Claim Severity

The old saying goes something like: “Keep your friends close, and your enemies closer.” Perhaps that is why we hired Steve Duke, a former senior claims adjustor for Allstate insurance and a formidable foe for many years, as an investigator for our firm. Steve was always prepared, professional, and effective on behalf of his corporate employer, but most importantly Steve understood the industry of insurance. We’re lucky to have converted him to the ‘good’ side, and look forward to his shedding light on our ‘enemy’, the insurance industry each month.

Marcus J. Michles II
Board Certified Civil Trial Lawyer

From the time a rookie adjuster is assigned his first claim, Claim Severity is the Sword of Damocles that will hang over his head for his entire career with the insurance company.

Claim severity is simply the average cost, per claim, per coverage, per exposure. Each accident is one claim. If, in that accident, there is a PIP claim, a collision coverage claim and three Bodily Injury claims (driver and two passengers) then when all coverages are closed (settled), the cost of each will be applied to the monthly statistics to that assigned adjuster. Adjusters are rewarded with salaries commensurate with their ability to keep claim severities lower that the average severity within the claim office for that geographic area. This is good news for the insurance company and bad news for the insured claimant.

In every accident, there is an insurance policyholder who has a policy affording various kinds of protection. In a full coverage policy, protection would include Bodily Injury Liability; Property Damage Liability, Medical Payments Coverage, Collision Coverage, Comprehensive Coverage, Rental Reimbursement Coverage, Uninsured/Underinsured Motorist Coverage and Personal Injury Protection (PIP) coverage.

If a vehicle driver operates his vehicle negligently and causes injury to another motorist or pedestrian, then the adjuster will attempt to contact the injured party and if settlement is appropriate, attempt to settle as quickly and as for as little as possible. Statistically, the law of large numbers favors the adjuster. If an adjuster has five or ten low range settlements in a month, this will help offset the inevitable large loss the adjuster may have to pay.

Statistics are kept monthly and there is also a running total for the calendar year. Annually, when an adjuster’s job performance is rated, his claim severity is a critical variable in determining what raise, if any, the adjuster will receive. Adjusters with low severities are paid handsomely while those with high severities receive minimal, if any raises, at all.

So, now you see why this concept of “claim severity” hangs so heavily over each adjuster’s head. You will never see this explained in any television commercial. You may settle your claim directly with an adjuster if you wish. But, please keep this in mind. Is a quick settlement in your best interest? Are there other issues which may need further investigation. Talk to your friends. Ask around. Are there attorneys with proven track records to help you receive the settlement amount you are entitled to?

Steven L. Duke email signature


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