles as reputation and references.  What programs has the TPA handled previously, and what type of claims were involved?  Did they do a good job, and were the clients happy with the level of service?  Did the TPA live up to its agreements?  Were regular claim audits conducted, and what were the findings?  It can be important to look closely at prior clients and outcomes.

Can the TPA provide the level of customization and flexibility a client is looking for?  And more importantly, is it willing to do so?  It might be willing to change its standard procedures for a large program, but may not for a smaller less profitable one.

Although the term is grossly overused, it can be very important for an insurance organization to form a true partnership with a TPA it selects to handle its claims.

Conclusions:

The claim TPA concept has been described, only half jokingly, as “Rent-A-Claim Department”, and there is some truth to that.  An insurer, Program Manager, MGA, reinsurer, or self-insured company clearly takes some risk when selecting an outside firm to take on the task of handling its claims.  This can include managing its loss reserves, issuing claim payments, and interacting directly with its customers.  A poor decision can have significant and long term effects.

My own background has provided a somewhat unique opportunity to see these issues from the perspective of both the insurer and the TPA.  I spent a number of years managing a Claim Department for an insurer which eventually started writing some Program business in addition to its traditional lines of business.  This put me in a position to evaluate and select TPA’s for the handling of a particular program in several instances.  I found, not surprisingly, that some TPA’s can be long on promises, and sometimes woefully short on delivery.  I learned fairly quickly that it is important to monitor a TPA’s work by reviewing and auditing individual claim files on an ongoing basis.

Outsourcing certain tasks has been commonplace for many years in some industries. Cities and municipalities may contract for certain services requiring specific skills or expertise such as community planning or traffic engineering. Businesses such as hospitals learned that outsourcing work such as maintenance and food services can create efficiencies and save them money. States and other governmental entities have contracted to outside firms the running of their prisons and even schools. Many companies routinely hire outside experts to take care of their legal, accounting, data systems, and other processes that can require particular specialized skills.

The insurance industry, which tends to be somewhat conservative by nature, was for much of its history behind this curve to some extent. Some claim processing and claim handling functions, particularly in very specialized and highly systems driven areas such as Employee Benefits or Workers’ Compensation, have been contracted out to third party specialists for many years. Most insurers, however, traditionally tended to keep the handling of other types of claims, particularly standard property and casualty claims, “in-house” to be handled directly by their own employees. In recent decades this has begun to change.

Why Outsource Claims?:


There are various reasons why an insurer would decide to entrust something as important as the handling of its claims to someone outside its company. The most obvious reason of these have to do with the potential economic benefits.

Claim related expenses represent a huge cost to any insurer. By one estimate, as much as 80% of a typical insurer’s earnings are consumed through claims and claim related expenses, and clearly represent the most significant cash outflow for an insurance organization. Even a small improvement in efficiency or a modest decrease in claim costs can obviously contribute significantly to an insurer’s bottom line.

Various ideas for reducing claim expenses have been considered. For example, insurance organizations have been able to realize some legitimate savings by implementing more automated systems. These benefits, however, have been somewhat limited when it comes to claims. Handling claims remains a hands-on process, one which has been described as “less automated and more highly skilled” than others such as policy issuance or data collection.

However, various industry studies have identified the outsourcing of claims as one of the areas which offers the greatest potential to reduce costs for insurers. One estimate projects the potential savings to an insurer by doing so as high as 15% of overall claim costs, and while specific details will obviously vary from one situation to another, more insurers have begun to focus on savings in the area of claims in looking for ways to improve their bottom lines.

A big part of the overall cost of claims to an insurer comes from maintaining a clam staff. One industry study concluded that over 40% of the time spent by insurance company employees on claims handling is associated with routine overhead functions which have little impact on the actual outcome of those claims. Many insurers have come to the realization that outsourcing claims can significantly affect the need to recruit, hire, and train their own claim staff. Those fixed internal salary and benefit expenses can then be converted to external service fees. Those fees, which are typically based on transaction volume, then will rise and fall with the flow of business. The insurer can also smooth out cash flows by avoiding periodic capital expenditures for in-house processes and systems related to claims.

In some cases the decision might be based on a particularly specialized knowledge base or skill set that is not readily available among its own staff. For example, an insurer may issue policies covering Fine Arts such as rare and expensive paintings, and outsource the handling of the resulting claims to a firm which has the required expertise to investigate and analyze those claims. In some instances, it can be simply a matter of overall staffing. An insurer may not have, or may not want to spend the resources to have, a full claims staff to handle a surge in claims, and may refer the “overflow” to an outside source.

