Negotiation Tactics in the Insurance Claims Handling Profession
by John W. Odam
Human beings are uniquely different from all other creatures great and small if in no other terms the way in which they settle their differences. It is highly unlikely that any other creature has the physical capabilities of communicating offers and counter offers, highballing and lowballing to reach an agreement. Only man (and that term is used generically) has formalized the negotiation process to the nth degree. Only man negotiates as an alternative to the use of brute force. Unfortunately, we sometimes feel like we must resort to that but very rarely do, only in war.
Those of us in the claims and litigation profession deal with negotiations each and every day, from the time we get to the office until the time we get home. In addition, we negotiate with our spouses, friends, co-employees and loved ones literally from the time we arise until the time we go to bed. Even after I go to bed, my wife and I negotiate as to whether I sleep on my back or left side to prevent my snoring.
Time does not permit me to cover today all the procedures on negotiating everything in life, from negotiating with your spouse about where you want to go out to eat, to negotiating with your teenage son about the use of the family automobile. Also, I will not include at this time, but would for a small fee later on, negotiating with your boss for a pay increase. My point is, the negotiation process is with us all our waking hours. Man creates rules and procedures, either consciously or unconsciously, about how we should talk to each other when we want what someone else has. Negotiating in business and in the claims practice sometimes may appear more complicated than it has to be. In the end, every negotiation decision should be guided by the Golden Rule: Do unto others as you would have them to unto you. I would like today to identify some key elements in what keeps negotiating from becoming stale or predictable. To talk about some aspects of negotiation that perhaps will excite you and enthuse you to come to work every day and to negotiate with the claimant and/or with plaintiff counsel.
I. TWO RECURRING THEMES
A. Question everything
One theme throughout my talk today is to "question everything." Develop a healthy skepticism. Keep in mind no two negotiations are the same. What you did two weeks ago may not work today. How you handled yesterday's claimant may not necessarily apply to the one today.
B. Think big
The second theme is to "think big." Now I do not mean to "think big" by giving away "big" money. What I do mean is that people should shoot for the moon on every deal to get the best situation from your side of the negotiation table. Strong positions, whether it means quoting an "outrageously" high price or making an offer, in our situation, that is "insultingly" low, makes people feel uncomfortable. From our side of the table, I urge you to start negotiations with "insultingly" low offers. Negotiating down the middle is splitting the difference. Any four year old can figure that out pretty quickly. Six Hershey bars on the counter and Tommy wants all six. Mother says he can have one so he says he will settle for three. The deal is done. This requires a very modest skill for a negotiator to simply split the difference. Thus, I say to you to "question everything" and "think big."
II. THE PERFECT NEGOTIATOR
I say at the outset that many of the principles and concepts of this book I attribute to Mr. Mark McCormick from his book Mark H. McCormick On Negotiating. I recommend it to you without reservation. If you do not know him, let me tell you who he is. He runs a sports marketing company which he started 35 years ago with $500 in Cleveland, Ohio called International Management Group ("IMG"). His first client was some golfer by the name of Arnold Palmer. He now represents hundreds of well known athletes such as Arnold Palmer, Jackie Stewart, Jean-Claude Killy, Bjorn Borg, Chris Everett, and Andre Agassi. His company also manages and creates events, everything from the Tokyo World Match Play at Wentworth, to a Jose Carreras concert in Singapore, to the Detroit Grand Prix Motor Race, to "Jesus Christ Super Star" in Sidney, Australia. They represent the Nobel Prize Foundation. They helped develop the commercial interest of Wimbleton and the Royal and Ancient Golf Club of St. Andrews. Most recently, he took on some freshman golfer by the name of Tiger Woods. If you do not happen to read the sports pages, which I doubt, read the business pages. I read the other day that Tiger Woods will make $60 million this year from endorsements. For example, recently he signed a lucrative contract with Rolex Watches, or I should say, Mark McCormick did. No doubt, McCormick negotiated a good deal for him.
McCormick's television arm has represented the International Broadcasting rights of sports properties such as the Olympic Games, the World and European Figure Skating Championships, the National Football League, and all the major golf and tennis championships. IMG now has more than 2,000 employees in 69 offices and 28 countries around the world.
