The Need for Excellence in Claims Handling

Insurers that decide they can handle claims with young, inexpensive, inexperienced and untrained claims handlers should be accosted by angry stockholders.

People having a Meeting

In search of profit, insurers have decimated their professional claims staff. They laid off experienced personnel and replaced them with young, untrained, unprepared people. A virtual clerk replaced the old professional claims handler. Process and computers replaced hands-on human skill, empathy and judgment. Money was saved by paying lower salaries. Within three months of firing the experienced claims people, gross profit increased. 

Insurance is a business. Corporate insurers must show their shareholders a profit that pays dividends and increases the share price of the insurer. For centuries insurers understood that catastrophes, firestorms, windstorms, hurricanes and tornados could not be predicted. Some years, the insurer will make profits, and some years it will incur a loss. The prudent insurer recognizes, because of the impossibility of predicting all possible losses, that they should measure profitability over a decade or several decades. No insurer can measure its profitability for periods of a quarter of a year. 

Insurance is a service business. The insurance contract is a collection of promises made by the insurer to those persons or entities that face risks of loss pay for an insurance contract that promises to protect the insured against the risks of loss the insured faces. The person or entity insured relies on the professionalism of the employees of the insurer who are called on to resolve the claims of the insured and provide the protection promised by the policy. 

The Development of the Insurance Claims Professional 

Insurers have created over the last few centuries professional claims personnel whom they trained to interpret the terms and conditions of the policy of insurance, how to thoroughly investigate every claim, how to assist the insured in the presentation and how to resolve claims made by or against the insured. The promises made by the policy to defend or indemnify the insured are kept by the professional claims person: the adjuster or claims representative. 

The prudent insurer understands that keeping a professional staff dedicated to excellence in claims handling is cost-effective over long periods. A professional and experienced adjuster will save the insurer millions by resolving disputes, paying claims owed promptly and fairly, and, by so doing, avoiding litigation. 

The professional claims person exists to resolve claims to the satisfaction of the insured and the insurer. When the claims person does so promptly, effectively and in good faith, the person insured will be satisfied that the promises made by the insurance policy were kept. When the insured and insurer are satisfied by the claims process, the insured will continue to renew his or her or its policy with the insurer and will tell friends and colleagues about how professional the insurer’s staff is. Those friends and colleagues will move their insurance to the insurer with the professional claims staff. The insurer’s business will grow, it will profit from the business of insurance and its shareholders will enjoy the fruits of their investments. 

Satisfying an insured that the promises made by the policy were fairly and completely kept is the key to the insurer’s desire to provide the services promised by the policy and avoid the expense and bad publicity of litigation. The satisfied insured will never decide to sue the insurer for breach of contract or the tort of bad faith. Neither party will need to involve counsel. A happy insured or claimant, satisfied with the results of his or her claim, will never find a need to sue the insurer. 

On the other hand, barely competent, incompetent or inadequate claims personnel will seldom resolve claims fairly and to the satisfaction of the insured or claimant. Inadequate claims personnel will often force insureds and claimants to public insurance adjusters and lawyers. 

It is axiomatic that every study performed on the cost of resolving claims establishes that claims with an insured or claimant represented by counsel or a public insurance adjuster cost more to resolve than those where counsel or a public adjuster is not involved. Prompt, effective, professional claims handling is cost-effective for the insured, the claimant and the insurer. Professional claims handling saves money because there is no need to pay the fees of a lawyer or public adjuster. When the insurer fulfills the promises made by the policy to the satisfaction of the insured when the insured acquired the policy the claim is resolved by the insured and the adjuster. 

Insurers that decide they can handle first- or third-party claims with young, inexpensive, inexperienced and untrained claims handlers should be accosted by angry stockholders whose dividends have plummeted or will plummet as a result. When an insurer compromises on staff, profits, thin as they may have been previously, will move rapidly into negative territory. Breach of contract suits and claims of violation of the tort of bad faith seeking tort and punitive damages will deplete the capital reserves of the insurer. Insurers will quickly question why they are writing insurance. Those that stay in the business of insurance will either adopt a program requiring excellence in claims handling from every member of their claims staff or they will fail. 

The Need for Change 

The insurance business must change — this time for the better — if it is to survive. Insurers must rethink the firing of experienced claims staff and reduction in training to save “expenses.” Insurers must recognize that the expense to train, educate and maintain a staff of professional claims handlers is a small part of the money that flows out of an insurer’s coffers. The major dollar expenditure is the money paid to insureds or claimants to pay claims. When inadequate or inexperienced adjusters pay claims the insurer did not owe, refuse to pay claims it did owe, or pay more than is appropriate, the potential for an insurer to make a profit is reduced much more than is saved by reducing the expense incurred paying a professional claims staff. 