As a growing number of insurers have recognized, outsourcing such operations as claims can also allow them to focus on their true core competencies such as writing new business, underwriting policies, and developing new product lines. In short, they can concentrate on growing their business and lowering overall costs rather than on day to day operations such as claim handling. As mergers and acquisitions by and between insurers have become more widespread, outsourcing can also minimize administrative costs for involvement in multiple claim programs. Another unexpected benefit realized by a number of insurers is that outsourcing claim functions has allowed them to recognize previously hidden overhead costs which now become visible and can be better managed.

Outsourcing can also provide a great “exit strategy” for an insurer. Rather than spend considerable money for staffing and offices for a particular program that may go away in a few years, it can be economically much more feasible to refer that program’s claims to a third party. When the insurer does decide to discontinue writing a particular program or line of business and focus its efforts and resources elsewhere, the existing claims, or those claims that may still arise, from this “run-off” program will have to be handled until they are concluded. It must maintain an infrastructure to service those claims, which might take as long as 5 to 10 years after the last policy was written, depending on the type of coverages and claims involved. And insurer claim staff costs can increase in run-off situations because of low morale and extra incentives required to retain staff members with reduced long term future prospects. In these circumstances, insurers and reinsurers have increasingly begun to contract with an outside TPA to handle the remaining claims. In addition to the cost savings involved by doing so, the insurance organizations can enter new lines or territories much more quickly without the “baggage” of run-off claims to deal with.

Program Business:


A number of insurers have developed a business model based specifically on the concept of outsourcing various key functions, not just as an “afterthought” or as a means of reducing existing costs, but as a basic cornerstone of their operations. These typically include areas such as underwriting and handling of claims, which traditionally were done by the insurer’s own employees. Some of these companies recognized that they could reduce their expenses by contracting certain processes to outside sources, while maintaining a relatively small home office staff to oversee and audit those functions.

This growing trend, often involving “Program” business, has contributed in recent years to the increased outsourcing of claims and other processes. Often these insurers will form partnerships with Program Administrators or Managing General Agents (MGA’s) which have successfully established a book of business in a particular niche in the market. This might be a fairly narrowly focused group of clients involving, say landfill operations or family owned hardware stores, or something a little more broad such as shuttle buses or small fleet truck operators. In most of these cases, the MGA has developed a detailed understanding of its program, including creative approaches to the risks, rates, and coverage forms involved. It may have built a network of retail agents to concentrate on the specifically targeted accounts involved.

The benefits involved can be significant for both partners in such a relationship. The insurer increases its premium volume by taking on an existing book of business which has already been established, and has a track record. The insurer also has the opportunity to take advantage of the MGA’s expertise and familiarity with the program. The MGA can gain greater control over what business is written and how it is written, and also have access to an established market to do so. In a typical program arrangement, the MGA will be responsible for the underwriting, rating, quoting, and binding of the business, including the issuing and servicing of the policies. In some cases, the MGA may even share a portion of the risk and potential rewards stemming from the program’s results.

Particularly in the recent soft markets, the interest of Property & Casualty insurers in this type of arrangement has increased. This not only includes larger insurers which have typically written certain programs like this in the past, but now includes many smaller insurers looking for new business opportunities. From all indications, this trend appears likely to continue, and the market for program business is expected to grow.

While in some cases a Program insurer may elect to have the claims handled by its own staff of employees, it is not unusual in these situations for the MGA and insurer to select an outside claim TPA to manage the claims that arise from the program.

Other Insurance Organizations:
                                                                                                                                                                                                                                                                                                                              In some cases, a non-U.S. insurance entity, such as a Lloyd’s of London Underwriting Syndicate acting as an insurer or reinsurer, typically through a broker or middleman in the U.S. or the U.K., may need domestic claims expertise and presence “on the ground” here to handle its claims. One of the simplest ways to do so is to contract with a TPA to handle the claims.

Self-Insureds:
                                                                                                                                                                                                                                                                                                                 Business firms or organizations sometimes elect to self-insure or retain a certain portion of their risk. In structuring their overall approach to risk management they might purchase some services from a traditional insurer or reinsurer, including excess insurance protection for large losses which exceed their selected level of retained risk, safety and loss control, or data capture and data management. The self-insured may not have the staff or expertise to handle its claims, or may recognize that there is no need to hire and retain highly technical resources for situations that occur only occasionally. It may elect to purchase claim handling services from its excess insurer as well, although in some cases, the services purchased from the insurer may be “unbundled”, and such aspects as claim handling contracted to an outside TPA.

Governmental Entities:
                                                                                                                                                                                                                                                                                                                       Many governmental or quasi-governmental organizations are also self-insured to some extent. Examples might include county or state agencies, school districts, public utility companies, and others. For many of the same reasons outlined above, these groups frequently elect to contract with an outside firm to handle such things as claim processing.