If you have not seen the movie, Jerry McGuire, I strongly suggest you do so. Not just for the acting of Tom Cruise and Cuba Gooding, Jr., although it was excellent, nor simply to hear the classic phrase, "Show me the money," but to see a great film on the art of negotiation in the sports arena.
Just think about it, each day you and I negotiate claims. While they are not, unfortunately or fortunately, in the realm of the Tiger Woods' fee arrangement with Nike, or what the fee might be for the next Garth Brooks concert, we do negotiate deals and try to reach agreements every day. Why? Because that is our business and also because you know more about the particular claim than twelve people off the street collected as a jury might. I believe in the jury system with all my heart and soul and I am glad we have it. I believe we have the finest judicial system in the entire world. I negotiate, mediate and litigate cases every day and still believe that the parties who know most about the dispute are the ones best to reach a reasonable and fair solution for all concerned. When a case goes to a jury, it is simply because the parties or the counsel, including myself, are overlooking or misjudging some of the facts or the law or the risk and benefit in their analysis. Let me also say that I do not intend to get into detail "risk/benefit analysis" such as occurs in mediation. I understand you have had that speech and I will save that for another date. What I do intend to discuss are broad principles of negotiation that are applicable to not only claims handling mediation and lawsuits, but to selling your residence or your automobile, or negotiating for a pay raise.
I suggest to you that the perfect negotiator needs at least one or more of the following personal traits:
A. A perfect people sense: Knowing what makes people tick and how far you can push your position before the other side resists or resents it.
B. Strong competitive streak: Enjoying the hand-to-hand combat that is the essence of negotiating.
C. A wide field of vision: Seeing the big picture, the long-term consequences as well as short-term gains.
D. An eye for details: Being able to spot the thorny issues that everyone else overlooks.
E. Unimpeachable integrity: Meaning what you say. You don't have to be hounded to keep your promise.
Of all of these, I believe unimpeachable integrity is at the top. Everyone respects honor and fair play.
F. Examples of knowledge I would prefer the other side not to have:
1 My client really wants to settle.
2. I need to settle the case to keep some third party happy: Boss, peers, a quota, a goal, or some artificial deadline.
III. NEGOTIATING TOOLS AT YOUR DISPOSAL
A. Do not need to be liked: Getting others to like you because of your brains, charm, honesty or sense of humor is a strength but needing to be liked is a weakness if it compels you to sacrifice negotiating points. Some negotiators are infinitely more pleasant than the other fellow. They will work with you to resolve an issue rather than work against you. Overriding strength as a deal-maker may be likability. Have one talent or personality trait that can help you in negotiating. The key is to learn to recognize that quality in ourselves and let it prevail.
B. Tolerate ambiguity and conflict: Learn to deal with a discussion when it takes a 90 degree turn and circumstances change. You can deal with chaos and ambiguity. You can scramble.
C. Have a lot of integrity.
D. Negotiate anything: Negotiators love to negotiate. If they do not, they will always be outgunned by someone who does love it. The best negotiator regards everything as negotiable. Everything is on the table. He/she devotes the same enthusiasm and care in negotiating for a wristwatch as he/she does in negotiating $1 million lawsuits. It is talent of all successful negotiators that they consider negotiating a sport they love. Like athletes, they do it constantly so they are never out of shape. This is very important.
E. Do not need to be the smartest person in the room: When negotiating, always discuss each major point as if starting at ground zero. This may put the other side off balance. They don't know what you actually know, so they often attribute more street smarts to you than you actually possess.
IV. A GREAT NEGOTIATOR NEEDS TO BE GOOD AT ONLY ONE THING
Four Traits Which Can Turn An Average Negotiator Into A Great One
1. Patience: Patience may be a virtue, but in negotiating it is a weapon of incalculable power. The patience to wait for a second, third or fourth discussion to have conditions improve.
2. Clarity: Ability to express themselves clearly and succinctly. Simply build your case logically and quickly and make things easy to understand.
