ANNOUNCEMENT   THE NEWEST TREND IN CLAIMS TRAINING AND CONSULTING  

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  Insurance Claims Consultants was founded on the philosophy that if you educate people on insurance matters, there would be less litigation, whether you are an attorney, doctor, injured party, consumer, business, institution, hospital, or company. With less litigation this would help make insurance more affordable for everyone in the United State. Our Experts in a minimal amount of time, would guide and instruct individuals and companies in the basic skills of how to properly present a claim to insurance companies and what the insurance companies' require in order to settle an insurance claim. 

    In the past seven  years, ICC  has helped businesses and  individuals  save millions of dollars by correctly and efficiently providing  training and  information that is required by the claims department of the insurance companies.  The result of these savings has been a contributing factor in the reduction of insurance premiums or return of dividends throughout the United States.  Through ICC's advanced technology  we have educated consumers  to be able to settle their own insurance claim. Before the innovative approach  of ICC's technology ,there was no other place where  the consumer could go to obtain  training of the proper way to present their claims to the insurance company except an attorney who is not an insurance claims expert. With consumers now handling their own claims, insurance companies, that is the Personal Injury Provider (PIP), could now receive 100% subrogation of the insurance claim dollars and would not have to pay an attorney the traditional 1/3 of the claim to protect their (PIP) lien. This saving  has helped lower insurance rates for the people throughout  the United States. State Farm was one of the first companies in 1998 to return unused premiums to its policyholders.

There has been a significant increase in the involvement of attorneys in the claims process. Nationally, this has accounted for an increase of 46% in the year 1992, more than 31% in 1977, almost a 150% increase. (See Figure 2-8 - Attorney Involvement.) Since attorneys tend to be involved disproportionately in the larger claims, most of the money paid for auto injuries are handled by attorneys.

In 1992, some 85% of total dollars paid went to attorney-represented BI claimants, compared with 82% for claimants paid by the UM coverage, 92% for those paid by the UIM coverage, 43% by MP coverage and 54% paid by PIP coverage with an average of more than 71%. (See Figure 2-9 - Attorney-Represented Claimants). About 40% of all attorney-represented claims were settled out of court.

The levels of attorney involvement in auto injury claims are associated with high auto insurance costs (see figure 2-10). The data documented several reasons why the involvement of attorneys were associated with higher auto injury costs. 1) Claimants with attorneys report numerous and more types of injuries, yet not as serious. 2) Claimants incur higher medical bills, even for injuries of the same type and similar degrees of severity.

    All types of injury combined, claimants with attorneys incurred economic losses (mostly medical bills) averaging $6,391 per person and collected gross payments averaging $11,939. By contrast, claimants without attorneys incurred economic losses averaging $1,755 and collected payment averaging $3,262. A difference in gross payment of $8,677. Thus, if a claimant does not have access to insurance the total settlement of $11,939 would result in a net payment to the claimant of only $1,608 after the payment for attorney fees and the cost of medical expenses. (See Figure 2-10.)

    Claimants without attorneys netted $1,507 after paying for their economic losses while the claimants with attorneys netted only $101 more. Thus, the balance of the cost to the system of the $8,677 went to attorneys and to the medical providers and not to the claimants. (See Figures 2-9 and 2-10.)

    Table 2-1 demonstrated how claimants fared with and without attorneys. Starting with the same economic loss and gross payment data shown in the national figures. The table adds a column showing the average net payment to represented and non represented claimants when both legal costs and economic losses are subtracted from the gross payment and a percentage comparison of the difference and the amount that they would have received with no representation.

    What is shocking about Table 2-1 is how much more it costs the insurance system (and, ultimately, insurance policyholders) to provide compensation for similar injuries when an attorney is involved and how little of those extra costs remains with the represented claimants. 

     In the forgoing analysis, it assumes that the claimants do not have access to health insurance or auto insurance MP coverage. The data clearly demonstrates that for those without health benefits or other auto insurance benefits there is substantial added cost in the system without any monetary benefit to the claimant. The extra cost in the auto BI liability system is paid to lawyers and medical providers.

    In many cases there is health insurance and/or auto MP coverage also available to the claimant, If a BI claimant does have health coverage and/or auto insurance MP coverage, and multiple recoveries are allowed, then the net payment to the BI claimant may be much higher, resulting in the cost to society being correspondingly higher when an attorney is involved. For example, the monetary cost to society of an "attorney represented" claimant, with payment from both auto insurance MP coverage and health insurance would be the aggregate payment of $11,939, plus reimbursement of the medical expense twice (once from the MP coverage and once from the health coverage). The result is a gross payment of about $21,000. The claimant that is not represented by a lawyer would stand to collect only about $6,000. A disparity of about $15,00 for this example. Keep in mind that this is not a payment of $15,00 to the claimant, it is the difference in costs to the insurance company and part of the reason for higher insurance premiums.