Conclusions:                                                                                                                                                                                                                                                                                                  
A TPA may be able to bring to the table specialized skills and expert services, not to mention lower overhead costs, which can contribute to various benefits for the outsourcing company. These can include increased efficiencies, reduced operating expenses, and in many cases improved customer service. All of these factors can obviously help the insurer, reinsurer, or self-insured be more competitive. With greater competition, drastically reduced investment incomes, and various other market factors affecting profitability, more insurance organizations are coming to recognize the potential benefits of outsourcing, and this increasingly includes the claim process

Cargo policies provide a somewhat hybrid form of coverage, involving elements of both third party liability coverage and first party property coverage.  The coverage is intended to respond to damages involving goods of others which are in the care, custody, and control of and being transported by the insured, which is typically a trucking or transportation company of some type.  Once the cargo is turned over to the insured in seemingly good condition, the insured is generally presumed to be responsible for any damage to or loss of those goods up to the time they are delivered.

Most cargo claims are governed by the Carmack Amendment, a federal statute intended to lay out overall rules, and which generally trumps state laws when a shipment involves interstate transit.  According to these rules, the designated transporter of the cargo is generally viewed as responsible for any loss or damage, regardless of the cause.  There are a very few exceptions which include so called Acts of God as well as acts of the shipper.  The rules are somewhat vague, and various courts have not always consistently agreed on their interpretation.

One example might involve damage to cargo that was packaged and/or loaded by the shipper, which was later found to be damaged as a result of inadequate or improper packaging or loading, and not by anything done by the transporter.  It would seem on the surface that a loss in these circumstances was not intended by the governing statute to be the responsibility of the transportation company.  Unfortunately, the facts are not always crystal clear, and courts have ruled both ways on the issue, often depending on the specific details of the case.

Insurance policies providing cargo coverage are not nearly so standardized as some other types of policies, and can vary significantly in how they are written and what they intend to cover.  Some policies provide coverage for losses resulting from a limited list of causes, similar to a basic property policy.  These might include only specified causes such as collision, overturn, fire, theft, etc.  Other policies more typically provide coverage on an “All Risk” basis, again similar to a more comprehensive property policy.  Some cargo policies provide coverage for the insured’s legal liability for damage to property of others which is being transported.  However, even the so called All Risk and legal liability coverage will contain some exclusions such as theft or illegal acts by the insured, losses resulting from war or terrorism, and other such causes which are considered to be uninsurable.

Another somewhat unique feature of many cargo policies is the insurer’s option to settle a claim with either the “claimant” or with the insured.  Cargo policies typically are subject to a deductible, which must be paid by the insured.  These can be modest amounts, such as $1,000.00, or can be fairly significant.

Cargo policies also may include specific endorsements or coverage limitations for certain types of losses.  One common example is the Refrigeration Endorsement or “Reefer Breakdown” endorsement, which typically limits or excludes coverage for loss resulting from the freezing or thawing of a temperature controlled load unless there is clear evidence of a mechanical or electrical malfunction of the refrigeration system.  This limitation is intended to avoid providing coverage for simple driver error in properly setting the temperature controls.

I am reminded of one Reefer Breakdown claim handled by our company.  The temperature control apparatus, similar to a home thermostat, included settings for either “F” (Fahrenheit) or “C” (Celsius).  The driver dutifully explained that he had correctly set the machine for “Cold” rather than “Freeze”, and couldn’t understand why the cargo of fresh vegetables had turned into tomato popsicles by the time he reached his destination. 

There are also a number of specialized types of cargo which can require specific coverage forms and endorsements.  Certain high risk and/or high value commodities such as furs or liquor may be excluded, or require additional premium.  Another example is pharmaceutical products such as prescription medications and other drugs, many of which can fall into the category of controlled substances.  Like most every other commodity in the world, these must be transported by truck, and can require particular underwriting and claim handling.  

Our firm handles a number of bank courier claims, which also fall into this category.  Because the “cargo” typically consists of paper checks which have been deposited into and credited to various accounts, but have not yet been processed for collection from the issuers, the loss of these checks involves damages which are not typical of other cargo claims.  For that reason, insurers of this type of cargo have created coverage forms which refer to “Face Value” amounts and “Reconstruction” costs as damages.

Cargo claims can also involve some of their own unique words and phrases.  The shipper is obviously the party who ships the load.  The party to whom the load is intended to be delivered, or to whom it is consigned, is typically known as the consignee.  The “shipper” may not be the same party who manufactured the goods, but may be involved only in providing shipping services.  There are often others involved in the flow, such as transportation logistics providers, load brokers or other middlemen, motor carriers who subcontract a particular load to another trucker, etc.  Different rules and obligations may apply to a Common Carrier as opposed to a Contract Carrier, although in recent times the distinctions between and among these various roles have tended to blur somewhat.

