11/22/2011

Trust...But Verify

Build confidence with claimants through a transparent process of validation.

By Donna J. Popow


Whom do you trust, and who trusts you? As a claim professional, trust plays an enormous role in your work life. It begins with the policyholder, who trusts the insurer to make good on a promise to pay when the need arises. Trust continues with the company giving you settlement authority and trusting that you will use it wisely, then providing you with access to proprietary information and trusting that you will keep it confidential.

 

Trust moves forward with policyholders and claimants supplying you with personal information and trusting that you will use it only for its intended purpose. Yet, once a claim is filed, does your trust start to waiver? Are you the type of adjuster who mistrusts every part of a claim, or are you the type of adjuster who "trusts but verifies"?

 

When you start to think about trust and the claim profession, things start to get muddy. Like many, you may have started your career believing that everyone is basically honest. A few years in claims causes you to start believing that everyone is dishonest. When it comes to claims, you start to question everything and everyone. And the more you mistrust the policyholder or claimant, the more they mistrust you. Eventually, the mistrust will start to color how you view almost everything.

 

Over the years, scholars with differing points of view across all disciplines—from social science and philosophy to psychology and economics—have advised that trust plays a central role in well functioning, healthy societies. In other words, as social psychologist David Good has said, "Without trust, the everyday social life which we take for granted is simply not possible." Think about it. Every time you get into your car to go to work, you trust that the other drivers will drive responsibly. But you also know not to trust blindly. You pay attention and drive defensively to avoid the driver who is speeding and wildly making lane changes.

 

From the perspective of the individual, trust allows the establishment of relationships with others. Although some risk must be taken, the mutual gain that is inherent at the heart of trust is one reason why it is so extraordinarily important and valuable. Trust is a survival mechanism—a building force that is nurturing. From an organizational standpoint, trust is a strategic resource that upholds a company's reputational value and brand identity in the court of public opinion, and that strengthens its competitive position in the marketplace.

 

Undeniably, the insurance industry is recognized as being founded on mutual trust and benefit. Yet a breakdown in confidence and a lack of public trust in insurers is still capturing national and international headlines. At the same time, insurers experience a loss of trust from the steady increase in questionable policyholder claim filings, fraud cases and other insurance-related crimes.

 

An overwhelming amount of survey data from various organizations reveals a prevailing public mistrust in financial services generally and in the insurance industry specifically. On the 2011 Edelman Trust Barometer Executive Summary, a global survey of trust, the U.S. has undergone a downturn in public trust across the board—from government and the media to businesses and NGOs. And on the Edelman Trust in U.S. Financial Services 2011 Survey, trust in property-casualty insurance companies to do what's right is held by only 37% of respondents.

 

Accenture Research's April 2009 Global Consumer Behavior Study produced similar results, with only 40% of responders indicating a trust of insurers. And according to the March 2011 Chicago Booth/Kellogg School Financial Trust Index, trust in America's financial system has slipped to 20%.
Meanwhile, according to a 2010 Accenture Insurance Consumer Fraud Survey, more than 68% of respondents believe insurance fraud occurs because people believe they can get away with it, and more than half of U.S. adults say poor service from an insurance company is more likely to cause an individual to commit fraud against that company.

 

Have we actually become less trusting, or is it just that we say we are less trusting? Cambridge philosophy professor Onorio O'Neill, in her inaugural BBC Reith Lecture in 2002, coined the term " a culture of suspicion," which she describes as one in which we are facing breaches of trust rather than experiencing deepening mistrust. Although trust is earned slowly and lost suddenly, it can be eventually reinstated. The ability to establish, grow, extend and restore trust is not only vital to our personal and interpersonal well-being, it is the key leadership competency of the new global economy.

 

What Is Trust?
"Simply put," says author Stephen Covey, "trust means confidence." The Oxford Dictionary defines trust as a "firm belief in the reliability, truth, ability or strength of someone or something." Merriam-Webster Dictionary says, "assured reliance on the character, ability, strength or truth of someone or something."

 

Internationally renowned social theorist Piotr Sztompka characterizes trust as "a bet about the future contingent actions of others." It is an active choice based on assessing risk rather than passively accepting certainty. And because there are no absolute guarantees, we need to carefully consider our options. Covey calls it "smart trust"—you need to combine the propensity to trust with the analysis to manage risk wisely.

 

Stanford University professor Roderick Kramer says that to survive as individuals we need to learn to trust wisely and well. He calls this "tempered trust." According to Kramer, tempered trust doesn't come easily, but if you diligently ask yourself the right questions, you can develop it.

 

Whether you call it "smart trust" or "tempered trust," for claim professionals it comes down to trust but verify. We will handle claims wisely and manage risk well if we ask the right questions and analyze the answers. We will trust that the answers we get to our questions are truthful, but we will also verify that they are.

