Post-pandemic, businesses across the country have recommitted to the mission of addressing diversity, equity and inclusion. Much emphasis has been placed on diversity and inclusion (D&I) during recruitment, yet the same can’t be said about D&I directives focused on the claims handling process.
Executive SummaryWhat impact do cross-racial, cultural and ethnic issues have on the handling of claim? Insurers are starting to do more to examine how diversity impacts claims handling and resolution, including taking part in an initiative to track how often candidates with diverse backgrounds are selected as mediators and arbitrators in insurance-related matters. Such data, which is presently unavailable, will allow insurers to benchmark their results against the overall industry.
D&I efforts shouldn’t end at time of hire, said industry experts, who believe diversity and inclusion should be considered within all departments throughout the insurance supply chain. The sometimes-adversarial nature that occurs during claims handling and resolution, in particular, where adjusters are often in contact with claimants of different backgrounds, is ripe for D&I awareness.
It’s a lofty goal, especially in claims, where the overwhelming majority of workers compensation adjusters are white women, according to K. Martine Cumbermack, an Atlanta-based insurance defense attorney and partner with the law firm of Swift Currie, who has studied diversity as it relates to the workers comp claims resolution process.
As the chair of the firm’s Diversity and Inclusion Committee since 2012, she began to take a wider look at stakeholder diversity within the workers comp claims process. Cumbermack noticed a claimant or adjuster’s background sometimes created barriers that caused delays and additional claim costs.
This insight raised questions: What impact do cross-racial, cultural and ethnic issues have on the handling of claims, and should insurers do more to examine how diversity impacts claims handling and resolution?
Martine Cumbermack, Swift Currie
A similar challenge exists within the broader property/casualty insurance industry, said Michael Daly, vice president of Claims Services for Raleigh, N.C.-based insurer IAT Insurance Group. Daly, a 45-year veteran of the insurance industry who holds a J.D., said his focus on alternative dispute resolution (ADR) led him to conclude the selection process for mediators and arbitrators isn’t fair. Many insurers are inclined to retain retired judges, a group predominately made up of white males.
“There is an illusion in the marketplace that there are not a significant number of mediators or arbitrators who are qualified,” Daly said.
Female mediators and arbitrators in the insurance world are relatively rare. And the same is true for people of color, Daly added. Another reason for this, he said, is that insurers tend to retain mediators and arbitrators they’ve used in the past, with whom they are comfortable.
“What that does is it sort of closes the opportunities for everyone else,” said Christopher Kwok, a JAMS mediator specializing in complex labor and employment disputes. “That means there’s a lot of new people that are never going to get the opportunity to learn.”
Christopher Kwok, JAMS Mediator
It’s a relationship issue that will only be corrected if something affirmative is done about it, said Daly.
Douglas Burrell, an Atlanta-based partner with Drew Eckl & Farnham and president-elect of the Defense Research Institute (DRI), an organization representing civil defense lawyers and in-house counsel, said diverse mediators can break through cultural differences to aid the resolution of cases.
“I understand…they [insurers] want to have someone they trust and know,” Kwok said. “We do have to think of new ways of how we open the pathways for new mediators.”
The insurance industry can take notes from the progress made in labor and employment disputes, added Kwok, who started his career in mediation working for the New York District Office of the U.S. Equal Employment Opportunity Commission.
“Labor and employment deal so much with discrimination and equal treatment that diversity is really at the center of the laws and the rules that you’re often talking about within the cases,” he said. “Diversity of the mediators is definitely first and foremost a critical area of inquiry that might have not previously been important, but I think that we’re beginning to realize how important that is.”
Douglas Burrell, Drew Eckl & Farnham
“The truth is, there has not been selection process fairness when it comes to mediators and arbitrators, whether it’s based upon gender, racial or ethnic background,” Daly said. The IAT claims executive referenced the well-publicized 2018 temporary restraining order filed by Shawn Carter, better known as Jay-Z, during a licensing dispute lawsuit with Iconix Brand. The suit triggered a mandated arbitration clause prompting the rapper and business mogul’s response, citing a lack of African-American candidates within the American Arbitration Association’s (AAA) arbitrator pool that amounted to discrimination. The AAA agreed to widen the pool of Black candidates and the case was eventually settled through arbitration.
According to Daly, the lawsuit garnered a significant amount of attention because the AAA changed the composition of its panel, which led to other ADR service providers committing to ensuring at least 30 percent of candidates will be diverse.
“But that, to me, is only a half a step because that’s sort of like the Rooney Rule in football or the Selig Rule in baseball,” Daly said.
The Rooney Rule, a National Football League policy named after Dan Rooney, former owner of the Pittsburgh Steelers, stipulates diversity and inclusiveness in the hiring of coaches and executive management within the league. The Selig Rule, a Major League Baseball policy with a similar diversity mandate and named after former commissioner Bud Selig, came about in 1999. Despite these rules, Daly said there is still “extremely restricted diversity and inclusiveness among coaches in football and baseball.”
