This is the second in a series of posts about the ethical issues associated with insurance claims. This focus this time is on compensatory justice.
Insurance plays a vital role in ensuring that those legally entitled to damages receive financial compensation, as well as ensuring its quid pro quo, that those against whom damages are awarded are not financially ruined by having to find the money for themselves.
Managing a system that brings premiums in for cover against possible damages and distributes claims out for damages awarded, represents a significant contribution that insurance makes to justice and social stability. On top of this, rating factors provide a feedback mechanism to encourage better risk management, so reducing actual incidents. And a great deal of marketing and broking helps raise awareness about the importance of taking out such cover in the first place.
All in all, it earns insurance a big ‘ethical tick’… subject of course to the caveat that the system is run efficiently and fairly. Insurance and legal liability for damages are now so intertwined that should the insurance contribution to compensatory justice fail to deliver in an efficient and fair manner, there’s a risk that society’s sense of fairness in the actual realisation of justice (for themselves and for others) can be undermined.
Consider the recent high level of whiplash claims. It’s led to a strong belief that something is systemically wrong within the system for claiming just compensation. Some people are receiving compensation that hardly seems deserved, while others could be hindered in obtaining what they do deserve. A myriad of commercial interests has resulted in a huge uplift in claims submitted and damages awarded, with, it has to be said, many firms in the insurance sector taking advantage of the opportunities this offered. All in all, this looks to be a classic example of how that social justice element of insurance needs to be carefully looked after.
When that system of compensatory justice is under pressure, as it seems to be at present, insurers come under pressure too, both financially and reputationally. Add to that a rise in fraudulent claims and claims departments must at times feel like they’re under siege from all sorts of chancers. Yet the vast bulk of claimants are genuine and their need for fair and just compensation, efficiently delivered, remains just as important as ever.
There’s a danger that claims departments will start to view more and more genuine claimants through the same lens as the fraudulent or opportunistic ones. Once you think of your customers in that way, it’s a short step to treating them in that way. Could some insurers be slowly drifting into just such a mindset without actually realising it? Fair claims will be overly challenged and some claimants discouraged altogether. ‘Walk away’ claimants are then labelled as potential fraudsters, withdrawing so as to find another way in, their files being marked for greater challenge next time round. It’s a downwards spiral.
Insurance is quite unusual in presenting its customers, when first using the product they’ve bought, with a minute or so of telephone script about what happens to fraudsters. Of course every claimant has to prove that their claim is genuine and of course insurers should have a claims process that challenges dubious claims, but even with fraud bills said to be as big as they are, claimants deserve to be greeted, and then treated, with a presumption of innocence.
We all benefit from damages not being too easily available, but we all lose if damages seem too hard to achieve. It may be an individual whose claim is unfairly turned down, but it is society who pays the bigger price in the long run. Think of it this way – when insurers challenge a suspicious claim, they challenge it for us all. When they quickly settle a fair claim, they settle it in such manner for us all. When they challenge too quickly or not often enough, they’ll soon find themselves on their own.
At the moment, there’s a question mark over how well insurers are doing. They’re even accused at times of being as much part of the problem as dubious lawyers or claims management companies. The challenge then is for insurers to take the middle ground where the vast bulk of claims lie and work it so efficiently and fairly that it becomes the high ground. Bring the public with them in how they do this and their returns, both financially and reputationally, will look a lot healthier.
In the next post in this series about ethics and insurance claims, we’ll be looking at conflicts of interest.