It can be critical to obtain the Bill of Lading and other shipping documents, which often spell out the parties involved and the specific terms of the shipping agreement.  The details of these documents might specify a particular motor carrier as the party responsible for any damage to the cargo, even though the actual transporting of the load has been subcontracted to another trucking firm.  Or, they might limit the transporter’s liability to a specific amount per pound, for example.  We handled a claim several years ago involving a load valued at close to a half million dollars, which was destroyed, and for which the insured trucking firm appeared to be responsible.  Upon reviewing the “fine print” of the Bill of Lading, we discovered that the insured’s liability was limited to a small amount per pound, and the claim was ultimately settled for something like $17,000.00.   

Most cargo policies provide coverage for what is typically termed “direct physical loss” to the goods being transported, and often specifically exclude any indirect or consequential damages.  For example, a shipper may have sent out a load of goods which cost it $10,000.00 to produce, but which they had tentatively sold for $15,000.00.  If that load of goods is completely destroyed in transit, there is a question regarding the extent of the “loss”.  The direct physical loss, or the actual cost to the shipper of the load was $10,000.00.  However, the shipper will logically feel that they also lost their prospective profit of $5,000.00.  Under many policies, this potential profit falls under the category of consequential damages, which are not covered.

It is particularly important to determine who owned the cargo at the time the loss occurred.  In the example given above, let’s assume that the buyer or consignee had already purchased the load for $15,000.00.  When the cargo is destroyed before being delivered to them, they have arguably lost the full $15,000.00 they paid for the load, and that may very well constitute the amount of their “direct physical loss”.  Confirming ownership and the actual value of the load can be critical when handling a cargo claim.

We recently handled a cargo loss for which the shipper presented a claim in the amount of approximately $30,000.00 for a load of food products.  This figure was based on the invoice issued by the shipper/manufacturer.  However, when the adjuster obtained further documentation it was determined that the shipper’s actual “cost” for the load was only approximately $7,500.00, and the settlement was based on that figure.  This obviously represents a substantial savings for the cargo insurer as a result of diligent claims work.

The nature of the cargo can also drive the method in which a claim is handled.  A load of steel girders that overturns in Montana in the middle of a blizzard can be picked up by a towing company and stored outside at their location for a time without any great danger of additional damage.  However, a load of fresh strawberries in the same situation will obviously not fare so well, and will likely require some immediate attention if it is to be saved.  Obviously, the timely reporting of a loss and prompt action can be critical in these situations.

Cargo claims come in all shapes and sizes.  One claim may involve general goods which can be handled fairly routinely, and the next one a cargo that requires specialized handling.  A load of live animals, such as livestock, may require rounding up and relocation to a fenced pasture where they can have the opportunity to calm down and continue feeding in order not to lose a significant portion of their value.  A steel coil being transported by flatbed trailer may sustain what appears to be only superficial damage to the edge, but is likely to be refused by the consignee because the risk of running that product through their plant might result in damage to their multimillion dollar machinery.

Another key element in the handling of cargo claims involves what can be done with the damaged or refused load.  As the old saying goes, “one man’s junk is another man’s treasure”, and determining what to do with the damaged items can have a significant impact on the ultimate cost of the claim.  Dealing with the so called salvage is very important. 

A load of meat may have suffered some degree of exposure to the elements or temperature that renders it unusable for sale in a grocery store, but it might still be completely useful for some other purpose such as pet food.  Fresh citrus may have lost its consumer preferred color, but still be perfectly fine for making juice.  That steel coil with the bent edges might have great value to another factory which can cut off the damaged section to create a smaller piece of steel exactly the size they need.

It is critical that the cargo adjuster have access to those who are interested in buying such damaged salvage.  The return in some cases can be surprising.  Although it is extremely rare, we have been involved in cases where the value of the salvage, or damaged goods, actually turned out to be greater than the amount of the original claim.

Our company handles a wide variety of cargo claims, the majority of which are generally fairly routine, but some of which can be somewhat exotic.  Within the past year we have dealt with everything from damage to a one-of-a-kind “priceless” custom concept car, to construction equipment worth hundreds of thousands of dollars which was being shipped overseas, to multimillion dollar shipments of pharmaceutical products.

There are several critical elements involved in the handling of cargo claims.  It starts with understanding the coverage and the scope of the insurer’s intent when issuing the policy.  Another involves properly identifying the cargo and the various parties involved, and their respective relationships, duties, and contractual responsibilities.  A crucial step involves the appropriate valuation of the damaged cargo.  Yet one more involves critical decisions regarding the handling and disposition of the damaged cargo. 

Because cargo losses can be so varied, and can potentially involve some very unique issues, they require particular expertise on the part of those handling the claims.  A cargo insurer’s decision on how their claims will be handled, and by whom, can make the difference between a successful program and one that is unprofitable.

