Its Not a Perfect World

In a perfect world after a loss the insurer and policyholder work together to measure and settle a loss. An amount is agreed upon and the claim is paid. Unfortunately, in the real world there are many factors that complicate this seemingly simple process. It is understandable that after paying insurance premiums for many years, policyholders expect to be made whole for their losses quickly and fully without a lot of work or aggravation. However, policyholders often become frustrated once they learn that they have to prove their claim, prepare it, substantiate it and then ultimately negotiate a settlement with the insurance company. All of this is taking place under the watchful eye of the insurance company, adjusters, underwriters, supervisors, accountants, engineers, experts and often attorneys. There are many reasons why an insurer might devalue the loss or deny all or part of a claim. There are also several methods which a claim may be resolved from negotiation, appraisal, arbitration, mediation and/or litigation.

Its apparent that an organization's or homeowner's priority is restoring the business or getting their life back in order and not preparing and negotiating an insurance claim. Claim preparation may not be viewed as a crucial and urgent step. However, the work involved in preparing and negotiating a claim may be one of the most important, challenging and difficult steps in recovery. 

The loss adjustment process is often long and tedious involving many different parties and factors. Simple claims may be settled within a few months, but more frequently losses are complex with delayed recovery efforts and the process can last many months to several years. The individuals involved often have varying interests, knowledge and expertise which may not always be in line with the policyholders goals or interests. Not everyone is familiar with the technicalities of loss adjustment process and often communications and information are misinterpreted, neglected or not presented properly. Insurance companies and their adjusters face many constraints on approving what is submitted based on the understanding that claims must be investigated, substantiated and verified before settlement can take place.

Insurance companies each have their own philosophy and protocol about claims handling. In our experience we have seen it vary from office to office, from year to year and from adjuster to adjuster. However, one thing is certain, Insurance companies are businesses and provide their products and services in order to make profits. While claims represent a significant expense to the company, in reality claims are also needed to justify the need for insurance.

Insurance Company Perspective

Generally speaking insurance companies handle claims with the intent to honor their contractual obligations. However, they also may look for ways to minimize these costs. They may argue loss costs submitted by the insured, hire experts to challenge or disprove certain aspects of a claim or delay settlements which may result in frustrating insured's into agreeing to lower settlements. It is not the insurance companies responsibility to identify all of damage or losses that the policyholder may have incurred, nor is it their responsibility to seek out and highlight all of the available types of coverage that may be available under the terms of the policy. The insurance company does have a fiduciary duty to verify claims submitted by the insured yet they should not use this as an excuse to challenge, reduce or deny valid claims. Therefore it is expected that insurance companies will seek to verify claims and minimize their obligation just as it understandable that policyholders will seek maximum recovery under the terms of the policy.