conflict of interest? insurance 4

[Said the Sky]

so recently I had a client hire me because her house burn down and the insurance company had their own engineer (internal, not third party) come out and inspect the concrete foundation to determine if it was structurally sound to rebuild on top of again, she wanted me to refute the internal engineers report as she believes the foundation should be rebuilt also. While I read through the engineers report and agree that it can be repaired locally by patching out damaged areas so it doesn't need to be replaced completely, however I can tell their report is definitely biased towards spending the least amount of money possible.

I guess my question is how can an insurance company have their own internal engineering team go out and make these kinds of decisions and remain unbiased? I assume they have a internal engineering team due to reduce engineering fees. Is this something new or has this been around and I just never seen them before?

 

[dik]

Sure they can... it can be an engineer on staff. The engineer has to, or should, provide an 'unbiased' report. I suspect he can get into difficulty if he didn't.

I've done numerous fire reports for insurance companies in Ontario back a couple of decades, and there was only one insurance company that denied claims consistently, even if they should have been responsible. I always let the people know that even though I was retained by the insurance company, my report would be very similar if they had hired me, and let them know that if they wanted to they could retain their own consultant. This advice was included in my reports. I played no favourites.

So strange to see the singularity approaching while the entire planet is rapidly turning into a hellscape. -John Coates

-Dik

 

[phamENG]

Would they be any more or less biased by you, an engineer hired by the homeowner to support homeowner's best interests?

That's the thing - as licensed engineers, we're not supposed to support any one party's best interests - we are to support the best interest of the public, which means we should make unbiased assessments with safety as the primary goal.

I haven't dealt with staff engineers from insurance companies - only forensic consultants that specialize in insurance work.

 

[MintJulep]

Doing what's necessary at the lowest cost isn't bias, it's business.

 

[MotorCity]

By definition, all opinions are biased. The insurance company's engineer is biased toward his employer as they would like to spend as little as possible on the claim (this is not a new concept). Your opinion is biased toward your client who wants to squeeze a new foundation out of the insurance company.
Why does your client believe the foundation should be rebuilt? Does she have reason to believe in cannot be repaired or does she just want a new foundation to go along with the new house? By your own admission, the foundation can be repaired which is what the insurance company's engineer deemed to be the most economic solution. As long as the other engineer provided a viable, safe solution, it is not unethical. His loyalty is to his employer just like your loyalty is to your client.

 

[CWB1]

Ask yourself how bias could impact an ethical engineering decision. Hint: It can’t.

Ethical engineering is based on facts not opinion, so bias is irrelevant. A foundation can either be proven to meet every requirement or it cannot. It can either be repaired or it cannot. You may have risk bc of different options in how you go about meeting the standard but ultimately even those decisions aren’t affected by opinion, they’re driven by assessing the facts in a standard risk assessment.

As many junior engineers have been forced to learn from the legal dept, the two words never used in engineering communications are “opinion” and “judgement.”

 

[Said the Sky]

I guess its true all opinions are a bit biased but I still think its a bit different when the Insurance hires a third party engineer to inspect versus a internal engineer to inspect, the third party engineer has no incentive to lean one way or another his fee is the same regardless, as the internal engineer's compensation (ex bonus package) could be influenced. (ex. more claims denied bigger available pot at the end of the year)

whats preventing insurance companies just buying out an entire forensic firm and just redirecting all their claims to their internal engineer staff? I think this is a hassle for homeowners too as they may view it as a "conflict of interest" which I agree its not but the homeowners will tend to disagree and likely result in them having to hire their own engineer unnecessarily.

 

[phamENG]

the third party engineer has no incentive to lean one way or another

I'm not sure you understand how these third party engineers work. This isn't you average Joe Schmoe, PE designing buildings who occasionally goes out and looks at one of these (though that does happen on occasion, to be fair). Most of the time, these are specialty forensics firms that work almost exclusively for insurance companies. How long would a business like that last if they got a reputation for recommending all claims for approval?

ex. more claims denied bigger available pot at the end of the year

I'm not sure you understand the size of the pot these folks tend to deal with.

whats preventing insurance companies just buying out an entire forensic firm and just redirecting all their claims to their internal engineer staff?