3. Mastery of details: Quite often the one who has the greatest expertise and mastery of details has the upper hand.
4. Administrative skill.
V. WAYS TO NEGOTIATE WITHIN A HOSTILE, IMPERFECT WORLD
A. Stay in the match: Negotiating with an ornery claimant or attorney is a lot like playing tennis with a powerful opponent. The key is to stay in the match. There is no clock, no time limit, only the final judgment in the lawsuit. As long as you don't lose match point, you have a chance to win. Your opponent may lose his or her stroke or concentration or may tire while you gain a second wind. You should not self-destruct just because the other side takes a surprisingly aggressive attitude. Think of the Rockets and the Jazz in the playoffs. Do not let personalities scare you away.
B. Keep your walkaway number to yourself: This is the absolute maximum you would be willing to pay to settle a case. Do not broadcast this number. In a hostile negotiation, if the other side knows the maximum you will pay, why should they accept any less? On the other hand, work to find out what their acceptable minimum is.
C. It is not always the price: Look for other aspects of the case such as timing on payment. Search and pry for what will help to get the claim settled.
D. Be hypothetical: If the opposition wants to get you to increase from $80,000 to $100,000, you might respond "What if we were to pay $80,000 but we were to throw in the following ingredients? For example, quick payment, etc."
E. Look for deal makers, not deal breakers: Do not use the term "deal breaker." Use the term "deal maker." "I'll do that but that has to be the deal maker." "I might agree with those terms if you unequivocally tell me we have a deal."
VI. NEVER LET THE OTHER SIDE KNOW WHAT YOU WOULD NOT DO
I heard an associate attorney one time come back from a negotiation and tell the partner that the other side was making some tough demands, then added, "Of course, I told them they were out of their minds. We would never even consider those terms." The partner cut him off and said, "Never tell them what you wouldn't do! The more options and the longer you can keep them, the stronger your position." This is a valid point. I am reminded of the moment in the movie The Godfather, when the Don tells his hothead son, Sonny, "Never tell anyone outside the family what you're thinking." This rule can apply in business and in our practice just as well. For example, the claims person may say, "I'd never pay more than X number of dollars to settle this claim." Conversely, the other side might say, "I won't take less than X number of dollars for this case." Ultimatums can backfire as often as they work. Ultimatums can stop discussion dead in its tracks. They are potential deal breakers, not deal makers. Most times, people abuse the "Never tell them what you wouldn't do" rule because of weakness or because of some misguided ego.
VII. A WORD TO INSURANCE CLAIMS MANAGERS: EVERYONE IS A NEGOTIATOR, EVERYTHING IS NEGOTIABLE
Let's think of it in business terms. Are we the buyer or the seller? We are the buyer. We have the money, and they want to sell us on what a great claim they have, how valuable it is. It is no different than us looking for a new home, come upon a "For Sale" sign and then talk with the owner to find out what a great house it is and why it is worth their asking price.
Buyers generally fall into two camps. One camp of people insist on negotiating everything. To them, the list price is nothing but a reference point, and absurd base price that, through shrewdness, persistence, and sheer nerve, they intend to lower. In our profession, that would apply to the initial demand made by the claimant or his/her attorney.
The second camp consists of people who never question "the rate card." They always pay the quoted price. They are constitutionally incapable of negotiating.
Needless to say, as a manager, you should prefer claims handlers who fall into the first group. It would be frightening to think that the claims handler comes anywhere close to paying the initial demand made by either the claimant or the plaintiff's attorney. There are simple management principles I suggest you impart to emulate the fierce negotiators as opposed to being at the other end of the spectrum of those who pay the initial asking price.
A. Make an attitude adjustment: Becoming a zealous negotiator first requires an attitude adjustment. You have to rethink your standards for what is and what is not negotiable. For example, it's ingrained in us to negotiate with certain people and not with others. You're supposed to negotiate with a used car dealer or a merchant at a flea market. Everyone knows that. On the other hand, you don't negotiate at a restaurant. If the menu says the steak cost $27.00, you don't tell the waiter, "I'll give you $24.00." Everyone knows that too. In our business it is in the company's best interest to always remind employees that bargaining chips should exist and should be aggressively used.
