A Few More Thoughts About Assignments of Benefits
I last wrote about assignments of benefits (AOB) back in January. You didn’t read that one? I’m shocked, but I’ll be ok. Here’s the link to my thoughts about assignments of benefits. You don’t even have to leave this page to read that one. Just press the control key when you click the link and it’ll bring up another window so that you can keep reading this post. You can thank me later.
So, if I wrote on this topic just a few months ago, why am I writing about it again? That’s an easy one. The problem hasn’t gone away and Insurance Journal is hosting a panel discussion webinar on the topic next week. That’s why I’m writing again.
The premise of the AOB
Let’s reset again and make sure that we’re all on the same page. An assignment of benefits is a document, or clause in a contract, that allows another party (a contractor, water mediation company, your doctor’s office) to file for, and receive insurance benefits. This process allows the insurance company to negotiate and pay the assignee for the claim, rather than the customer having to pay their contractor first and then file the claim.
In theory, it’s a great way to operate. Think about it. The customer takes one link out of the claim chain. Without the AOB, the process is centered on the customer who spends their time getting an estimate, sending it to the insurance company, negotiating with the adjuster about the most fair claim payment, receiving the payment, getting the contractor to start the work, paying the contractor, and then finalizing the claim (or reopening the claim if the repairs take more money that initially paid, which means starting over almost from the beginning).
The AOB makes it so that the insured can hire a contractor and then remove themselves from the process. All they have to do is drink their coffee, wait for the contractor to finish the work, and pay their deductible. OK, that might be an oversimplification, but you get the point. The insurance company works directly with the contractor to get the repairs going.
The problem with the AOB
As you know by now (because you’re daily Insurance Journal readers), it just doesn’t work that way. Not every insurance company pays the claims that they probably should as easily as they should (sorry insurance people, but it’s kind of true). Not every repair contractor files the correct amount for their claim. Sometimes they inflate the costs. What happens when the insurance company doesn’t want to pay for the costs as presented by the contractor? That’s right, the contractor calls their attorney and (you know it) the insurance company contacts their legal team. What happens with the customer?
The customer finds themselves in the middle of a feud, which might leave them waiting for the work to be done, or worse yet, they find that they are on the hook for the balance if the insurance company wins against the contractor. For the customer, the best case is that they get their repairs paid for and find out later that their insurance premiums go up (along with the rest of us, thanks) to make up for the extra expenses that the insurance company had.
The potential solution for the AOB issue
As the primary contact with the customer, we (and by we, I mean we insurance professionals) need agents to be involved way before the claim ever happens.
The solution starts with educating customer about a few things.
You guessed it, I think we need to be proactive about helping our customers. It can’t just be about selling a product. Insurance policies aren’t commodities to be purchased without proper explanation and conversations. Insurance policies are complicated, and we have the education and training to help our customers to understand what it is that they’re purchasing.
When we are reactionary, which insurance people kind of tend to be, we end up paying for it. We lose time, credibility, and money dealing with these issues. Let’s face it, all of us would rather be serving the customer before the claim, than dealing with an angry customer after the claim goes wrong.