My father was an independent claims adjuster who worked from our home, and when I was growing up I helped him on weekends and over the summer.  I was answering the phone and taking reports of new losses starting when I was maybe twelve.  I do remember that my voice hadn’t changed yet, and the callers generally assumed I was a female secretary.  When I was old enough to drive, and possibly slightly before, my dad would send me to take photos of wrecked cars and to the police station to pick up accident reports.

I had decided pretty firmly that I was not going to go into the claims business.  In fact, my father always preached that if I ended up in insurance for some incomprehensible reason, I should at least go into marketing, since that paid better than claims.  Needless to say, I did eventually drift into handling claims, and that’s what I’ve done all my life.

I recall that my dad had an old photocopy machine that actually took a picture of the document, and what came out was essentially a negative.  The page on the copy was dark, with the lettering in white – an exact opposite of the original.  The copy was on heavy slick paper, and was initially blank.  You had to place it in a pan of liquid developing fluid for several minutes, and then hang it up to dry.  We had a place in the corner of the office with a small clothesline where we would use clothespins to hang the documents until they were dry enough to put in a file.

As a young adjuster I spent most of my time in the car.  To call someone, I had to find an outdoor, drive-up pay phone.  Usually the cord would barely stretch to the car window, no matter how close you were, and so you usually had your head part way out the window.  I can tell you that in the winter in Nebraska the phone calls were kept as short as possible.  You also had to make sure you always had plenty of dimes for the pay phones.

Along with every other adjuster at the time, I used to take handwritten statements from insureds, claimants, and witnesses.  Some of the old timers I worked with when I was getting started carried around a portable typewriter in their car for typing statements, release forms, and the like.  They would sit in the car, or at someone’s kitchen table or picnic bench, with an old Underwood on their lap, and usually with one finger, type everything out for signatures right on the spot.

At times I used an old fashioned Polaroid camera, the kind where you would snap the picture and then pull out the undeveloped negative by the tab.  It was covered with some kind of developing goo, and much like the old photocopy machine needed several minutes before you could peel off the covering and actually see your picture.  I learned that in cold weather the goo became thick and wouldn’t work well.  When I was out at an accident site in the winter I would have to tuck the undeveloped pictures under my arm, or take them back to the car and put them on the floor under the heater vent.  In fact, ballpoint pens would freeze as well, and I learned to keep a spare under one arm to remain thawed, and then switch them back & forth as one stopped working.
Naturally, we had no GPS in those days, so as an outside adjuster it was important to get good directions to where you were going.  Being in the Midwest there were plenty of claims involving farms and travel in rural areas.  The layout in Nebraska is pretty simple.  There is generally a country road every mile.  So the directions would be something like “three miles north and one and a half miles west” of some particular town or landmark.  It usually worked out OK.

At one point I was handling claims in Houston, Texas, and ran into a somewhat different method of giving directions.  One old guy I was going to see directed me to a specific convenience store.  He explained that when I walked in there, they would have a big tub of iced beers right inside, and I should buy myself a cold beer.  Then, while sipping on my beer (it was legal then in Texas to drink and drive) I should start driving north on a certain road.  When my beer was getting down to about half empty I should watch for a big red barn, and make a right turn.  Then when my beer was almost gone I would be there.  It was the first and only time I’d ever been given directions “by beer”.  I can’t help chuckling to myself when I think of telling someone that I’ll meet them “two beers north, and then half a beer west”.  I guess it would be important that the driver drink his or her beer at approximately the same pace as the one providing the directions, or it would never work.

I also recall that when faxes were first introduced, they were only used for particularly important messages.  And back then they were printed on very thin slick paper that curled up from being on a roll, and it was hard to flatten them out to put in a file.  It probably didn’t matter that much since the ink always faded after awhile anyway.

While I am not a techie by any stretch, I have to admit that some of the gadgets and technology that have come along have certainly made our lives easier.  Everyone has a cell phone, and most business people have a Blackberry or similar device.  A great deal of our communication these days involving claims is done by e-mail.  And you can obviously get on the internet and have access to a wealth of information, not to mention quite a bit of junk.

Perhaps the biggest change for the claims industry brought about by the introduction of some of these new technologies has been a sense of immediacy.  At one time an insurance company claim examiner, upon receiving a new loss, would send a typewritten assignment to an independent adjusting firm by mail, and diary the file ahead for 30 or 40 days.  It was accepted that the local adjuster would conduct their investigation, get photos of the damage developed, and mail in a full report generally within a month or so.  Upon receipt, the examiner would review the adjuster’s report, write back (again by snail mail) with any questions or clarifications, and maybe extend authority to the adjuster to try and settle the claim.  Or, the examiner might need to request the paper policy file from the Underwriting Department, and it would eventually show up in the interoffice mail cart in a few days or a week.  Then, maybe in another month, the signed Releases and payment recommendations from the local adjuster would show up.  The examiner might then submit a payment request, which could languish on someone else’s desk for several days or a week, and eventually a check would be typed and mailed out.  It could be months in some cases between the time the loss occurred and the time the settlement check was received, even in fairly routine cases.

