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To the editor: I read with great interest and lots of personally generated applause, the Dec. 4, 1995 Perspective, "Think Ahead to Avoid Retro Policy Pitfalls."
Experience proves your authors, Bradfute Davenport Jr. and Clark Lewis, to be absolutely on the right track!
There is some minutiae that helps in controlling claims costs in a retro plan that they did not mention: Making sure the location numbers are correct for multi-location companies; making sure that correct claim numbers are used; making sure that correct policy numbers are used; and making sure that claims adjusters begin servicing claims as quickly as they receive them. Note also that an account large enough for a retro plan should have 'dedicated' adjusters.
Not so microscopic is an active, creative, attractive safety program. This is a prime aspect of loss control. Careful adherence to OSHA requirements by workers at all levels fosters safety.
Messrs. Davenport and Lewis did not mention a great claims control mechanism available from most workers comp insurers that do retrospective business: In addition to insurance that is pretty broad in its concepts and coverages, a separate side agreement may be entered into with the insurer, called a "Special Claims Handling Agreement." The fact of an agreement of this sort is not unusual among large policyholders; the terms of the agreement may well be.
All corporate claim handling ought to be centralized. Depending on claims frequency, one individual should be familiar with and carefully administer each claim, with the tiny ones getting the same careful scrutiny as the large ones. Suspected phony claims are treated very vigorously and payment for something that is not justified by the facts should be hard won.
Under the "Special Claims Handling Agreement" the policyholder should enjoy the final say so in whether a claim will be paid and often how much, unless a judge disagrees. The "Special Claims Handling Agreement" also should allow the policyholder the choice or approval of legal counsel; claims adjusters; and many other aspects of claims administration.
The methods that Messrs. Davenport and Lewis espouse in their article work. They require work and they require a basic instruction from a company's upper management: "If an employee or customer is in any way hurt on the job or by what we do, see to it that they are made as nearly whole as possible-If an employee or customer is trying something less than respectable, see to it that they are taken care of properly, too!"
Palm Springs, Calif.
To the editor: The recent Perspective article, "Think Ahead to Avoid Retro Policy Pitfalls," was a disappointment, especially since it was authored by two attorneys representing a respected law firm in the city I now call home.
References to cases in 1965 and 1983 show just how uninformed the authors are about the realities of claims management in today's insurance environment. The notion that insurance companies benefit financially from paying more claim dollars is absurd, and certainly damaging to their ability to attract quality new business or even to retain existing accounts.
The truth, 13 years since 1983 and 31 years since 1965, is that most retro accounts are administered by sophisticated brokers or agents who require quality claims management from all parties in the insurance contract, thereby protecting the financial interest of their clients.
Insurers seeking to attract large policyholders would be undermining that objective if they did not practice the "best" in claims management and other services that contribute to preventing or minimizing losses.
Edward J. Smith
Amerisure Insurance Group