Triangles
I've never experienced a "triangular" arrangement with the principal-agent model, but I've seen something similar to an agent with two or more principals. This past summer, I interned at an insurance company in the workers compensation division of the claims department. workers
compensation is a type of insurance required for employers by law that provides medical and indemnity insurance for employees who get injured on the job, covering medical expenses pertaining to an employee’s work-related injury and an adjusted compensation if they incur lost time. I witnessed and assisted a team of claims adjusters, technical assistants, nurse consultants, and investigators.
Working as a claims adjustor, specialist, or nurse consultant (they are the ones who assist the claimants along the medical recovery process) presents an interesting dynamic of the principal-agent model. It is a little different from the triangle structure described in the prompt because the agent doesn't directly interact with the client. In worker's compensation (WC), the client is called the "insured", which in the case of WC is the employer. The "claimant" is the injured worker. As a claims adjustor, you have to act in the interests of three "principals", your company, your insured/client, and your claimant.
Each worker's compensation claim has many variables that interact with each other, and depending on the case, the "agent's" interaction with the different "principals" can also vary. In most cases, the adjustor's main and most frequent interaction is with the their company and the claimant; there's usually much less interaction with the insured and it's only to update them on major changes in the claim such as changes in claim-type status (whether it is a medical-only claim or both medical and indemnity) or out-of-work status. All this depends on the severity and the relation of the injury. Some cases are like standard injuries from work-related incidents like a construction worker falling and spraining his legs, or can stem from repetitive movements related from the job like carpal tunnel or back strain from sitting.
I was also educated on the type of injuries that qualified as coverable work-related injuries, and how the two jurisdictions of New Jersey and New York differ in their workers compensation laws in regards to how claims are handled, what the procedures are, and how this affects the life of a claim. For example, they both have different laws relating to how and by whom medical treatment can be dictated, how a claimant can file a claim petition if they disagree with their course of treatment or seek permanent disability benefits, how long Chubb is responsible for a claimant until they reach maximum medical improvement (MMI), and how temporary or totally disabled an injured worker is.
Some companies (the insured) have special handling instructions with how they want claims from their company to be handled. For example, they might require constant communication every step of the way from one of our adjustors with a representative from their HR or Benefits department. Some times these instructions can be confusing because they aren't written properly. If the claims adjustor doesn't follow the instructions the way the insured wants, this creates problems between the client and the insurance company. Some of these instructions are so specific or anal, that if the adjustor is confused and asks for help from their superior, the superior might instruct them handle it as they wish, which can create tension with the insured
All of these factors influence how a claims adjustors handles a claim with the claimant. They need to handle it in the interest of the claimant if his claim is a true valid and compensable claim. There are also many cases where claims adjustors have to handle fraudulent claims and in these cases, it is the responsibility of the claims adjustor to be able to detect the fraudulent claims. Some examples of fraudulent claims are claimants lying about their injury, lying about the extent of their injury (like complaining of pain after many months of treatment and when doctors don't find anything wrong), and making claims so they can get some paid time off. These type of claims hurt the insured because if the insured's number of claims exceed a certain estimated cost (this number is usually based on how many employees the insured is insuring), then their premiums go up. The insurance company also doesn't want to have to pay more than it should in benefits. In these cases, the claimant can become difficult to handle.
As I mentioned before, each state has different laws that determine the compensability of a claim. For example, certain types of injuries are covered in New Jersey, while they aren't covered in New York. In New Jersey, the insurance company has the right to dictate where and with whom the claimant seeks medical attention from, while in New York that is up the the claimant. States also have different laws on how a claim petition can be filed. Claim petitions arise if the claimant disagrees with the course of action that the claims adjustor, who represents insurance company, has taken. The insurance company hires their own lawyers to represent the interests of the insurance company, so this is a case where two "principals" are disagreeing. I interned at a New Jersey office where there were adjustors handling claims from both states, so they had to be familiar with the regulations of both states.
There are also cases where if a claimant had a traumatic injury that required an extended period of time to recover, as they get to the end of their recovery and reach MMI, it is an adjustment for them to be let go from the claims adjustors. In this case, the adjustor has to act in the interest of the insurance company to find the best solutions to let a claimant go.