These days, particularly in the world of transportation claims, those kinds of timeframes are no longer acceptable.  It isn’t unusual for our office to receive notice of a new loss shortly after it occurs.  Sometimes we’re contacted by the driver calling right from the accident scene.  With faxes and e-mail, communication is almost instantaneous.  We often have electronic access to our clients’ policy information so that coverage can be confirmed right away.  We may assign a local adjuster by phone, fax, or e-mail upon receipt of a new loss, and in the case of an emergency we may instruct the adjuster to immediately drive to the accident scene.  We no longer can afford to wait weeks for the adjuster’s report, but often receive them within days or weeks of the loss.  In many cases where we have the ability to issue payments on behalf of our clients, we may issue a check to a towing company or for temporary repair costs in order to minimize downtime or further costs, or to get a cargo reloaded and delivered.  We have literally had claims that were reported one afternoon, and we were able to have a check delivered across the country the following morning.

There is definitely a sense of urgency involved with many losses in the current claim environment.  Because of advances in technology, our claim handlers are able to gather information and get things done with a speed that would astound adjusters from decades ago.  While the basic elements of investigating and handling a claim may not have changed dramatically, the timeframes have undoubtedly done so.

No, I don’t miss those old days much when I think about what now seem like pretty silly things we had to do.  I do sometime wish I still had that old Polaroid camera; it would probably bring a few bucks on E-Bay as an antique.

One of the highlights was a visit to Lloyd’s, and an informal tour of the place by a London broker and friend.

Many of us in the industry have heard the story of the earliest recorded use of something like insurance.  According to many sources, ancient Chinese merchants would arrange to divide up their goods amongst themselves when traveling on dangerous rivers.  Each would carry only a portion of his own wares in his boat, along with portions of the other merchants’ commodities, so that if one boat were to sink each businessman would lose only a relatively small part of his possessions.  By sharing the risk among themselves they each had some measure of protection against being totally wiped out by a single disaster.

Most sources also agree that while the concept may have been around much earlier, it was the businessmen associated with Lloyds who perfected the modern business of insurance.

By the late 1600’s London had become a center for trade and shipping worldwide.  It is said that in 1688 Edward Lloyd opened Lloyd’s Coffee House in Tower Street in London, and it became an informal meeting place for the conducting of business transactions.  A merchant with a ship or cargo to insure would retain a “broker” to carry the written details of the risk around to various wealthy businessmen, who would in turn write upon this “slip” the particular percentage of the risk for which each was willing to be responsible.  Each of these “underwriters” wrote his name and agreed percentage below the outline of the voyage until the risk was fully covered.

Eventually over a period of time the process became more formalized among brokers and underwriters, and their gathering place was relocated several times to larger quarters, but the name “Lloyd’s” has remained.

Naturally, today much of the work is done electronically.  Nevertheless, there is a huge amount of tradition that remains.  It was very interesting to visit the main floors where the underwriters sit in their “boxes”, being visited by brokers with new offerings or details of losses on existing accounts.  Some underwriters focus on property or specific casualty risks, while others are involved with specialty areas such as fine arts or even communication satellites, and of course there are still those whose work involves the age old shipping risks.  I was somewhat surprised to see that paper “slips” are still used to record the underwriters and their respective percentages of the risk.

In the middle of the whole bustling place sits the famous Lutine Bell, salvaged from a ship that sank in 1799 (the claim for the lost cargo was insured by and paid in full by Lloyd’s underwriters), and traditionally rung to announce important news, both good and bad.  I understand that it was rung following the terrorist attacks on 9/11/01.

I didn’t have a chance to do much visiting of tourist sites on this London trip, but certainly hope to do more of that next time.  The chance to visit Lloyd’s, and see what truly has to be considered one of the foundations of modern insurance, was one that I hope to do again.

Step One: Coverage

The first key element is Coverage. The adjuster must review and understand the policy, its intended scope, coverage forms and endorsements, effective dates, and key provisions. Does this particular policy apply to the loss? If there is a vehicle involved, is it required to be listed on the policy schedule, and is it there? Does the policy require that the driver be specifically insured, or in the alternative is this particular driver excluded from coverage? If the loss involves a transportation accident, does this particular policy apply to liability, physical damage to the tractor and/or trailer, cargo, injuries to the driver or any passengers? Is the person or firm involved, or the particular location, the same as the one intended to be covered under the policy?