B. Create policies that encourage negotiating: I will not expand upon this, but obviously it has to do with settling claims at the lowest possible "fair" price.
C. Treat good claims handlers as corporate heros: Think about it in the sales world. If a salesperson at a company closes a huge deal, word quickly spreads through the company. The salesperson is hailed as a hero and often rewarded with a bonus. The same hero treatment should be given to employees who make great buys. Sometimes stellar negotiating efforts go unnoticed and unheralded. Most companies don't send out memos hailing Jane Smith for the great lease she re-negotiated. Buying is not perceived as glamorous or heroic as selling. The honor of saving the company money rarely matches the glory of bringing it in. If you recognize and honor people for negotiating great buys, you're employees will not only learn from them, but will take pride in emulating them.
D. Attack the little deals as well as the big ones: Not everyone is in a position to negotiate multi-million dollar lawsuits. Not everyone handles brain injuries and paraplegics. Sometimes it takes as much brains and initiative to negotiate the little deals where the dollars are closer. The point is, no deal point should be too small to question or fight for. Obviously, taken individually, no individual small claim settlement will make or break the company, but instill the attitude and multiply it by the dozens and dozens of claims one deals with in each of the offices of the company and the economic effect can be substantial. Most importantly, it does not cost the company anything to instill that attitude, even with respect to negotiating small claims. They add up. As an investment, it is all reward and no risk.
VIII. WHAT YOU CAN LEARN FROM NEGOTIATING WITH YOUR SPOUSE
Considering all the mutual decisions married couples have to make each day as a result of negotiating with each other, the spousal relationship may be the most efficient negotiating situation in the world. A messy marriage on the brink of divorce is surely the least efficient negotiating situation. Whether they are negotiating little items such as who gets the shower first in the morning, or major items as where to go on vacation, couples maneuver, yield and assert themselves in fluid, effortless, and sometimes wordless ways. We can learn about negotiating simply from analyzing conditions that force us to behave that way. Can you create the same conditions when you get to work? It reminds me of the line in Mark Chestnut's song, "Divorce", "I got the Jeep and she got the palace!"
A. Couples have to see each other again: No matter how heated the debate, a couple knows they will have to face each other again when they turn in at night -- unless they intend to divorce or separate. That fact alone tempers how extreme and firm their positions are. When people know they will have to "do business" with someone in the future, they tend to be more agreeable and less willing to pick a fight. It is quite likely you will be seeing the same plaintiff attorney, even if it is not the same claimant. In the workplace, knowing you will have to deal with the other side again on other matters not only makes people more agreeable, it makes them less desperate.
B. Couples respect each other's turf: There are "no trespassing" zones in every marriage. It could be a touchy subject that automatically upsets the husband, an area of expertise particular to the wife, or an exclusive relationship that one partner has developed. It might be tough to emulate the same sensitivity in a business negotiation or claim settlement. After all, you probably do not know the other side one-tenth as well as you know your spouse. But a little homework should tell you what the other side regards as inviolate turf.
C. Couples really need a mutual benefit: A lot of business people pay lip service to the "win-win" ideal in negotiating. The same applies to claims handling. Think about it. I do not know any skilled negotiator who isn't looking to win a little more than the other side. That should apply to the plaintiff attorney or to the claimant if they are awake and alert and worth their salt. It is nice when both sides walk away equally happy, but that is not absolutely necessary. Pushing for that edge is what makes a talented negotiator. It is also what kills a lot of deals. Push the envelope but try not to tear it open. It is different negotiating with a spouse. If either the husband or wife gets the better end of a negotiation, both of them might lose.
IX. DO NOT FORGET TO LOOK AT YOUR HOLD CARDS, I.E., YOUR CLAIM FILE
What do I mean by this? In all areas of business negotiations and dealings sometimes people fail to do basic research. For example, some might make investments and plunge their money into a stock without researching a company, based upon a whim or the unsupported enthusiasm of a friend. Many people invest in a way similar to playing poker all night without ever looking at their cards. No doubt all lawyers and claims handlers are guilty of this to some extent. They do not know the full value of the hand they are holding because they forget to study their cards.