While my experience as an intern might not be the best example of a "triangle" structure of the principal-agent model, it certainly opened up my perspective on how a professional has to battle different interests of different principals. In the end, the employer of the agent (which is the insurance company), ends up being the dominant principal.
compensation is a type of insurance required for employers by law that provides medical and indemnity insurance for employees who get injured on the job, covering medical expenses pertaining to an employee’s work-related injury and an adjusted compensation if they incur lost time. I witnessed and assisted a team of claims adjusters, technical assistants, nurse consultants, and investigators.
Working as a claims adjustor, specialist, or nurse consultant (they are the ones who assist the claimants along the medical recovery process) presents an interesting dynamic of the principal-agent model. It is a little different from the triangle structure described in the prompt because the agent doesn't directly interact with the client. In worker's compensation (WC), the client is called the "insured", which in the case of WC is the employer. The "claimant" is the injured worker. As a claims adjustor, you have to act in the interests of three "principals", your company, your insured/client, and your claimant.
Each worker's compensation claim has many variables that interact with each other, and depending on the case, the "agent's" interaction with the different "principals" can also vary. In most cases, the adjustor's main and most frequent interaction is with the their company and the claimant; there's usually much less interaction with the insured and it's only to update them on major changes in the claim such as changes in claim-type status (whether it is a medical-only claim or both medical and indemnity) or out-of-work status. All this depends on the severity and the relation of the injury. Some cases are like standard injuries from work-related incidents like a construction worker falling and spraining his legs, or can stem from repetitive movements related from the job like carpal tunnel or back strain from sitting.
I was also educated on the type of injuries that qualified as coverable work-related injuries, and how the two jurisdictions of New Jersey and New York differ in their workers compensation laws in regards to how claims are handled, what the procedures are, and how this affects the life of a claim. For example, they both have different laws relating to how and by whom medical treatment can be dictated, how a claimant can file a claim petition if they disagree with their course of treatment or seek permanent disability benefits, how long Chubb is responsible for a claimant until they reach maximum medical improvement (MMI), and how temporary or totally disabled an injured worker is.
Some companies (the insured) have special handling instructions with how they want claims from their company to be handled. For example, they might require constant communication every step of the way from one of our adjustors with a representative from their HR or Benefits department. Some times these instructions can be confusing because they aren't written properly. If the claims adjustor doesn't follow the instructions the way the insured wants, this creates problems between the client and the insurance company. Some of these instructions are so specific or anal, that if the adjustor is confused and asks for help from their superior, the superior might instruct them handle it as they wish, which can create tension with the insured
All of these factors influence how a claims adjustors handles a claim with the claimant. They need to handle it in the interest of the claimant if his claim is a true valid and compensable claim. There are also many cases where claims adjustors have to handle fraudulent claims and in these cases, it is the responsibility of the claims adjustor to be able to detect the fraudulent claims. Some examples of fraudulent claims are claimants lying about their injury, lying about the extent of their injury (like complaining of pain after many months of treatment and when doctors don't find anything wrong), and making claims so they can get some paid time off. These type of claims hurt the insured because if the insured's number of claims exceed a certain estimated cost (this number is usually based on how many employees the insured is insuring), then their premiums go up. The insurance company also doesn't want to have to pay more than it should in benefits. In these cases, the claimant can become difficult to handle.
As I mentioned before, each state has different laws that determine the compensability of a claim. For example, certain types of injuries are covered in New Jersey, while they aren't covered in New York. In New Jersey, the insurance company has the right to dictate where and with whom the claimant seeks medical attention from, while in New York that is up the the claimant. States also have different laws on how a claim petition can be filed. Claim petitions arise if the claimant disagrees with the course of action that the claims adjustor, who represents insurance company, has taken. The insurance company hires their own lawyers to represent the interests of the insurance company, so this is a case where two "principals" are disagreeing. I interned at a New Jersey office where there were adjustors handling claims from both states, so they had to be familiar with the regulations of both states.