Once the coverage issues have been analyzed, a key decision must be made. If there is no coverage applicable to the loss involved, there may be no need to move on to the next categories. However, the answer is oftentimes not completely clear. A vehicle or driver or location required to be listed on the policy schedule may not be included, but it is possible that it is in the process of being added. Many policies involve the monthly reporting of vehicles and/or drivers, and there is always some delay in that information reaching the appropriate party in order for the policy to be updated. It may be necessary to check with the agent, insurer, or underwriter to confirm.

It may be that the adjuster does not have the complete policy or coverage details. Most policies include various endorsements, some of which may potentially have an effect on a particular loss. It may be necessary to obtain and review additional parts of the policy in order to make an informed coverage opinion.

If it appears there may be no coverage, more decisions must be made. It can be dangerous to simply take the position that the policy doesn’t apply, and take no further action. There is no way of knowing whether the information initially provided concerning the loss is complete or accurate. If there are questions, it may be necessary to conduct additional investigation in order to rule out coverage. In such a case, the adjuster may make the decision to issue a formal Reservation of Rights to the insured, or obtain a Non-Waiver Agreement, which formally notifies the insured that there is a question regarding coverage. It essentially allows the adjuster to develop more information, while at the same time protecting against the allegation that such action implied that coverage was in order.

If the first notice of the claim was in the form of a lawsuit, with a specific timeframe in which an answer must be filed, the adjuster has additional decisions to make. Should he or she retain an attorney to file a response, in order to avoid a default judgment potentially being entered against the insured or driver? Is it possible to obtain an agreed extension of the answer date from the plaintiff attorney? If the coverage issues are not clear, as is often the case, should the adjuster hire coverage counsel to look into the matter and research the applicable law?

If there is clearly no coverage, or once additional steps have been taken to confirm that there is no coverage, there may be no need to move to the next element of the claim. If coverage does apply, it is then necessary to move on to the second phase.

Step Two: Liability

Once coverage is confirmed, the second key element is to determine Liability. Was the insured at fault or legally responsible for the loss? This obviously can involve such straightforward facts as who ran the red light, or who failed to clear the ice from the sidewalk. But it may not always be as simple as that. There may be contracts or leases that could create legal liability on the part of the insured. The insured may or may not be responsible for acts of another party. Or the loss may involve a jurisdiction where comparative fault can be the basis for a claim. For example, your insured may be only slightly responsible for an accident, but in some states still potentially at risk for a proportionate share of the resulting injuries or damages.

If the loss involves “First Party” damages, the Liability phase may be moot. For example, if coverage is provided contractually under the policy for damage to the insured’s vehicle, or the driver’s medical bills, or for Workers Compensation, or for some type of property, or some other type of loss, it may be considered to apply automatically without regard to fault.

If the investigation indicates that there is no liability on the part of the insured, those presenting claims must be appropriately notified of that determination. In certain states this requires that the claimant also be referred to a state insurance department for a possible review of their claim.

Once sufficient investigation and fact finding has been completed to establish coverage as well as liability on the part of the insured, the adjuster can move on to the next phase of the claim.

Step Three: Damages

Once it’s been determined that there is coverage and the insured is at fault (or in certain instances is not required to be at fault), the adjuster must then determine what damages resulted from the loss.

Damage to a vehicle or some other physical object can be relatively simple to ascertain. A vehicle appraiser can inspect the damage and write an estimate for the cost to repair it, or determine what its market value was prior to the accident. The cost to replace a damaged roof, or repair a destroyed guardrail, can be determined fairly easily.

However, the damages involved in an injury can be much more difficult to quantify. The nature and extent of the injury, the scope and costs involved in treatment, the time missed from work, additional expenses, and other types of “special” damages can be determined. But what of the so called pain and suffering, or “general” damages to which the injured person might be entitled? This is much more subjective and open to interpretation. The situation is typically complicated by the wish of the injured claimant to get a settlement as large as possible. It is oftentimes further complicated by the presence of an attorney who might intentionally or otherwise exaggerate the extent of the injury, or even encourage the injured party to incur additional medical bills, in order to enhance the perceived value of the claim.

The location of the accident, and the jurisdiction in which the case might potentially be tried, are also significant factors. Juries in some areas are generally considered to be much more liberal in awarding damages than in other areas. An injury claim in New York City or the Rio Grande River Valley may be worth much more than the same injury in North Dakota, or even in a small rural area of New York State. These are all factors the adjuster must weigh.

Conclusions

Some would add a fourth critical element in the handling of a claim: Settlement. Once the coverage, liability, and damages have been reasonably determined, the final phase involves bringing the claim to a conclusion by way of reasonable settlement. The terms and figures must be explained clearly to the claimant, who must agree to accept the proposed settlement. This can involve back and forth negotiations, depending on the situation. This would generally be followed by the signing of some type of document such as a Release or Proof of Loss, and the actual issuing of the settlement check.