Insurers should, if they wish to succeed, adopt a program to promote excellence in claims handling. Only with a staff of claims handlers dedicated to excellence in claims handling can insurers promptly, fairly and in good faith keep the promises made by the insurance policy and avoid charges of breach of contract and the tort of bad faith in both first and third party claims. 

Insurers must understand that they cannot adequately fulfill the promises they make to their insureds and their obligations under fair claims practices acts without a professional, well trained and experienced claims staff. An insurer must work vigorously and intelligently to create a professional claims department or recognize it will lose its market and any hope of profit. 

The Insurance claims professional is a person who: 

  • can read and understand the insurance policies issued by the insurer. 

  • understands the promises made by the policy and their obligation, as an insurer’s claims staff, to fulfill the promises made. 

  • are competent investigators. 

  • have empathy and recognize the difference between empathy and sympathy. 

  • understand medicine relating to traumatic injuries and are sufficiently versed in tort law to deal with lawyers as equals. 

  • understand how to repair damage to real and personal property and the value of the repairs or the property. 

See also: 5 Ways Generative AI Will Transform Claims

A Proposal to Create Claims Professionals 

To avoid claims of breach of contract, bad faith, punitive damages, unresolved losses, and to make a profit, insurers must, in my opinion, maintain a claims staff dedicated to excellence in claims handling. They must recognize that they, as representatives of the insurer, are obligated to assist the policyholder and the insurer to fulfill all the promises made by the insurer in the wording of the policy. An insurer can create a claims staff dedicated to excellence in claims handling by, at least: 

  • Hiring well trained, educated and empathetic insurance claims professionals. 

  • If professionals are not available, train all members of the existing claims staff to be insurance claims professionals. 

  • Train each member of the claims staff annually on the local fair claims settlement practices regulations.

  • Supervise each claims handler closely to confirm all claims are handled professionally and in good faith.

  • Explain to each member of the claims staff the meaning of the covenant of good faith and fair dealing from its inception in the 18th Century to the present. 

  • Require that staff treat every insured with good faith and fair dealing. 

  • Demand excellence in claims handling from the claims staff on every claim whether small or major, whether an individual or a corporate insured. 

  • Explain to the claims staff that the insurer is ready to immediately dismiss any claims handler who fails to treat every insured with good faith and fair dealing. 

  • If any experienced claims professionals exist on the insurer’s staff, the insurer must cherish and nurture them and use their experience and professionalism to train new claims people. 

  • If none are available, the insurer has no option but to train its people from scratch using available materials produced by the National Association of Insurance Commissioners, the state’s Department of Insurance, insurance associations and professionals who have – for a reasonable fee – the ability to train claims personnel properly and effectively. 

When the claims staff is made up of claims people who treat all insureds and claimants with good faith and fair dealing and who provide excellence in claims handling, litigation between the insurer and its insureds will be reduced exponentially. 

To keep the professional claims staff operating efficiently and in good faith they must be honored with increases in earnings and perquisites. 

Conversely, those who do not treat all insureds and claimants with good faith and fair dealing should be counseled and given detailed training if they are willing to learn. If they are not willing or able to learn they must be dismissed and sent off to a different career. 

If a claims person provides less than professional claims services and excellence in claims handling, they must be fired. 

Claims management must insist on excellence. There is no reason to accept less than excellence in claims handling. The insurer must make clear to all employees that it is committed to immediately eliminating staff members who do not provide excellence in claims handling and are ready to fire publicly and quickly those who cannot or do not provide excellence in claims handling. 


An excellence in claims handling program begins with a statement in the insurer’s claims manual or statement of professionalism, that it is dedicated to provide excellence in claims handling to every insured who presents a claim. To create an excellence in claims handling program should include, at a minimum: 

