You’re here because you’re struggling with the lack of control over insurance claims, meaning your insurance carrier is making decisions you disagree with, but you have no say. The lack of control is frustrating, particularly in cases of disputed claims or when carriers settle without considering the business's perspective.
It’s annoying (to say the least) when you pay so much in premiums only to have zero say as to how your claims should be resolved. Based on how your carrier resolved your claim, it haunts you and continues to affect the cost of your premium.
At ReNu Insurance Group, we have experience in the traditional and alternative insurance markets. We have helped more than our fair share of business owners who feel they lack control over insurance claims and need viable alternatives.
In this article, we’ll provide insights into why you're facing these challenges and offer options that can better serve your business. That way, you’ll understand alternatives that can give you the control over claims that you desire.
Table of Contents:
- Why don't I have control over insurance claims for my business?
- Are there insurance claims that are denied?
- How do I get control over insurance claims for my business?
- These alternative insurance plans can also keep premium costs down
Why don’t I have control over insurance claims for my business?
If you’re in the market as a small to mid-sized enterprise (SME) buying from a traditional carrier, there is nothing—most times—in the policy that requires the carrier to consult you before they make a settlement. That is other than to get the details you’re required to give them. But you have zero say on what the carrier can and can’t agree to in terms of settling the claim.
It’s a consensus settlement. You have to consent to settle an insurance claim. If you don’t, there’s a percentage of the loss you’ll pay over and above the original settlement of the carrier.
The carrier is the one running the show when it comes to claims involving workers’ comp, general liability, or auto liability claims.
While you might advise your carrier to investigate a claim, they’re under no obligation to do so. And that’s tough when the carrier chooses to settle for $100,000 when every lawyer in the room knows there’s no culpability. There have been clients where an employee got hurt on their second day on the job, and it was clear the claim was fraudulent.
Sometimes, the carrier pays the settlements when they feel it’s better than dealing with a lawsuit. Even if there isn’t a preponderance of evidence from the insured, your carrier doesn’t want to deal with the potential hassle.
Some people learn the hard way that fighting stuff on principle will cost more money than not. And you won’t always win. You might lose more times than you win. It’s a painful and disheartening lesson.
Are there insurance claims that are denied?
Yes, though insurance carriers are not looking to deny a claim right out of the gate.
When a claim is questioned, the carrier will send out a reservation rights letter that essentially says, “Hey, we’re not sure about this claim, but we’re going to look more into it. We’re not telling you it’s denied, but we’re not telling you it’s covered, either. Hang tight.”
From there, an adjuster who works for the carrier is an outsourced field person. Just because the adjuster is independent doesn’t mean they’ll be fair to you. They’re not advocating for you. There’s no contractual relationship between you two. They apply what’s in the policy to what the loss is.
With the traditional market, it's a contract of adhesion, meaning the carriers generate the contract. That means you either accept the contract on its terms or leave it.
One prominent example of claim denials was the coronavirus and the pandemic. People were claiming business interruption because civil authorities shut down their businesses. Their policies read that there has to be physical damage to the building that’s insured to trigger the limit.
You might be able to see the problem: COVID-19 didn’t punch a hole into the building, destroy a window, or anything inside. As far as we know, those things aren’t COVID symptoms.
The majority were denied. Some were paid out because they had an endorsement that included the pandemic exposure, but these were few and far between.
How do I get control over insurance claims for my business?
Easy. Don’t have any... which is easier said than done.
The best way to control your insurance claims is to have programs that minimize the impact on your business, employees, and/or the third party affected. Prevention and containment rule the day.
Spend your time preventing claims from happening in the first place. Granted, even with the best safety and risk management programs, you’ll be hit with a big claim at least once every five years. The point is to minimize the amount of claims and their severity.
What have you done to prevent an accident, and what can you do to contain it?
More robust return-to-work programs for workers’ comp
Have a return-to-work program where your employees aren’t sitting at home. The longer an employee stays home after a work-related injury, the worse the claim goes. This is huge in mitigating the impact of workers’ comp.
Assuming your employee is cleared by a doctor to return to work for limited duty, they can do things such as take messages, answer the fine, put documents in files, etc. The point is that all kinds of things can be done.
This will minimize the impact of the claim on your workers’ comp policy because the carrier isn’t paying the indemnity portion, which is the worker’s wages; they’re paying the medical. When it comes to work, you’re paying the employee to come in every day. It’s way cheaper to do it this way.
For other ways to reduce your work comp premium, read our article on six ways to reduce your workers' comp premium cost.
Alternate methods in the traditional insurance market that give you more control
The carrier wants you to have skin in the game to gain control over the claims process. This means you take on more risk. There are multiple ways to accomplish this. You could increase your deductible—not by a few thousand dollars, but a few hundred thousand dollars (think general liability or workers’ comp policy).
We call this the frequency layer because it aims to eliminate smaller “nuisance claims” and require you to participate in them. By increasing your deductible (or using a Self-Insured Retention), you will receive special claims handling and thus more control.
Note: the carrier still has the majority of the control. You just have a little more influence on how things go.
The point is that the carrier and adjuster will pay attention to your input compared to if you still pay a guaranteed cost. You get more attention for taking on more risk.
These alternative insurance plans can also keep premium costs down
If you’re not looking to move from the traditional market, that’s totally okay. Read our article, which provides insurance strategies for business owners in a bad market. This article will give alternate insurance methods you can use to keep the cost of your premium low for your business.
You’ll learn about Self-Insured Retention (SIR), high-deductible plans, retrospective plans, and methods outside the traditional market, such as captive insurers.
If you have any questions you want to bring to a qualified insurance advisor, schedule a call with ReNu Insurance Group to figure out insurance alternatives that fit your business.
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