In a relatively small percentage of cases it may not be possible to reach a reasonable settlement, for various reasons. Maybe the demands or expectations of the claimant or his/her attorney are not realistic or in line with the facts. Or there may simply be a wide gap between what each side sees as the true value of the claim. In these cases it may sometimes be necessary for the case to be tried, and for a judge and/or jury to determine the ultimate value of the claim.

Whether a claim involves a rock chip in a windshield or total destruction of a vehicle, a shingle blown off the roof or the complete collapse of a skyscraper, a cut on the hand or a catastrophic brain injury, the basic elements are the same. The process can appear to be fairly simple, and in many cases it is, but there are a huge number of variable factors at each stage of the claim process which can complicate things. The trained and professional claim handler will take these into account, but will still remain focused on the key components of each claim.

After some discussion with various people I slowly came around to the idea that maybe, for several reasons, there might actually be some relatively worthwhile comments and observations to be made on various topics.

For one thing, our location in the Midwest probably gives us a somewhat unique perspective on the insurance world, and certainly a different view than those on either coast or in larger cities.  Omaha, where I live, has always been home to a number of insurance companies, large self-insureds, and various claims offices.  At one point, according to statistics, Omaha was behind only Hartford in the number of insurance jobs per capita among U.S. cities.

Our role as a TPA, or third party claims administrator, also places us in a position to view the world of insurance and claims somewhat differently than many others in the industry.  A TPA is in many ways something of a hybrid, with characteristics of both an insurance company claim department as well as an independent adjusting firm.  In addition, we handle claims and manage the claims process for a number of different clients, and this tends to give us exposure to various philosophies and approaches to claims.

It was also pointed out to me that in my 35+ years in the claims business I have no doubt, even by accident, picked up a few tidbits of useful knowledge.  My career has taken me from an outside field adjuster, both for independent adjusting companies and large & small insurers, to an inside supervisor of other adjusters, to a claim manager, eventually to Vice President of Claims, and ultimately to opening Criterion Claim Solutions some eight years ago.

Over that time I have been involved with a great many different types of claims, and with the possible exception of large aircraft and large ocean going vessels, I have probably come across most every coverage and claim that might exist at one time or another.  I certainly wouldn’t say that I’m an expert in every category of claim, but have seen plenty of them.  I have been called out in the middle of the night (usually also in the middle of a blizzard) to the scene of truck accidents.  I have reviewed and audited more claim files than I care to remember.  I have helped create and tweak coverage forms and endorsements.  I have conducted due diligence reviews for prospective new programs of various types, and provided my analysis and comments.  I have sat in many large loss committees to decide how catastrophic claims might best be handled.  I have sat through depositions and trials, and seen close up how the legal system actually works.  And in my most recent occupation, I have met with many insurers, brokers, agents, and reinsurers to try and convince them that they should hire our company to handle their claims.

My career has also given me the opportunity to create, build, and manage claims operations of various sizes.  Fairly early in my career I supervised a half dozen adjusters.  Eventually I was promoted to a manager level position with oversight over a number of claim units, and at times a branch claims office with all its issues and challenges.  As the head of an insurance company claim department I was in a position where the various managers, of Property Claims, Auto Claims, General Liability Claims, Workers Compensation Claims, Litigation, Subrogation, as well as support staff reported to me.  This also put me in close regular contact with other company departments such as Underwriting, Regulatory, Special Investigations, and Internal Audit, and the mundane but important issues of Human Resources, supplies, etc.

I was fortunate enough to be with a company which underwent a great deal of growth, and this gave me the opportunity to build up a Claim Department basically from scratch, and make my own choices as to the structure and staffing.  I have had good bosses and miserably bad bosses, with most probably falling somewhere in between, and have tried to learn something from each – even if it might be how not to do something.  I will admit that I’ve made my share of mistakes in hiring (and firing) decisions, in electing when to listen to and when to ignore the advice of others (including superiors), and various other situations along the way.  Hopefully, both from my successes and mistakes along the way have taught me some lessons.

I also worked with various outside claim service providers, including a number of TPA’s, which provided some additional insights and no doubt helped prepare me for perhaps my biggest career challenge – starting Criterion Claim Solutions.  Among other lessons, I have learned that “the buck stops here” is not just an empty saying.

All of these various experiences, both good and bad, have taught me a great deal about the insurance industry, people in general, and specifically the handling and managing of claims. And based on the premise that these experiences may give me certain insights or perspectives on some issues, I have somewhat reluctantly agreed to contribute my thoughts and opinions from time to time.  I certainly don’t have any illusions of supplying any particularly profound headline making epiphanies, but may from time to time be able to offer some humble observations on the nuts and bolts of the claims world.  As we say in the Midwest, even a blind hog finds an acorn once in awhile.