Zero tolerance is an popular catchphrase for insurers to bandy around. It implies a blanket boycott of dubious claims, the marshaling of an insurer’s full resources at every turn.
In practice, zero tolerance is a moving target. Few insurers can assert they contest every dubious claim. Even the most principled insurers decide which claims to challenge, and which to let slide through.
Focusing limited staff resources on a complex staged-crash ring that’s stealing hundreds of thousands of dollars might make more sense, from an insurer’s standpoint, than taking on a handful of smaller homeowner claims that prosecutors likely aren’t interested in pursuing.
Perhaps paying a $5,000 nuisance claim from a clearly setup fall in a restaurant makes more sense, as an insurer sees it, than spending many times that amount in legals fees to defend against the determined crook’s civil suit. A sympathetic jury could dole out $500,000 to the swindler, who’s faking a convincing limp in court. Just pay off the guy and make his claim go away.
That said, one of best business cases for zero tolerance recently was mapped by former CNA chief claims officer George Fay. He writes movingly in the Journal of Insurance Fraud in America.
“Most claim denials for fraud result in a lawsuit against the company, no matter how solid your case,” George wrote soon after retiring. “A strong anti-fraud position can earn your insurer a reputation within the criminal underworld for being an undesirable target to try and bilk. This principled stance saves legal fees in the long run.”
And helps build customer loyalty: “When you make customers aware of your anti-fraud efforts, they see it for themselves and usually stay with you for life.
Zero tolerance also reflects an insurer’s character, from the leadership down through line staff. “An insurer that knowingly pays a fraudulent claim violates its values statement,” George writes. “And certainly the insurer lacks character. The same is true of insurer employees — from the SIU director to claims personnel to adjusters. Character is critical to building the foundation of successful fraud-fighting efforts.”
Zero tolerance — strengthen your backbone, stop false claims and reap rewards. George Fay writes an inspiring roadmap. Insurers should study that vision closely — your honest policyholders will be glad you did.
About the author: Jim Quiggle is director of communications for the Coalition Against Insurance Fraud.