There are also cases where if a claimant had a traumatic injury that required an extended period of time to recover, as they get to the end of their recovery and reach MMI, it is an adjustment for them to be let go from the claims adjustors. In this case, the adjustor has to act in the interest of the insurance company to find the best solutions to let a claimant go.
While my experience as an intern might not be the best example of a "triangle" structure of the principal-agent model, it certainly opened up my perspective on how a professional has to battle different interests of different principals. In the end, the employer of the agent (which is the insurance company), ends up being the dominant principal.
It is an interesting story. It would be good to consider this from the case of a legitimate claim. The company has things it needs to know - does it find a temporary replacement for the injured worker, does it leave the injured worker's position unfilled, or does it plan to replace the injured worker permanently (and perhaps find a different job for the employee, if the employee returns. Since the company needs to manage that decision, its demand on the insurance provider can be thought of as providing information on what is the best solution.
ReplyDeleteThe above is the immediate issue. There is another issue whether the injury was a pure accident - accidents do happen - or if it was preventable, in which case the work environment needs to be adjusted so future accidents are much less likely. On this, I'm not as sure that what the insurance provider says helps the company, but perhaps it does.
There is also a determination to be made whether the accident caused a permanent disability or merely something temporary and if the former where there is still work at the company that the employee might perform, even if that is different from the old job. Otherwise the former employee ends up retiring on disability.
These are all things that need to be decided when fraud is clearly not present. The possibility of fraud complicates things. I will add one more thought here, which is about whether the accident was caused because the employee was on drugs or had ben drinking excessively. I am not sure what the implications would be in that case, but liability might then shift from the firm to the employee. So it is clearly something where the company would want to make a determination.
The compensability of an accident really varies by state. In most cases, as long as the injury occurred while the person was on the job, it is usually covered by worker's compensation, regardless if their injury was an occupational hazard (like something falling on a construction worker's head or miners inhaling fumes) or simply an accident that occurred while the person was working (slip and fall in the office bathroom, car accident when traveling). Depending on the situation, the insurance company will pursue subrogation if they can find liability on someone else. This is like when a slip and fall in the bathroom happens because the floor was wet and no "wet floor" sign was put, the leaser of the building (who is usually in charge of the janitors) could be held liable. In the case of a car accident, if the other vehicle (not driven by the employee) was at fault then they are liable.
DeleteIn the case of an accident causing permanent disability, there is a process where if the claimant can't go back to work because of the injuries, the insurance company will pay a disability/indemnity income for the remaining life of the claimant that correlates to the percentage of injury and out of work capacity.
If an accident was caused by the injured being under the influence of drugs or alcohol, that bears a heavy impact on the validity of the claim. I'm not an expert and I would have to consult with my former colleagues, but it would really depends on the laws of the state and the context of the situation. For example, if the injury occurred at a corporate social event where alcohol is present, that would definitely complicate things and would most likely be a compensable claim. If an employee (like a pizza delivery guy) was driving while intoxicated on the job and gets hurt, it would probably be an invalid claim.
I like that your analysis of the insurance company you interned for was thorough. It seems like the triangle principal-agent problem will be common in insurance companies, law firms and schools especially when it deals with working with customers. Reflecting back on other people's blog post on this prompt, I noticed that they had two principals and one agent, likewise myself. Yet, I think it is interesting that a claim adjustor might have three principals. It might be tough to balance satisfying everyone as most times they might all want different things. I also see lack of proper communication being a problem in this instance. As you mentioned, the transmission of information from both parties might be misunderstood especially if instructions are not properly written.
ReplyDeleteAnother interesting thing you mentioned that I would like to touch on is that people need to constantly remember that the laws in every state differs. This can be frustrating if an occurrence happens in a different state than where one lives. It might be hard to transfer the case from states which mostly just makes filing a claim and resolving it time consuming. Above all, the agent has to use their best judgement when dealing with multiple principals.
To your second point, that is indeed true. There are many New Jersey residents that are employed in New York, but perhaps travel or work from home remotely. In cases where the injury happened in a different state from where they are employed, questions about jurisdiction arise.
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