The Mad Hatter's New Gig

by Mark Goldwich

We're all familiar with the Mad Hatter of Alice in Wonderland.  He's the character that doesn't quite

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see the world the same as the rest of us.  While a work of fiction, he would feel right at home in the insurance industry as you will see in today's blog.

In a previous blog, I gave you an overview of the insurance industry’s third big “coincidence” – what you and I might call intentional avoidance of responsibility.

When you encounter this event, which can come about at any point in the process, you’ll learn that the industry is quite adept at shifting responsibility for taking action on a valid claim to some other organization, entity, or person. In this blog, we’ll get a close look at some of the simpler methods that the industry has established over the years for deflecting important questions. What follows is a thumbnail sketch of what might be called “low-level” or “basic” deflection. (We’ll look at some of the more advanced strategies the industry can put into play in the next blog.)

Q&A: What you should know:

• How does the insurance industry make deflection work in its favor at the most basic level? By taking full advantage of the coincidence of incompetence among the very people it hires as adjusters and other third-party representatives. I can’t tell you how many times policyholders have had an experience like the following:

- Call the insurance company. Get a recording with another number to call.

- Call the number (disaster call center). Hold for extended period.

- Get disconnected.

- Call the call center repeatedly. Hold for extended period. Find out it wasn’t the call center that you wanted to talk to.

- Get adjuster’s number to call.

- Call the adjuster. Fail to get a response.

- Call the adjuster. Fail to get a response.

- Call the adjuster several more times. Finally, get some unsatisfying response.

- Call the adjuster. Fail to get any response, even an unsatisfying one.

- Wait absurd amounts of time. After losing all patience with the adjuster, call the insurance company to complain.

- Upon reaching the insurance company, hear something like the following: “We’ve had problems with that adjuster – he’s no longer working for us. We’ve assigned someone else to your claim.”

- And so on.

I know it sounds absurd, but you can rest assured that this kind of thing really happens. Here is an actual call center conversation sent to me by a client:

Policyholder: “Hello, I'm calling about my claim.”

Insurance company: “The phone number for the claims department is no longer being answered by the claims department.”

Policyholder: “Why?”

Insurance company: “The claims department is not taking calls because they are too busy. You can leave a message and someone will call you back.”

Policyholder: “When?”

Insurance company: “We can't say, because they are just too busy.”

Policyholder: “Is there a number I can call for the claims department?”

Insurance company: “Yes, the number you just called.”

Policyholder: “But you said you were not the claims department.”

Insurance company: “Yes, that’s correct…Is there anything else I can help you with?”

Policyholder: “Well, I'm not sure, since you haven't helped me at all.”

What is the hatter with me?

Notice that, because the call center person or adjuster is often an independent contractor, rather than a full-time employee, the insurance company itself is very often not “at fault” for anything -- beyond selecting a poor contractor. “Besides,” they will tell you, “this was a major catastrophe.” As if your home being in ruins wasn’t a good enough hint.

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Note, too, the cumulative effect of this whole process, especially the insurance company’s assurance that someone else is now on the case … someone who will be equally hard to track down. The cumulative effect is to further exasperate and frustrate the policyholder. You’re one step closer to giving up on the whole process. Once again, people within the industry are likely to say that such a turn of events is entirely coincidental and beyond their control. But this coincidence, too, endlessly repeated in the lives of thousands upon thousands of policyholders who have recently experienced a disaster or accident, happens to benefit the bottom line of the industry as a whole.

And all the while, the company can claim that the dereliction of duty is not their responsibility, but someone else’s.

• Are “incompetent” adjusters the industry’s only means of deflecting responsibility for taking action on a valid claim? Not by a long shot. Think of it this way: if you wanted to go out hunting for bear, would you load only one bullet in your gun?

• What other varieties of low-level deflection do policyholders have to contend with? One of the most common is what I call the “Engineer’s Deflection.” In this shocking coincidence, the engineering firm the insurance company hires becomes the scapegoat.

The insurance company will say that it has to arrange for the opinion of an outside expert – typically an engineering firm – to assess a specific damage to your property. Time will pass. The engineer will be identified. More time will pass. The engineer will show up to look at your property. The engineer will make an inspection, take some photographs and notes, and leave. More time will pass (usually a lot more time). The engineer will file a report with the insurance company. More time will pass.

Having taken even more time to analyze the report, the insurance company will find something unusual, strange, or inadequate about an issue the engineer has raised, and will tell the adjuster about it. More time will pass. The adjuster will inform you that his or her “hands are tied” – that the engineer has found a problem or inconsistency that keeps the adjuster from processing the claim in your favor.

You might as well say "I eat what I see" is the same thing as "I see what I eat!"

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In these situations, it’s not at all uncommon for the adjuster to tell the homeowner something along the following lines: “In most cases where we encounter (storm damage/fire damage/whatever damage) like this, we pay the claim … but in your situation, the engineer found (Strange Situation We Hardly Ever Encounter). I wish I could pay the claim, but the engineer’s report won’t let me.”

What the adjuster won’t tell you in this situation is that the same speech, with slight variations, has been delivered to countless other policyholders who trusted that insurance company, and paid that insurance company, to protect them against a certain risk.

• Can the engineer really “tie the insurance company’s hands” in this way? No, absolutely not. The engineering firm is not driving the process, and the engineer’s report is not binding on the insurance company. It is one tool, and only one tool, the company uses to determine the cause, nature and extent of the damage to your property. A different engineering report from a different firm can (and often does) point toward a totally different conclusion. But the insurance company, and the adjuster it hires to represent it, often likes to pretend that a report from an engineer that “raises red flags” is like an edict from the U.S. Supreme Court.

Of course, it doesn’t have to be an engineer. The entity “tying the insurance company’s hands” can be a roofer, plumber, contractor, restoration company, weather service – the deflection list goes on and on.

• Who else can the insurance company use as an agent of “low-level” deflection? You.

• Me? Yes, you, the policyholder. In a lawsuit filed by Mississippi Attorney General Jim Hood, it was alleged that in the aftermath of Hurricane Katrina, and without drawing much attention to themselves, insurance industry representatives went around visiting homeowners and asked them to sign some (seemingly) routine paperwork before the adjuster could actually examine the property or pay for living expenses. Many of the homeowners, eager to get the wheels of the adjusting process moving, or out of desperation for the promise of financial assistance, simply signed these documents without reading them closely. Big mistake.

What the papers said was that the policyholders were acknowledging that they were victims of flood damage (for which they were not covered) rather than hurricane damage (for which they were). Thus, the final responsibility for nonpayment of the claim shifted to the all-too-compliant policyholder. Who made this deflection possible? You did!

• What’s the moral of these horror stories? There are three big lessons to take away from these stories. First, and most important, get a public adjuster working for you just as soon as you suspect you may have to file a claim for damage to your property (or, at the very least, once you find your claim going sour). Second, refer all questions about engineers and engineering reports to your public adjuster. And third, never, ever sign anything because you think you’re “supposed to” in order to get an insurance company adjuster to look at your property. There should never be any preliminary paperwork necessary to get an adjuster to assess damage to your home.

That’s “low-level” deflection. In the next blog, you’ll see some of the examples of advanced deflection from the insurance industry. They’re even scarier. What's the hatter with them?

Mark Goldwich is president of Gold Star Adjusters, a group of public insurance adjusters dedicated to helping citizens get the maximum settlement for any insurance claim.