Mirror, Mirror on the Wall

My wife called me crying in anger. She was traveling to Penn State with my oldest daughter for a campus visit when someone backed into her brand-new vehicle at a gas station. No one was injured and the damage was minor, but christening a new ride with less than a few thousand miles on it is never a great way to start a week. Fortunately, the other driver apologized profusely, exchanged information, and even had the same insurance carrier as us. This could be considered a best-case scenario given the circumstances. But wait, it gets worse.

After filing the claim, it took our normally responsive insurance carrier 10 days to respond to us. If that wasn’t aggravating enough, the claims adjuster proceeded to tell my wife that he had already spoken to the other party, who claimed she backed into his vehicle. Based on the photos, the claims adjuster believed the other party’s story and, consequently, was going to find my wife at fault for the accident. Given the irritation of the delayed attention to the claim, the improper order of interviewing the parties, and now the accusation of my wife lying, you can imagine how one might react. 

It’s a Strange World We’re Working in Right Now

Recent discussions with most of our clients in the restoration industry reveal a similar level of ineptness from claims departments on the property side. Reports of approval delays, coverage disputes, payment issues, communication breakdowns, and overall inattention to best practices seem to be prolific right now in the insurance community. 

Digging deeper, I decided to reach out to a few of my contacts on the insurance side to see if they could anonymously corroborate this observation. What I found was not surprising. The turnover among adjusters and CSRs in claims departments has created a shortage of resources needed to properly attend to current claims volumes. This is supported by reports from Zippia and studies by Deloitte that indicate turnover rates in these positions moving from a relatively high 20% to nearly 25% since 2020. To make matters worse, a staggering 48% leave the industry all together. The result is an influx of inexperienced adjusters who know little about claims settlement and even less about restoration or damage repair. 

Now here’s where it gets interesting. Despite these findings, and a forecasted increase in claims volume due to a rise in natural disasters, the U.S. Bureau of Labor Statistics is still forecasting a 6% decrease in projected employment among claims adjusters, appraisers, examiners, and investigators by the year 2031. This is while still maintaining over 23,000 open positions due to folks moving on to other occupations or exiting the workforce. This means that current claims settlement struggles may only be getting started and more challenging times lie ahead.  

Between general industry consolidation, labor shortages, economic inflation, the collapse of financial institutions, and Florida-based insurance company failures in 2022, it would be tough to argue that this is a strange world we’re working in right now. 

The World Needs an Attitude Adjustment

Christian evangelist and author Charles R. Swindoll is credited with the saying, “Life is 10% what happens to you and 90% how you react to it.” We can reasonably assume this applies to business as well, so the way I interpret his statement is simple: our response to things that are out of our control is paramount to our success. 

All too often I hear complaints about the various issues we face today in business. Employers and employees alike play the victim’s role and blame seems rampant. It is easy to point fingers at insurance adjusters, third-party administrators, mortgage companies, subcontractors, or customers for the challenges we face. Looking in the mirror and figuring out how we contribute to the situation is hard. It requires introspection and humility—neither of which seem very prevalent in today’s society. Hence the need for an attitude adjustment.

If we consider the industry’s claims settlement woes from this perspective, I believe there are three critical observations restorers can make about their contributions to the problem: ineffective communication, incomplete documentation, and inadequate resources. In the first of this two-part article, we identify these issues and then we will explore remedies for improvement in part two.

Understanding is Misunderstood

Ineffective communication is the undisputed champion of project failure. The worst part is that everyone knows it and it still happens! But this is rarely a product of malicious intent. In my observation, parties seldom withhold information deliberately. As a matter of fact, most simply choose to avoid crucial conversations due to a fear of conflict. This leads to project stakeholders not having the right information at the right time.

Compounding this issue is the decline of face-to-face or even just verbal communication. We now live in a world where email and text messages have become the primary methods of communicating. While each serve a purpose, they are used so frequently that people have become callous to the sense of urgency in which they are sometimes intended. They also lack tone of voice and body language, both of which are critical feedback mechanisms used by the participants to confirm understanding.

In addition to these issues, one of the biggest mistakes I see contractors make that lead to delays and conflict during the claims settlement process is assumption. They assume there is adequate coverage. They assume payment will be issued promptly. They assume all parties will act in good faith, read every word of their contract and correspondence, and respond in a timely and professional manner. These assumptions become uncommunicated expectations, setting the stage from the very beginning for misunderstandings and, ultimately, failure. 

Documentation is Viewed as a Burden of Proof

A restoration project should not be a legal battle. Yet it is treated as such, mainly because of how an insurance policy is written. To prove this point, here is an excerpt from my personal homeowner’s policy regarding my duties after a loss:

SECTION I – CONDITIONS
2. Your Duties After Loss. After a loss to which this insurance may apply, you shall see that the following duties are performed:
e. submit to us, within 60 days after the loss, your signed, sworn proof of loss which set forth, to the best of your knowledge and belief:
(5) specifications of any damaged building and detailed estimates for repair of the damage.

The interpretation of these statements is simple: it is my responsibility to submit my claim to the carrier and prove it in order to seek remedy under the terms of the policy. At that point, it is then the claims representative’s responsibility to validate the information to issue payment. Essentially, the burden of proof is on the insured. And since most do not possess the knowledge to provide the information themselves, the restoration contractor provides this service. Often at no charge.

The real battle is not over the terms of the policy but over the methods used in the scope and price of the project. Often this occurs after the work has been completed, either in mitigation or supplemental repair items. This is both frustrating and time consuming for the contractor, because most claims adjusters are not as knowledgeable in these areas as they need to be and the contractor is viewed as “guilty until proven innocent.”

I Stayed at a Holiday Inn Express Last Night

The vast majority of restoration contractors struggle with the same resource issues as insurance carriers do. Unless they are licensed adjusters, most estimators and project managers are ill-equipped to navigate the discussions that ensue during a claims settlement. They know construction, restoration, and remediation techniques but not insurance. The same holds true of claims representatives and the result is conflicting viewpoints on how projects get handled.

This situation is akin to a Primary Care Physician (PCP) trying to perform heart surgery. While the PCP knows how the heart works, they are not trained in the specific disciplines to perform such a procedure. Staying at a Holiday Inn Express does not count. Nor would a patient tolerate this scenario if another option existed. Yet, in the restoration world, contractors create these circumstances by design. They expect estimators and project managers to prepare documents, follow protocols, and communicate in a manner that is conducive to meeting the needs of the carrier with only limited knowledge about what is actually required.

If we think about the context of the situation, knowing how frustrating it can be to work with adjusters who know very little about restoration or damage repair, we can assume that feelings are mutual on the other side of the bargaining table. Then factor in the internal “rules” both parties have (that are completely unknown to the other party) and you can see how challenging these situations become.

Mirror, Mirror on the Wall

I am confident this introduction resonates with more than a handful of you who are struggling with the delays and disputes associated with claims settlements in this new era. If you are one of them, I would like to challenge you to stop pointing fingers in blame and summon the courage to humbly pick up a mirror and explore the possibilities of how you can improve the situation for everyone involved. In part 2 of this article, we will do just that with recommendations of best practices for effective communication, leveraging technology to improve documentation, and alternative solutions for enabling personnel to do what they do best in managing projects to timely and successful completion. And maybe, with a little luck (and hard work), I might have some resolution to share regarding the settlement of my wife’s auto claim.