What are your cards? Your cards are your file. I guarantee you your file material is far more organized than that of the claimant and probably that of a plaintiff attorney. You have the luxury of having all of that file material in front of you and updated. If not in front of you, get them so you can comment and respond intelligently. Thus, base your decisions on facts and figures that you know. Again, think of an analogy of you being the buyer. The claimant or plaintiff attorney is trying to sell you on their case. If you are missing certain information or have certain questions ask that it be provided. If it is not provided then you have a basis for sticking to your opinion as to your evaluation of the claim. Again, think of buying a house. If the seller does not tell you the condition of the roof or the last time the house was inspected for termites or produce certain certificates, you certainly have basis to not pay their asking price. It is hard for the seller to quarrel with this rationale.
A. Do not catch the virus of desperation.
Sometimes there are external pressures; a supervisor pushing you to settle cases, a quota or deadline to be met, a rival in the office who is performing better than you on closings. Do not get desperate to get a deal done and make a bad deal. Such negotiating objective is no longer to get the best deal but rather to make sure any deal does not disappear. Again, if you were a manager, instill in your subordinates this philosophy. Do not pay more than a claim is worth just to close the file. A dollar here, $500 there, $1,000 here, $5,000 there adds up in the big picture of things. Inoculate your people against this philosophy.
B. Do not be distracted by a pot of gold.
Once again, using the poker analogy, it is not unlike playing against someone who has a massive pile of chips. You are looking at the strengths of the other side rather than the strengths of your case. You focus on the strengths that the seller/plaintiff/claimant is telling you and not focusing on their strengths which are in your file. Do not be distracted by their sales pitch. Do keep it in mind but again, assess your hold card, assess your own file. Point out the weaknesses which you have documented in your file about their claim.
C. Do not be dazzled by the fine china.
I use this point for dealing with very successful plaintiff attorneys. Try to get out of your office and go to the office of the opposition but once there, do not be distracted by their physical signs of success; the brochures, newspaper articles framed on the walls, furnishings that would not even appear in the private offices of chief executive officers of the highest corporate officials in Houston. Again, focus on your hold card, focus on your case. All of those trappings of success have nothing to do with this particular case. Think of the Rockets vs. the Jazz. The fine china is the same as playing at home. Part of the purpose of the crowd is to distract the out of town players, get their mind off the game. Focus on your case. Think of the focus that Charles Barkley or John Stockton has. Think of the focus an out of town player has when lining up for a free throw and hundreds of people are waving balloons in his face behind the goal. All is a distraction from what one is about. Do not be distracted by the fine china, focus on your hold card.
X. THE TOOLS AT THE OTHER SIDE'S DISPOSAL:
A. What pattern is the other side weaving:
1. The concession pattern.
Everyone, consciously or unconsciously, has a pattern of conceding points in a negotiation. Some people stair-step their concessions. They give away points in increasingly larger increments, starting out small and holding back on the big concession they hope you never ask for. Other people reverse that pattern, shrinking their concessions as the process drags on. There is no single ideal concession pattern but it is a sin not to be aware of it -- in yourself, as well as others.
2. The accession pattern.
This is the flip-flop on the stair-step concession. On the stair-step for example, you are literally going up the steps, perhaps taking one step at a time or two steps at a time, increasing the amount of your offer in the same amounts or increasing amounts. Keep a record in your file so that you know what you are doing and keep a record of what the other side is doing.
What is the accession pattern? Take an obvious example, if you were to walk into an auto showroom and ask about a car listed at $20,000 and accepted the salespersons opening quote of the list price. After you and the salesperson shake hands you slightly add, "that includes leather seats, of course? and anti-lock brakes? and dual airbags? and an extended warranty doesn't it?" Perhaps it does not but perhaps the salesperson goes ahead and agrees to everything without adding the increased amount for those items if it did not include such. You might have grabbed on to $4,000 worth of free features.
