Sometimes, the most difficult aspect of “insurance disruption” is not only attempting to unchain our own thinking of insurance, but the thinking of every other carrier we deal with. We call that “legacy baggage,” or simply, the black hole thinking, and we joke about it all the time. You know, “…help, I’ve fallen into the gravitational vortex of insurance, and can’t get out…”
That traditional thinking stretches to Claims. Ok, insurance claims handling isn’t as sexy as, say engineering, and yes, it has its idiosyncrasies. Honestly, even for people in the business, just speaking to another insurance company on the phone can be a frustrating experience. Or, it can be more entertaining than a Mixed Martial Arts fight in the Octagon.
Below is a true email exchange (emphasis mine), insurance company to insurance company, on a very simple subrogation claim in our current insurance landscape. (Subrogation is insurance speak for: you are responsible for the damages we had to pay out, so here is your bill…please pay it.)
The Back And Forth
“Hi. Attached is the subrogation request forwarded to you by your agency. The total is $2,100, and includes our insured’s $250.00 renter’s deductible. Can you please advise the status of this file? The file was submitted to your insured 20 days ago, on November 15th, 2016.”
“Hi. Hope all is well. I have received your claim and attached subrogation documents. Do you have a receipt for the original couch?”
“Good afternoon. No, our Lemonade insured could not locate the receipt. We determined the couch was purchased at Crate and Barrel, and he had replacement cover on his Renters policy, so we were able to skip the receipt and speed up the claim handling. The sofa was not salvaged as it was completely waterlogged.”
THEY REPLIED (7 DAYS LATER):
“How did you ascertain that the couch was purchased at Crate and Barrel? Did anyone see that the couch was completely waterlogged and could not be salvaged? Also, do we know when the original couch was purchased?”
“So many questions for a simple, single item claim for $2100.00. We issued payment on our Lemonade policy, and your insured was responsible for the leak because the gutters on the apartment building were not maintained. The water from the gutters drained into the apartment wall, and into his sofa. This process should not be that difficult. The sofa has a Crate and Barrel label on it. Your own insured’s employee [Management Company] verified the sofa was so waterlogged it could not be moved. The sofa sat for 3 days soaking up water while our Lemonade insured was out of town. Who would want the salvage? It becomes a health department violation. Besides, the age of the sofa is irrelevant, for our insured has an RCV policy, and the price of the sofa is well within reason. We contacted Crate and Barrel at this number and verified it. Can you please pay settle this claim so that we may reimburse our insured their $250 deductible before year’s end?”
“No, we have a Commercial General Liability policy and the insured did nothing wrong. You will have a difficult time proving they did, so I’ll offer you $250.
I am so not kidding.
If there’s money left over, or recovered in subrogation, it belongs to this insured’s chosen charity, which happens to be the American Red Cross. Why would we accept 10 cents on the dollar?
The evidence, which included: proof of payment to the insured, copy of an e-quote for the sofa, photos of the sofa, proof that the apartment building gutters were being replaced from our insured’s living room, and information on the claimant were all insufficient to convince this adjuster that their insured was responsible. Amazing. But this is how the industry works today.
But, what really rattled me, is that this is precisely how many insurance companies treat their own customers. OMG! I’m beginning to get the joke now, and understand why the industry is so hated.
This was a typical example: there was doubt of the facts; doubt of damages; doubt that there could never be any previous notice in deteriorating gutters, despite the fact that annual maintenance should have flagged the issue and the damage was sufficient for the gutters to require replacement – not just cleaning; doubt that a waterlogged, probably moldy sofa couldn’t (or shouldn’t) be cleaned and salvaged, despite sitting soaked for 3 days.
This carrier practically called our Lemonade insured a fraudster, for all intents and purposes.
And, don’t forget, there was also an unspoken accusation that the Lemonade claims adjusting was very poorly executed on this claim because (gasp!), our insured didn’t have a receipt, and we didn’t torture him to obtain one. Whoa, wait. Lemonade is the carrier, not even the insured, and yet we were treated exactly the same way? All this, for a $2100 subrogation claim?
Well, guess what?
We really wished for a different outcome. Perhaps a quick email response that said, “Hey, thanks for the proofs. Liability is set. We’re sending out the payment today.” Nope.
Ok then. This is the industry today, and how we were taught to handle claims. There isn’t any other way. We call it being thorough. Not just “trust-but-verify,” but rather “…overturn-every-rock-so-you-could-never-be-second-guessed-by-your-own-manager, and then, with glee, force the other carrier go through small claims court or Arbitration Forums, wear them down through attrition, all the while pretending that I’m a more thorough, competent Senior Technical Claims Adjuster than you are…”
Sound familiar? Remember, our competitors fight for every nickel because these are profits we are talking about. Real money. I bet this representative’s manager is even rewarding this behavior – maybe a $25 gift card for being a bad-ass adjuster?
Somehow though, our customers deserve better. Really, all of our customers. Think about it: Would we try to “get away with” misrepresenting the facts to another carrier, just because we know someone else is paying the bill? Of course not. We pay what we owe.
So what happened with this claim? Well, nine-months later we received 40% of our subrogation amount. Yes, it took this company 9 months to pay us. Why? Compromise. We hated to do it, but the practical, economical sense kicked in. It made more sense to settle, because our unpaid claims expense money goes to charity, too. I guess it paid for this carrier to drag their feet.
They won this battle. We vow to fight the war.
At Lemonade, we’re trying hard to change insurance industry behaviors in Claims, too. We are trying a new approach, such as trusting our customers more, eliminating needless paperwork activity, and being reasonable in our settlement approaches. (People don’t keep every receipt, and if we can verify the property, OK.) We try to expedite the claim process, while at the same time look out for fraudsters that can negatively impact our charitable donations if we have leftover money.
We already know policyholders don’t trust their carriers. We also know change doesn’t come easily. Changing our customers’ impression and view of insurance companies will be crazy difficult. But, perhaps trying to influence other carriers, our competitors, and colleagues in this space to also change, may prove to be the most difficult challenge of all.
Keep the Lemonade flowing.