Table 2-1 - Claimants With and Without Attorneys

    The analysis of the data has shown that attorney-represented claimants report higher economic losses than non represented claimants with similar injuries, similar period of disability and similar amounts of time lost from work. "What accounts for this difference? It is that attorney-represented claimants incur more expensive medical treatment for their injuries."

    In many cases, claimants were all employed and the most serious injury reported for these claimants was a back sprain or strain. For a "back sprain" claimant with no time lost from work the average economic loss claimed was $3,447 for attorney-represented claimants and just $1,071 for non represented claimants. Even when severity of injury and possible differences in wage losses are controlled, attorney-represented claimants received much more medical treatment than non represented claimants.

    The link between attorney involvement and utilization of medical treatment was also explored in another study based on a survey of families with recent auto injury experience. When asked what services their attorneys provided, besides handling the auto insurance claim, 18% said their attorneys advised them which doctors, chiropractors or clinics to use for treatment of their accident-related injuries. 

    In Table 2-2 - Number Of Days Between Report of Injury and FIRST Payment to Claimant BI and PIP claimants showed that the percentage of claimants receiving their first payment from BI and PIP overages at various time intervals after the auto insurer received notice of the injury (also see Table 2-3). 42% of those that an attorney did not represent received a first payment within 30 days of reporting their claim.

    Attorney-represented BI claimants, only 3% received a first payment within 30 days. Ninety days after reporting a claim to the insurance company, 66% of non-represented BI claimants had received a first payment compared to about 10% of attorney-represented claimants.

    According to the information  found and published, one year after reporting an injury to an insurance company, 6% of non represented BI claimants had not received a first payment, compared with 42% of attorney-represented claimants. Attorney involvement also slowed first payment of PIP benefits, but to a much smaller degree. 

    Table 2-2 - Number of Days Between Report of Injury and FIRST Payment to BI Claimants and PIP Claimants

Paying for Auto Injuries, Insurance Research Council (1994).

Table 2-3 - Number of Days Between Report of Injury and FINAL Payment to BI Claimants and PIP Claimants

    Table 2-3 - Number of Days between Report of Injury and FINAL payment it shows that the attorney-represented claimants also received their final payments substantially later than did the non-represented claimants.

    There substantial consideration of the length of time, but the time value of money enters into the financial equation of the claimant. Basically, the time value of money states that a $1 is worth more today than it is worth one year from now. In other words, not only are the claims taking longer to process with attorney-represented claimants, when they are settled the value of that $1 is less as time goes by. Depending on the fluctuation of the market and the available interest rates a claimant could lose as much as 10% of the value of their claim by waiting a year to have it settled.

    If the attorney is able to settle for more money, when in fact the data shows that in most cases they do not, the value of that settlement is less. If the individual had not taken attorney representation and settled within the first 180 days and deposited that money in an interest bearing account it would have accrued additional cash. Whereas, when the settlement is received one year down the road, the claimant has lost the use of the money for that one year, and all the interest that could have been gained.

    Under the current adjudication system the process of claims settlements had two courses of action. One, the individual could attempt to settle directly with the insurance company or two, they may retain the services of an attorney.

    Herein lays the inherent problem. The insurance companies, to protect their profits and margins, in the past years have been under no obligation to help the injured party document his/her  loss in order to pay a claim. Their reasoning behind this is that there was an alarming increase in the usage of attorneys to settle such claims.

    The empirical research data  shows, (as is referenced in Figure 2-8, Attorney Represented Claimants) when considering BI claims, some 85% of all total dollars paid went to the attorney-represented claimants. In the study, attorney involvement lead to much higher auto insurance claims that resulted in higher cost of insurance.

    However, the higher settlement claims did not result in higher payments to the claimant, in fact in most cases the claimant receives less of the settlement than if they had negotiated directly with the insurance company without the attorney. In the claims involving a fracture of a weight-bearing bone, the award to the claimant can be as much as 69.67% less than the award to the individual that was not represented by an attorney. In other words the non- represented made more money settling his own claim.  The study showed, the non-represented  received on the average $5,866 more than if they had been represented by an attorney. See Table 2-1, Claimants with and without attorneys. With the consideration of "All Injuries" it shows that the person that has retained an attorney averages just under 7% more for his claim. Yet, as the data indicates that with the use of attorneys the cost to the system almost doubles. See figure 2-9, cost to the system.

    The findings show that on a continual basis, (As seen in Figure 3-4 Current Process of Claims Settlement) showed that there are two basic venues of choice for the injured party. The first is through straight negotiations with the insurance company and the second is through the retention of an attorney.

    The example used in Figure 3-4, the injured party has a claim for a neck injury that is payable under a liability policy. Under one venue the injured party, has chosen to negotiate directly with the insurance company. The company informs them that it will pay $30,000 as a result of their injuries. In  77% of similar cases the injured party will have received their award of $30,000 in 180 days or less.