Good business sense? It's one thing to have an engineer or two on staff - it makes good sense, especially if they get in a position where they need to manage outside engineers. That way they have an employee that can interface with the contract guys on a technical front - it's another thing entirely to try to run an entire firm out of an insurance office.

Whether the engineer is an employee of the insurance company or a contractor, they have still been hired by the insurance company, their bills are being paid by the insurance company, and they'll have similar potential motivations to placate their employer. So the issue isn't going to be with the arrangement, but would be with an unethical engineer in any arrangement.

 

[dik]

I've never let an employer, or client affect my 'take on things'. The one insurance company I mentioned was concerned that I had advised the homeowner that they should seek another consultant if they wanted to... but they hired me for other projects... else, I'd have lost a client.

So strange to see the singularity approaching while the entire planet is rapidly turning into a hellscape. -John Coates

-Dik

 

[phamENG]

I've never let an employer, or client affect my 'take on things'.

And that's the key.

We have to realize that a potential conflict of interest can be made of nearly any situation. We have an interest in everything we do and in the consequences of the doing or not doing. It's easy to find a way to say that my interests align with helping my client rather than maintaining my ethics.

Much of classical economic theory depends on the notion of self interest. That idea is generally accurate, but many misapply it. For instance: what is the greatest driver of my self interest: keeping this client/this job, or keeping my career and long term earning potential? Because if I sacrifice my ethics for my current job, I could be hauled in front of the licensing board and lose the ability to make my rather comfortable living for the foreseeable future. A month without a paycheck isn't so bad compared to flipping burgers or doing data entry for the rest of my working life.

 

[dik]

I've never thought of that as a reason. It's just not the correct way to do things.

So strange to see the singularity approaching while the entire planet is rapidly turning into a hellscape. -John Coates

-Dik

 

[skeletron]

The foundations are always a contentious point of debate in fires. There's so much cost in removing and replacing concrete foundations (footings, slabs, etc) because of the extra steps in the work. So the insurance company is protecting its interest by having a forensic team to review.

Cost is a part of the engineering equation, yeah? As ideal as it would be to just draw and stamp a new foundation, it's not completely necessary unless it has been compromised by fire or if there are design inadequacies.

 

[phamENG]

More of a technical statement about this kind of project than an ethics thing - best to refer them to a testing lab, or have a testing lab work along side you. You can look at concrete all day long - even hit it with a hammer - and you won't know that the heat degraded the matrix to well below design strength unless it chips off. So you may approve what looks like a perfectly good foundation, but what is really a bad one but you could only tell if you cored it and tested/examined the samples. Most of us structural folks don't have the facilities or capabilities to do that on our own.

 

[XR250]

Maybe as a happy medium, the customer could ask that the foundation be stuccoed to hide any of the repaired areas.

 

[Envelope3]

If you have proper experience in evaluating fire damage to floor slabs and are confident that the engineer has made unethical opinions, by all means, report them to the license board. But also understand that if you are out of your element, you can be fired right back upon and reported for being biased to the homeowner.

In my experience, I more often see design-based engineers who are out of their element on a fire damage site and make wild unsubstantiated accusations that nothing is repairable.

 

[hydrae]

If you have doubts, figure a way to test the structure.
I had a project were a concrete earth anchor was loaded by a falling tree the broke the wire rope
it was holding, when we installed the new rope, we then did a test load (at 2x) and confirmed it was solid.
Your loads are vertical down, so bring in some weights, could be a simple as the contractors excavator pushes down on the foundation with the bucket. You can calculate the loads, you can get the weight of the machine, if the concrete crumbles, the insurance company has a problem.

Hydrae