Even if an insurer embraces the pivot to more D&I among mediators selected, Daly said the decision might be met with resistance, especially by outside counsel. Whether the cause for concern is valid or not, change is inevitable.
“To have a wider spectrum of life experience is going to, I think, benefit everybody,” Kwok said.
D&I Claims Data Lacking
A gap exists in data tracking diversity and inclusion within the claims resolution process, experts agreed. Statistics relating to medical costs of claims involving a claimant from an underrepresented or minority group where the adjuster is not also from an underrepresented group either aren’t being tracked or the data isn’t being shared.
Cumbermack’s research, using statistics compiled by the National Council on Compensation Insurance and the National Bureau of Labor Statistics, found that jobs in industries like manufacturing, labor, construction, housekeeping and maintenance generally were held by those with minority backgrounds. They also carried the greatest risk for injury.
“The data, broken down by demographics, reveal that a lot of injuries, especially the more severe injuries, come from underrepresented minority groups. If I’m the average adjuster, a lot of my claims are going to be people who probably don’t speak English or are from a different racial or ethnic background than myself,” Cumbermack opined.
She cited studies on workers who are more or less likely to report workplace injuries depending upon their or their supervisor’s racial or ethnic background.
“Do those barriers, ultimately, result in additional dollars spent on a claim?” she asked.
Cumbermack thinks so. For example, interpreter and transportation costs “are disproportionately required on cases where the claimant is Hispanic or from a different socioeconomic class, which tend to be more so minority,” she added.
Similarly, stalled mediations due to cultural misunderstandings can result in increased claim costs.
“Sometimes, there are subtle cultural clues that people wouldn’t pick up unless you are from that culture,” said Burrell.
One aspect of the claims resolution process that will soon see data tracking is the use of mediators and arbitrators in insurance-related matters. Insurers, bar associations and ADR services will collaborate on research to develop benchmarks to track progress of the D&I initiative, expected to launch in September.
For insurers who participate, Daly explained, staff and outside counsel—upon the conclusion of a case—will complete a form relaying how often a candidate from a diverse background was selected as a mediator or arbitrator. The form will be sent to a DRI-hosted databank, where the data will be collected and interpreted with the assistance of Maria Volpe, a sociology professor at John Jay College of Criminal Justice in New York, who has written extensively on the lack of quantifiable data associated with D&I in the ADR process.
By fourth-quarter 2021, data will begin being collected by participating insurers and law firms, Daly said, adding that by the end of 2022, a report on the findings will be generated with an expectation the data will continue being collected and analyzed annually. An insurer can request its own data in order to benchmark itself against the aggregated database for the industry as a whole.
“No one will have access to individual company data other than the individual company itself,” he added.
According to Kwok, knowing the statistics will help drive change. “Having all of the different stakeholders together figuring out how do we collect data, how do we make it productive, how do we encourage diversity in a way that we can all be winners at the table is the goal,” he said.
Awareness and Education Crucial
Experts agree awareness is key.
“The claims adjuster and the injured worker’s connection, in my opinion, is the most important, second only to that injured worker’s connection with their employer—how they connect with that claimant, how they perceive that claimant, how they believe that claimant,” Cumbermack said.
To address D&I adequately, both new and existing employees must be trained, experts agreed.
“There is always a benefit to good diversity training. There is a trickle-down effect, I think, having that issue be on your mind and being aware about issues with implicit bias,” Kwok said.
It’s commendable that insurers are willing to embrace a more diverse and inclusive work environment, said Cumbermack. “But you also need to have employees who are culturally competent or trained to be culturally competent in dealing with claims,” she added.
That’s why D&I initiatives focused only on the hiring process may miss the mark.
“It’s not enough to say we have more minority claim professionals or more minority claims supervisors because just being a minority also doesn’t necessarily make you culturally competent,” she said. “It’s not a given.”
According to Cumbermack, implicit and explicit biases come into play in day-to-day interactions with co-workers and employees and while managing claims and case mediations. “You can’t really understand how to be culturally competent if you’re not aware of your unconscious biases,” added Cumbermack, who serves as a co-chair of the state bar of Georgia’s diversity program. “It’s such a basic, bare minimum level of understanding that we need to have before we have any other discussions about diversity, equity and inclusion.”
To successfully integrate cultural awareness remains the goal, experts said.
“Until we can say this is what we need to improve from—we need to have a baseline, and then we need to say, how do we measure progress. Until we have those things, those kinds of metrics, it’s just going to be a lot of talk,” Kwok said.
Ultimately, there needs to be a top-down approach and a commitment to creating a diverse and inclusive culture within the organization for it to be successful, Cumbermack said.
All agreed awareness, data tracking and a companywide mission to address D&I will lead to long-term success.