The second choice  the injured party elected to retain an attorney in hopes of increasing their settlement value. Under this scenario the attorney is able to increase the value of their claim by 167% for a total value of $50,000 (multiple $30,000 by 1.67). Based on national data of more than 62,000 claims, the attorney charges his "reasonable fees" of 1/3 (33.3%) of the amount of the claim. This amounts to $16,666, now leaving a balance of the settlement at $33,334. After "reasonable" attorney fees and the additional cost of the medical procedures the original claim of $50,000 now has an award value to the injured party of $29,130 or 2.90% less than if the injured party had settled with the insurance company direct. In addition, there is almost a 50% chance that the award to the injured party will not happen for at least one year following the filing of the claim.

    It would be an impossible consideration for each of the injured parties to undertake the necessary studies to be able to prepare themselves in the intricacies of insurance negotiations and claims process. This is where technological training and consulting services are of value.

    Currently, when an insurance company, that represents an injured policyholder receives a PIP claim for benefits, the insurance company will pay the PIP benefits in  accordance to the policy provisions . The Insurance Company will then subrogate the benefits paid by originating a lien against the adverse insurance carrier for reimbursement.

     Figure 3-6, is a flow chart of an example of the procedures that an insurance company undertakes to establish the rights for subrogation and lien. The example depicts a individual  injured in an accident. This individual  reports the accident to his insurance company. The injured party files for PIP benefits according to his policy. In this example we are using PIP benefits of $30,000 for medial expenses.

    The Insurance Company receives a $30,000 claim for PIP benefits and reviews the circumstances involved in the accident. In this example it was determined that the other adverse  party involved in the accident had insurance. 

The injured party’s insurance company files a lien for reimbursed of $30,000. This process in known as subrogation. To be able to file a subrogation the insurance company retains an attorney who protects their lien with the adverse insurance carrier. To retain the attorney the insurance company agrees to pay 33.3% of the PIP. This 33.3% attorney fee is considered a "reasonable fee" according to the states - Reparations Act. The Reparation Acts simply states that the insurance company HAS TO PAY these fees.

     Figure 3-7  gives an example. In this example the reasonable charge by the attorney to protect the lien is $10,000, or 33.3% of the PIP benefits paid. The attorney now takes the subrogation assignment from he PIP carrier and at the same time represents his injured clients in settlement with the adverse carrier.

    The adverse insurance carrier receives the $30,000 lien filed by the attorney. They review the lien to make sure that it falls within the policy. After determination that the lien is valid and there is no contributory negligence, the adverse insurance carrier issues a reimbursement payment of $30,000.

    However, the full amount of the $30,000 reimbursement does not go to offset the original insurance company’s payment of the PIP benefits of $30,000. 

Instead, the original Insurance company (PIP Carrier)  must pay the "reasonable fees" charged by the attorney in the amount of $10,000.  Note the time the attorney spends protecting the PIP lien in most cases is less than 3 hours which converts to $3,333.00 per hour. No attorney is worth that much and it what you call " fleecing Americans"

     Now the balance of the reimbursement of $20,000 is paid to the injured party’s insurance company for the $30,000 PIP benefits that they paid on behalf of their policy holder. This represents only a 66.6% recovery of the money that the insurance company has already paid.

    The $10,000 difference in the amount that the insurance company paid to the injured party and the amount that they received in total recovery is a loss on the transaction for the insurance company. In other words if the insurance companies pay out $300 billion in PIP benefits under the current system, the insurance company pays out $ 100 billion to attorneys. 

    If the injured party settles his own claim with the adverse carrier the PIP carrier will not have to pay the insured's attorney to protect their lien  and will recover 100% of their $30,000.00 PIP Lien. This type of saving would amount to 100 billion dollars in attorney fees which would reduce insurance premiums and provide better scientific research  for health care.     

     Under standard business consideration, this loss must be absorbed somehow by the company. Since most companies run on a thin profit margin there is no "room" for the loss disbursements through profits, instead this must reflect in a cost to the policy holders (cost to public).

    This "cost to public" results in one of two (or often both) venues: The first is that the insurance company, in order to stay in business, must either maintain the current level of premiums or increase them to be able to remain a solvent insurance company.

    The second is that many services or policies that the insurance company could have provided can no longer be offered. In many cases the insurance companies are having to "redline" policies that would have otherwise been available to the public. In "redlining" the insurance company must cancel such policies that are marginal at best or exclude coverage.  

    In the economic system of the United States the only way any company, including insurance companies, can stay in business is through reinvestment in new products, new services, new technology, better pricing, and diversity. If all that a company can do is to maintain a "status quo" that company cannot offer new and innovative services, products and provide better pricing to the consumers..

    In fact with a continued "loss" in the recovery of the reimbursements, the insurance companies are severally restricted in the amount of reinvestment that is possible. This directly affects each and every citizen in the form of either increased cost of insurance premiums or reduce benefits. With a revised system of recovery the insurance company will be able to partially reduce insurance premiums, offer new services and new products for the people.

 Dan Martinez CEO 

Coming Article : Are attorneys experts in insurance claims? The answer is No. Find out the truth.    

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