 

The Dynamics of Trust
The benefit of trust is that it creates a climate that encourages cooperation and collaboration, stimulates open communication, increases motivation and consequently increases the efficiency and productivity of the claim handling process.

 

If there is a mutuality of trust between you and the policyholder or claimant, which is based upon a shared interest in resolving the claim fairly and in a timely manner, then the balance of power between the parties will be shared. Add the trust-but-verify concept to the mix, and you have the necessary safeguards in place to manage the risk of fraud. Remember that trust-but-verify works on both sides of the claim. While you trust the policyholder or claimant to be forthright with you, at the same time you are verifying the facts as presented to you. Likewise, the policyholder or claimant will be doing the same.
How Do You Lose Trust?
Trust is fragile. It takes a long time to create and can take only a second to lose. Covey says that reputation is brand, and brand is trust within the marketplace. Organizational reputation is an extremely valuable asset. According to the Reputation Institute, "[people] are more likely to buy the products of companies they trust, work for the organizations they respect, and recommend companies they admire. As claim professionals, we operate in a business environment that has had its reputation tarnished in the recent past. Recall the outrage over how claims were handled after Hurricane Katrina and the public outcry over the actions of AIG. Add to the mix the rise of consumerism and the easy access to information via the Internet, and it is no wonder that the public does not trust insurers to keep their promise.

 

How Do You Restore Trust in the Claim Handling Process?
A contract of insurance may be defined as "a contract in which the insurer agrees, in the event of a covered loss, to pay an amount directly related to the amount of the loss." Its principal function is the acceptance of risks transferred to it by others. Insurers and policyholders must trust others to fulfill their respective promises and to behave in predictable and appropriate ways.

 

Initially, policyholder trust can be shaped by positive experiences discovered at the beginning of the insurer's new business continuum. For some prospective buyers, it could be a TV ad or a website; for others, it may be the guidance provided by a knowledgeable agent/broker or sales representative. For the insurer, trust is driven by the applicant's truthful responses to a request for a quote or accurate completion of a new business application or renewal.

 

In return for premiums paid by insureds, insurers promise to pay for the losses covered by the insurance contract. Insureds trust that during the claim process, the insurer will uphold the promise made at the time of policy issuance. Therefore, claim handlers are placed in the bright glare of the "trust" limelight because of their direct relationships with claimants.

 

Covey points out that trust can be both created and destroyed, and although difficult, in most cases lost trust can be restored. One way to restore trust in the claim handling process is to apply transparency and disclosure when dealing with the policyholder and claimant. The clearer you are about the process—how it will be accomplished and in what time frame it will be carried out—the more cooperation and trust you will get from the policyholder or claimant. Verification provides the transparency needed to build the trust that diminishes the likelihood for misunderstandings and miscalculations.

 

Regulatory compliance mandates much of the communication and disclosure in the claim handling process, but to restore trust you need to go further. Make communication with the policyholder and claimant a tool to further their trust in you. This means going beyond what is required by the regulations and making sure that your position and intentions are understood.

 

Knowledge is one of the biggest individual factors leading to greater trust and success. A claim professional who demonstrates superior technical claim handling skills and has an enhanced understanding of claim principles and practices increases customer satisfaction. Additionally, effective communication and negotiation skills lead to good-faith claim handling and strengthen the policyholder's confidence in the claim process. An insurance professional designation raises the trust quotient even higher in the eyes of the consumer.
Finally, adhering to the ethical guidelines of your organization and your personal code of ethics will further enhance the trust that is placed in you. The fact that you have arrived at an opinion through an ethical analysis will make people respect your opinion even if they disagree with it.

 

Focusing on customer service is another way companies can build trust and enhance customer satisfaction. An example of one measurement of trust/satisfaction in claims is the survey conducted annually by the global marketing information services company J. D. Power and Associates, which uses the following six factors: first notice of loss or injury; service interaction; appraisal; repair process; rental experience; and settlement.

 

Following the concept of trust-but-verify will change the way you think and the way you handle claims. Its importance to success is undeniable. Over time, it will enhance your personal credibility, and in the long run it will benefit your employer and the industry. In his book The Way Up, Donald Hurzeler, who was the 2004-2005 president of the CPCU Society, devotes a whole chapter to trust-but-verify. "So how do you turn this good advice into a business tool that you can use to advance ahead of the competition?" he asks. "The best place to use trust…but verify is in every single management job you'll ever have." Hurzeler ends the chapter with: "To trust…but verify gives you a competitive advantage. Use this tool wisely." This is good advice!


Donna J. Popow, JD, CPCU, AIC, is president of Donna J. Popow LLC, and has more than 25 years of experience in the property and casualty insurance industry. She has been a CLM Fellow since 2007 and can be reached at (215) 630-0829.

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