Personal Bias in Automobile Claims Settlement

By Doerpinghaus, Helen; Schmit, Joan et al. | Journal of Risk and Insurance, June 2003 | Go to article overview

Personal Bias in Automobile Claims Settlement


Doerpinghaus, Helen, Schmit, Joan, Yeh, Jason Jia-Hsing, Journal of Risk and Insurance


ABSTRACT

Despite the importance of claims handling practices to consumers and insurers, relatively little research has been done in this area. Our purpose here is to consider one aspect of automobile bodily injury liability claims management: the assignment of fault across parties as judged by the insured defendant's claims adjuster. Because legal fault assessment directly affects whether a defendant is held liable, and if so, for how much, this aspect of claims management is significant. We use accident data from the 1997 Insurance Research Council Closed Claim Survey to test for relationships between fault assessment and gender, age, and state comparative negligence rules. Controlling for actual fault, we find a greater assessment of fault against female, young, and elderly drivers. The results of the study are of interest to insurers seeking to provide better customer service, to consumer advocacy groups interested in claims settlement practices, and to insurance regulators.

INTRODUCTION

In 1998, the average cost of automobile insurance in the United States was $705 per year per vehicle, and expenditures on private passenger automobile insurance totaled $119 billion (Insurance Information Institute, 2001). Approximately 15 percent of personal auto premiums were used for loss adjustment (A. M. Best, 2001). In addition to being costly, claims adjusting represents the most important direct contact between insurers and customers after sale. Despite the importance of claims handling practices to consumers and insurers, relatively little research has been done in this area. A few studies focus on the insurer's role in claims settlement, such as how organizational characteristics affect claims service quality, or the effect of claims payment practices on insurer total costs (see Doerpinghaus, 1991; Barrese et al., 1995; Browne and Wells, 1999). Others have analyzed the effect of the legal system on the claims process, including the plaintiff's willingness to litigate or settle, and circumstances und er which an attorney is more likely to be involved in the negotiations (see Cummins and Tennyson, 1996; Kritzer, 1998; Kritzer and Krishnan, 1999).

The purpose of this article is to provide information on a previously unexamined aspect of claims management, namely, the potential for bias associated with personal demographic characteristics and state liability rules on claims adjuster assessment of fault. To test for claims adjuster bias, we use a rich data set from the Insurance Research Council (IRC) on automobile insurance claims closed within a two-week period during 1997. Each time a claim was closed during this period, the claims adjuster was asked to complete a detailed record of the claim, containing approximately 250 pieces of information.

We examine data for 17,367 bodily injury liability claims in which two cars were involved. The percentage of fault assigned by the claims adjuster against the insured defendant is not necessarily a figure that has been resolved or agreed on by the parties or by a court, which would be the case with the claims payment amount. Using fault assignment percentages strengthens the model's measure of the perspective or "bias" of the claims adjuster versus measuring the claims payment amount, which reflects the outcome of a bargaining process. A significant number of cases report either 100 percent or 0 percent fault assessed against the insured defendant. Since these cases may involve less opportunity for claims adjuster judgment, we also consider a reduced sample of 2,130 observations in which 0 percent and 100 percent fault claims are omitted.

Consistent with previous economic literature, we find higher assessed fault against female, young, and elderly insured defendants, all else remaining equal. These findings are of interest to insurers seeking to provide better customer service, to consumer advocacy groups interested in fair claims settlement practices, and to insurance regulators. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Personal Bias in Automobile Claims Settlement
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.