The Einstellung Effect

Another claim. Another meeting. Another discussion.

What strategy to adopt? Lawyer up and hard nose it? Hi ho, hi ho, it’s off to (premature) negotiation we go?

Image: redditgifts.com

Image: redditgifts.com

Of course, there are various nuanced positions relative to these two extremes. The approach taken often appears to be driven by the cultural imperatives of the organisation, or more often, the personality of the individuals concerned.

Think stock exchange and bear and bull markets. Think funds managers, constantly moving dollars to try to get the best return. Well hello, we all know the use of a blindfold, dart and dartboard will generally get just as good a return as a fund manager. Think I’m being unkind to funds managers? Go read Dan Kaufman’s book on behavioural economics and prepare to reconsider some well accepted social norms of (economic) behaviour.

Whatever way you approach it, there will always be winners and losers – to a certain extent. Winning the argument, only to find out the cost is as much as you were arguing about, doesn’t strike me as a real win.

Consider the volume of trades done in a day on the stock market where both the buyers and sellers are hoping to make money. Does it suggest that what one person considers an opportunity, the other considers a liability? So who is right?

Using your intuition you are generally right about fifty per cent of the time and therefore wrong about fifty per cent of the time. There is good evidentiary and statistical information for that comment. Ergo, never, ever trust anyone who tells you they always rely on their gut instincts.

Image: quickmemes.com

Image: quickmemes.com

So when both sides habitually lawyer up to a claim, there is a pretty good bet there are the same odds for achieving a good outcome as for a bad outcome.

Sometimes the thinking is ‘this is too hard, let’s give it to a lawyer’.  Don’t get me wrong, complex legal issues require good lawyers. But let’s remember we are human beings. Much of what we deal with is, really, just navigating other people and their viewpoints. Viewpoints are usually driven by the person’s own identity, and are overlain by what they think the cultural precepts of their organisation are.

Let me borrow from JFK: ‘Ask not what your KPI’s can do for you, but ask do you really need them?’ How much time does a person have to deal with a claim? What training are they given? Do people even realise there are alternative claims settlement strategies? Emphasis here on the word ‘settlement’.

Measuring outcomes, as we all know, is a very difficult process. In claims you can’t measure the efficiency of a settlement. It’s more how the person ‘feels’ at the end of the process. That feeling will often drive how they react to the next claim that comes in. That response actually has a name. It’s called the Einstellung effect. If you don’t feel like a Google today, stay tuned for part two of this blog.

Words by one of the country’s leading Loss Adjusters

The Craft of Unturning Stones (AKA Gunsmoke)

The English poet John Dryden once wrote: ‘errors like straws, upon the water flow, he who would seek for pearls must dive below’.

Recently, that’s been quite apposite. Three days out of the office looking at sulphur and desalination plants. Well, looking is perhaps a bit of a euphemism when certain parts are twenty metres beneath the waves and other parts are buried under molten sulphur.

What links them, and seemingly most other complex claims, is the gathering of information to understand what happened.

Construction and engineering claims have their own peculiarities and issues. One of them – though this probably also applies to other industries, and sometimes to our competitors – is the moving on of staff after projects are completed.

Longevity in a company? Longevity in an industry? Even Japan has given that up. Project managers, engineers and construction staff all increasingly follow projects rather than companies.  This can complicate matters for both insurers and insureds alike; such as in trying to understand not only the rationale for certain decisions, but who may have taken them.

Even more complicating is where the problems manifest themselves after practical completion. Inevitably it increases the time taken to investigate (hint hint to insurers: why do you think it increases our costs?). It also leads to erroneous assumptions being made on both sides of the table.

Image: toonpool.comImage: toonpool.com

QA documentation is all well and good; however, a failure to complete it, even incorrectly, is not of itself evidence of a design deficiency, indemnifiable under the policy.

There is also the normal human tendency to move on, in the mind.  It’s the double whammy – people finishing on a project, people finishing with a company. Try to get them after the event to co-operate or even have an interest in remembering what happened? Good luck!

Then it comes down to the quality of the investigation.

Remember the adage ‘leave no stone unturned’? Here at FTA, we try to figure out which stones should and should not be turned; identifying those that bring no benefit to anyone and only obfuscate matters and increase costs.

But there’s always the smoking gun contingent, isn’t there? To them a word of warning.

Be careful, be very careful.

Sometimes be scared, very scared.

Well, ok, if you’re an exclusion clause lover, just be a bit concerned about what might crawl out from beneath those carefully turned stones to defeat your carefully crafted declinature. It’s a version of the smoking gun but in reverse. It’s the one where you have just shot yourself in the foot.

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Image: pinterest.com

Words by one of the country’s leading Loss Adjusters