American Insurers Need to Adopt and Implement Excellence in Claims Handling
Attempts to Obtain a Quarterly Profit Insurers Lose Multi-Year Profits
© 2025 Barry Zalma
Insurers have, over the last three decades, decimated their professional claims staffs. Experienced claims adjusters were fired and replaced with young, untrained, unprepared people. A virtual clerk replaced the old professional claims handler. Software programs took over from the seasoned interviewer to analyze the right to claims proceeds. Hands-on human skill, empathy and judgment were removed from insurers contact with those to whom they promised to provide indemnity fairly, promptly and in good faith. Money was saved from the insurer’s expense column by paying lower salaries. Within three months of firing the experienced claims people gross profit increased for a quarter of a year or two quarters.
Insurance is a business. Corporate insurers must show their shareholders a profit that pays dividends and increases the share price of the insurer. For centuries insurers understood that catastrophes, firestorms, windstorms, hurricanes and tornados could not be predicted. Some years the insurer will make profits and some years it will incur a loss. The prudent insurer recognized that because of the impossibility of predicting all possible losses, profitability was measured over a decade or several decades. No insurer can accurately measure its profitability for periods of a quarter of a year.
Insurance is a service business. The insurance contract is a collection of promises made by the insurer to those persons or entities who understand that they, or their business, face risks of loss that could destroy the viability of a business or the home of a family. Insurers promise to pay to protect the insured against the risks of loss the insured faces. The person or entity insured relies on the professionalism of the employees of the insurer who are called upon to resolve the claims of the insured and provide the protection promised by the policy.
Since people face a material loss to a house, factory, office, or commercial structure rarely, if at all. Insurance spreads the risk faced by many so that it can indemnify the few who actually suffer a loss. It is the claims person who was created to work with the insured to keep the promises made by the policy. If the claims person is inexperienced, untrained and not able to deal professionally with an insured the promises will not be kept. Unhappy insureds will leave the insurer for another and word of mouth of unhappy insureds will devastate the sales of the insurer.
The Development of the Insurance Claims Professional
When I was a young trainee adjuster in 1967 I was trained thoroughly to read and understand insurance policies issued by the insurer for whom I worked. I was also trained to conduct a thorough claims investigation, to interview thoroughly insureds, claimants and independent witnesses, and how to evaluate thee damages incurred by the insured. The training included “ride alongs” with experienced adjusters to learn what and how they conduct themselves in a claim situation in each of the many types of claims faced by the insurer.
The insurer that trained me and all other insurers at the time trained their claims people about the same as I was trained.
Insurers have created, over the last few centuries, professional claims personnel who they trained to interpret the terms and conditions of the policy of insurance, how to thoroughly investigate every claim, how to assist the insured in the presentation and how to resolve claims made by or against the insured. The promises made by the policy to defend and/or indemnify the insured are kept by the professional claims person: the adjuster or claims representative.
The prudent insurer understands that keeping a professional claims staff dedicated to excellence in claims handling is cost-effective over long periods of time. A professional and experienced adjuster will save the insurer millions by resolving disputes, paying claims owed promptly and fairly, and by so doing avoid litigation.
The professional claims person exists to resolve claims to the satisfaction of the insured and the insurer. When the claims person does so promptly, effectively and in good faith the person insured will be satisfied that the promises made by the insurance policy were kept. A competent and effective claims adjuster is the best advertisement an insurer can have since a claim, adjusted promptly, in good faith, and to the satisfaction of the insured will cause the insured to brag to his friends and neighbors how well he was treated and convince his contacts to change their insurer. When the insured and insurer are satisfied by the claims process the insured will continue to renew his or her or its policy with the insurer. The insurer’s business will grow, it will profit from the business of insurance, and its shareholders will enjoy the fruits of their investments.