  1. A series of lectures supported by text materials explaining: 
    1. A definition of insurance. 
    2.  How to read and understand an insurance policy. 
    3.  How to interview an insured, witness, or claimant. 
    4.  How to assist an insured in the insured’s obligation to prove a claim. 
    5.  How to repair or replace damaged real or personal property. 
    6.  How to repair or replace damaged vehicles. 
    7.  How to identify causes of loss. 
    8.  How to recognize the red flags of fraud. 
    9.  The duty of the claims person who suspects attempted fraud. 
    10.  How to negotiate with an insured, claimant, public adjuster or lawyer to resolve a claim. k. How to recognize when retaining counsel to represent the insurer is necessary. 
    11.  How to retain counsel to represent the insured. 
      1.  How to read and understand the contract that is the basis of every adjustment, including but not limited to: 
      2.  The formation of the insurance policy. 
    12.  The rules of contract interpretation. 
    13.  Tort law: including negligence, strict liability in tort, and intentional torts. 
    14.  Contract law including: 
      1.  the insurance contract, 
      2.  the commercial or residential lease agreement, 
      3.  the bill of lading, nonwaiver agreements, 
      4.  proofs of loss, 
      5.  releases of claims, 
      6.  non-waiver agreements, and 
      7.  other claims related contracts or documents. 
    15.  The duties and obligations of the insured in a personal injury claim. 
    16.  The duties and obligations of the insurer in a personal injury claim. 
    17.  The duties and obligations of the insured in a first party property claim. 
    18.  The duties and obligations of the insurer in a first party property claim. 
    19.  The Fair Claims Practices Act and the regulations that enforce it. 
    20.  The thorough investigation, including: 
      1.  Basic investigation of an auto accident claim. 
      2.  Investigation of a construction defect claim. 
    21.  Investigation of a nonauto negligence claim. 
    22.  Investigation of a strict liability claim. 
      1.  Investigation of the first party property claim. 
    23.  The recorded statement of the first party property claimant. 
    24.  The recorded statement or interview of a third party claimant. 
    25.  The recorded statement of the insured. 
    26.  The red flags of fraud. 
      1. The SIU and the obligation of the claims representative when fraud is suspected. v. Claims report writing. 
    27.  The evaluation and settlement of the personal injury claim. 
    28.  How to retain coverage counsel to aid when a coverage issue is detected. 
    29.  How to control coverage counsel. 
    30.  How to instruct coverage counsel on the issue to be resolved. 
  2.  Instruction, by lecture, documents, webinars on: 
    1.  Dealing with a plaintiff’s lawyer. 
    2.  Dealing with personal injury defense counsel. 
    3.  The evaluation and settlement of the property damage claim. 
    4.  The appraisal process. 
    5.  Arbitration and mediation and the claims representative. 

See also: How to Optimize Insurance Claims Management

Claims handling without excellence is both dangerous and expensive. Insurers must develop a professional claims staff and provide excellence in claims handling because by so doing they will profit more than if they keep an inadequate and unprofessional claims staff. 

The training lectures must be supplemented by meetings between knowledgeable and experienced supervisors and claims staff on a regular basis to reinforce the information learned in the lectures. 

To guarantee that the training and requirement for excellence in claims handling is effective, the insurer must also institute a regular program of auditing claims files to establish compliance with the requirement to deal fairly and in good faith to the insured. 

The insurer’s management must support the training and repeat it regularly because people have short-term memory loss and need to reinforce what they have learned and what is required of them when dealing with an insurance claim. The professional claims handler never sees the identical claim every time. Claims, factual background and the people involved are invariably different, and the professional claims handler must be capable of adapting to the people and facts involved. 

The insurer’s management must, therefore, audit claims files to determine whether the training has taken and is being applied to each claim and whether there is a need to refresh the memory of the claims personnel and add new information and claims processes. 

There is no quick and easy solution. Training takes time; learning takes longer and must be repeated and modified to changed situations and new and modified appellate decisions changing the interpretation of a policy wording. If the insurer does not have personnel with the ability to train its staff, it should use outside vendors who can do so effectively. Many such sources are available from professional associations, independent claims adjuster firms, independent counsel, insurance related publications, insurance related podcasts and continuing education providers. 

I have created, to assist those who wish to create a professional claims staff dedicated to provide excellence in claims handling, a series of publications at my Locals community and at In addition, at, I produced a short Excellence in Claims Handling program available at and multiple insurance claims related programs. 

I also published at more than 660 videos dealing with insurance, insurance coverage, insurance claims handling, insurance law and investigation of claims with similar videos at I have also published more than 4,450 blog posts digesting appellate decisions modified from the actual language of the court decisions, condensed for ease of reading, and convey the opinions of the author regarding each case on insurance, insurance coverage, insurance claims handling, insurance law, and investigation of claims available for no cost to anyone who watches. At the Insurance Claims Library, I have published more than 30 books on insurance law, insurance claims and insurance claims handling, available at low cost from 

Barry Zalma

Profile picture for user BarryZalma

Barry Zalma

Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud over the last 55 years. 

Read More