Navigating the Complex Field of Casualty Claims

The article is based on an interview with Terrence Jarrett, Vice President of Head of Casualty Claims at PURE Insurance.

Major Challenges and Complexities Involved in Handling Casualty Claims

I believe the major challenges and complexities of casualty claims include the subjectivity and emotion that are part of claim valuation and resolution and the varying and constantly changing impact of local and national factors, including political, economic, and judicial climates. These challenges have always existed, but today, a more rapid pace of change in the political, economic, and legal landscapes only exacerbates these challenges during and after the COVID-19 pandemic. In the past, we could better predict outcomes based on factors like medical inflation or, perhaps, generally accepted conventions about claim values.

Today, we faceincreasing claim costs impacted byobservable but difficult or impossible to quantify factors (often aggregated into the umbrella term ‘social inflation’). We are seeing more verdicts driven by emotion and/or a desire to level the economic playing field by punishing wealthy individuals or commercial defendants as opposed to verdicts driven by facts and the law.

Adapting Casualty Claims Process to Meet the Needs of Policyholders

The rising frequency of natural disasters and resultant catastrophic events presents an ongoing challenge to casualty claims professionals. Casualty professionals are increasingly being called upon to support colleagues with increasing workloads. At PURE, our casualty teams are increasingly working to share the burden and take on more simple/administrative type tasks to support their colleagues. These include taking first notice of loss and claim status calls, assisting with administrative work such as subrogation demands, and leadership taking on the supervision and administrative oversight of temporary adjusting resources.

From a liability standpoint, I think we have had to start thinking more about the liability fallout from natural disasters. For example, in early 2023, there was a record amount of precipitation in California, causing, among other things, floods, mudslides, and erosion. From a first-party property perspective, there is often no coverage in these situations. This puts affected homeowners in a bind, facing hundreds of thousands if not millions of dollars in uninsured repair costs, which leads them to seek other sources of recovery, in particular their neighbors. These claims often don’t come right when the catastrophe happens but rather months or even years after the fact. Carriers are seeing increasing numbers of significant claims where there is an allegation of negligence against their insureds when cliffs erode and flood homes below them. One thing I think we need to do better as an industry is to better assess these potential claims at the time of the catastrophic event. The casualty industry is continuing to evolve as we continue to observe the effects of increasingly frequent natural disasters.

Examples of Technologies Used to Improve Underwriting, Claims Processing, and Risk Assessment

Technology that assists with the evaluation of injury claims has been around for decades. Today, there are numerous new companies entering this space with the ability to take data and give a range of valuesfor a claim based on specific injuries sustained and other factors. While I believe there is a time and place for these tools, I don’t see them as a ‘one size fits all’ solution to the increasingly complex task of evaluating a claim. With the rise in litigation, we are increasingly turning to tools that in the past were only in the purview of extremely catastrophic cases. For example, we are more frequently turning to mock trials and jury evaluator tools to test how our case, including theories of liability and damages, resonates with actual potential jurors in a particular geography.These tools help us to more quickly to refine our strategy on a case and achieve the right outcome faster. In some cases, feedback received from mock trials/jury evaluators has even caused us to completely change our strategy to a claim. As discussed earlier, the pace of change and evolution driven by social inflation factors is rapid. Our assumptions regarding the resonance of facts, case values, and potential outcomes based on our past experience are being regularly challenged. These previously under-utilized tools help us not only challenge but also learn more about how these factors affect cases in real-time and make decisions that lead to the right outcome more quickly.

"The rising frequency of natural disasters and resultant catastrophic events presents an ongoing challenge to casualty claims professionals."

The Previous Experiences That Empowered You to Successfully Detect and Prevent Fraud in Casualty Claims

I spent the first half of my career in a non-standard company. The importance of pennies saved was as valuable as thousands of dollars today. The skill set to recognize and deter fraud was our biggest asset. It’s probably not the right venue, but I'll say that fraud recognition and detection have become more data-driven than adjuster driven. 'Red Flags' and other things companies use to identify fraud is a tool, but it has become the benchmark for referrals in today's world, and that has made fraud more rampant today. The problem with investigating fraud is that it is up against competing priorities. You have companies that ‘fast track’ certain types of claims where adjusters are not involved in the claims process at all. You have a fear of poor service scores if you question the validity of an insured's claim, and with premiums today, one of the biggest differentiators is service. You have a workforce who wants things simplified and more streamlined, and pausing to question a fact that doesn't make sense is not as prioritized as the file being closed in 30 days. So, comparing my previous experiences and what made me or my teams successful don’t exist today. However, in my team, we do the right things for the right reasons all the time. We are reciprocal, and protecting the member's assets might mean having uncomfortable conversations on some of our claims. That type of mentality has to survive somewhere.  

Advice for Senior Leaders and CXOs

I’d like to give a cliché response that we have all heard numerous times from our peers. However, I’ll give a simpler response. 'Don’t ignore what your eyes are telling you.’  I missed the early signs of the impact of social inflation, not because I didn’t notice them, but because I ignored them. I thought it was a term utilized by claims organizations to explain away deteriorating results. Had I not, I could have probably better prepared my team and my organization. It's real, its impact is real, and I don't see it changing anytime soon. It's been the equivalent of a sailboat morphing into a speedboat, and we have to deal with it. 

That being said, the situation for insurers is not hopeless. Insurers need to continue to fight the good fight. They need to continuously improve more deeply and more quickly than ever before, do the right thing always, and fight back. The verdicts of recent yearsare far above and beyond, putting people back in the position they were before an accident, let alone what insurance was intended to cover. We have to stand up to the injustice of the justice system in some areas.