(An edited version of this article appeared in the October 1996 issue of Claims Magazine)

It's About Trust,...

by Ronald J. Zaremba, CPCU,AIC,ARM

We all learn early in our insurance career that the insurance contract is a personal contract and not assignable. What many of us do not seem to learn is that insurance is a personal business. The sales department seems concerned with "product development and delivery". The claims department seems concerned with volume, closings and costs. The whole process from sales to claims is becoming more "efficient" i.e., impersonal.

A first time call to an insurance company is not a "personal" experience but rather a trial by and with an automated audio menu. All the insurers advertise that they are there to help you and will be there when you need them. Yet when you first call, what do you get ? A machine. What's the first thing they want from you ? Your policy or claim number. They do not seem to care who you are, or what your problems are. There is a big difference between the promise of personal service in the advertising and the reality with the insurer in that first call. This is but one breach of the public's expectations; expectations raised in the public in part by the insurers' advertising. Our failure to meet the publics expectations does not instill trust and confidence in us. Furthermore, we are being broadsided by cheap shots from a wide array of self serving, short sighted profiteers.

A recent issue of a magazine aimed at small and medium businesses had a marketing article about a Midwest body shop. This body shop chose not to participate in insurer direct repair programs. Instead the body shop chose to market their claim that the direct repair programs are a fraud and collusion by the insurers and the body shops, their competitors. Instead of selling their own attributes, they chose to use scare tactics, and play to the fear and suspicion of the public for their own gain. Successful ? Their gross sales increased six fold in three years.

The plaintiff's bar uses the same tactics. Politicians use the same tactics. We are guilty of it too. It is called negative advertising. Legal ? Yes, up to the point of libel and slander. Ethical ? No, unless you debase ethical standards down to legal standards. This magazine article even lauded this body shop for buying lists of the names of people recently involved in automobile accidents for direct mail solicitation. Is this "wrecker" chasing ? The plaintiff's bar would find this conduct unethical. The magazine article said the body shop called rebating the insured's deductible an "advertising" expense. Not mentioned in the article is that this is an illegal practice in most states and it is not ethical anywhere. More revealing was

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the level of the ethical standards displayed by the editors of the magazine that published the article.

The plain truth is that most of the consuming public is neither stupid nor unethical. Unfortunately we can be shortsighted. There is a dichotomy in the marketplace caused by what economists call diminishing marginal utility. We want and expect personal service but we are not willing to pay extra for

it. The benefits of the product of insurance are not delivered until some future date, if at all. Thus the increased marginal utility of the purchase of "good service" to be delivered at an unknown future date is less than the marginal utility of the current purchasing power of the cash at hand. In other words, insurance is purchased on price with little consideration given to the value of the future service. How much value are you going to place on a service you hope you don't have to use ? Therefore, do not expect market pressures to bring about higher standards of service as long as the majority of consumers willingly sacrifice service for price.

The effects of negative advertising can not be easily isolated. Whether you like it or not you are in business with your competitors and all who will pay your charges, customer and their insurers alike. If you choose to tar and feather your competitors as a group, the public sees you as part of that group too. You are judged by the company you keep. If you claim your competitors are liars and cheats, why would anyone think you are any more ethical than they ? Because you say you are ? Dream on !

When body shops and attorneys conduct negative advertising using the insurance industry as their foil, it debases not only the insurers but the advertisers themselves. In the short run, they may experience financial success. In the long run, though, they corrode the public's trust not only in the insurers but themselves and everything and everyone in the insurance and claim resolution process. We are sinking in the quicksands of fear and greed. Do we have the means to extricate ourselves from this quagmire ? Are we doomed by our human failities ?

Look at the effect in the political arena. Negative advertising has now reduced the trust in the government and the political institutions to the lowest level in history. Public apathy and cynicism is widespread. This lack of trust manifests itself in a lack of caring and interest. The long term changes may not be beneficial to the health of our nation.

So how do we reverse the process ? We may not be able to reverse the effects of negative advertising, but we must try. We must try even though we may not succeed, because not to try, would be to capitulate to fear and greed. We must make a conscious effort to quit taking cheap shots at each other and work together to engender trust in each other. We can start by making insurance a personal business again. As long as the public

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perceives a difference in what we promise versus what we are willing to deliver, then we will have a problem in earning their trust. We must not only deliver what we promise to deliver but also deliver what the public believes to be reasonable and fair. While it possible that insurers will respond by "personalizing " their business", it is more likely, due to competitive and cost pressures, that they will not.

With the effects of negative advertising already pronounced, we need a new approach or counterpoint. It is time to "professionalism" the claims business. If we were perceived as professionals, the claims adjuster would be seen not just as a

paid advocate for the insurer but as a trustworthy and reliable defender of the interests of the policyholder and the public as well. This will take time, effort and commitment by all claims people. First, adjusters need to establish a national professional society with enforced educational and ethical standards by peer review. Enforcement can also come through state licensing. It is time for state licensing of all adjusters. The bureaucratic paperwork and fees becomes a small price to pay to improve not only the result the public gets but also the public's perception of us.

A new national organization for adjusters has been formed, the National Association of Insurance Claim Professionals (NAICP). NAICP was established to address specifically these problems as well as others that confront the adjuster. The ethical charge of NAICP members is: "Through my commitment to honor, education and integrity, I will, as a claims professional, place the interests of those I serve above my own".

Your participation is needed now as a charter member of the National Association of Insurance Claim Professionals. Your participation can and will make a difference. Join today. The membership application is on page xx of this magazine or can be obtained by mailing a self addressed stamped envelope to me at P. O. Box 1259, Goldendale, WA 98620-1259.