What about the claim? What if you say you will settle a case for $10,000 and the claimant accepts and they then say that means I can have the check tomorrow doesn't it? How about next Monday? That does include payment of my medical expenses, does it? Perhaps there are certain points where you will obviously say no but there might be points that you had not intended to include but you accede to those because you know the deal is done. Perhaps you are not giving away anything of value but obviously if you did not intend to include it as a part of your original deal and you do now include it, you have added something of value.
3. Splitting the difference.
One would think this would be the easiest pattern to spot. It is how most of the world "negotiates". You want $20,000, I offer $10,000 and we settle at $15,000. Perhaps both sides end up not entirely happy. Some people simply live to split the difference. Their first offers are intentionally so extreme, high if they are selling, low if they are buying, that splitting the difference is an excellent and desirable result for them. Constantly check to see if this is the pattern. See if it is the dominant pattern of a negotiation and determine if that is one you want to adopt or not. If the claimant is strategically exaggerating their position, waiting for you to split the difference, they will whip you every time. We all know on personal injury claims that in addition to the hard specials, there are the general damages that either the attorney or the claimant decides on. Do not let them quote $30,000 with the view to get to $15,000, unless you think the case is worth $15,000. Keep in mind also that as concessions are made on both sides there will probably be a point where one will want to split the remaining difference or that is suggested at least. Again, do not split that difference unless you think that is moving to the true value of the case and you are not being whipped.
B. Block that tactic:
As indicated above, the claimant may be using certain negotiation tactics. If you are well prepared and have a good idea of what the other side is doing, be ready for every question they throw at you. Try to transform the negotiation process into a pleasant dialogue rather than be confrontational. Negotiation tactics are like moves in a chess game. You do not over react or get angry when someone makes a daring move in chess so do not over react in negotiation either. You should be familiar with the move and know what your next move should be. The following are some examples of how to deal with tactics from the other side of the negotiation table.
1. Do not accept the negative attack.
This is the person that immediately comes in and starts making disparaging remarks about your insured and their conduct and is the crudest negotiation tactic at all. There might be various reasons for this. They may think you would be intimidated by the assault. They certainly might believe in the truthfulness of their statements. They may be wanting to make you feel guilty or responsible for what your insured did. The tactic is designed to break down your position. Listen to it but do not give in to it.
2. Do not accept their ultimatum.
How many times have we heard "take it or leave it" or "you have to do better than that"? Sometimes these phrases really work. Perhaps with a trained attorney in mediation that truly is their bottom line but do not necessarily believe that to be the case with the claimant; that their ultimatum is the end. Rarely are ultimatums the end, they are only the beginning.
3. Do not fall for the good cop.
The "good cop/bad cop" tactic is one of the most familiar routines in negotiation. We have all seen it. Two people show up at the negotiation table. One of them is the designated bad guy whose job is to chew you up, wear you down and make outrageous demands. The other person is the good guy, usually a senior person whose job it is to apologize for his colleagues bad manners.
Obviously this might be the tactic with plaintiff attorney who is playing the roll of the good cop and the bad cop is the client who simply will not take less than a certain amount of money. It may be the claimant who is the good cop but claims his wife, spouse or someone else he seeks advice from simply is telling them to stand fast.
Focus all of your energy on turning the bad guy around to your point of view. If you cannot do that you have not lost anything - because you will not do any better with his partner.
C. Let the other side show you how it is done.
McCormick using the example of Bjorn Borg who hit the ball with such over powering topspin, his opponents had to enhance their repertoire, simply to stay on the court with him. The smart ones, however, were willing to adapt and play Bjorg and challenge him with a topspin of their own.
XI. QUESTION EVERYTHING:
A. Learn to ask, "Says Who?"
This simply means applying skepticism to the other side. Treat each of their assumptions and statements with extreme skepticism. When the other side outlines a position always think to yourself, "Says Who?" If they say it cost x to repair the car, "Says Who?" Where is the report from the bodyshop saying that? If they give a negotiating deadline, ask why there is such a rush. If they make a suspiciously high demand ask for proof of why the case is worth that much.
These examples could go on and on but I hope you get the point. Whatever is said think to yourself "Says Who?" as to that value. Who is the doctor they went to see? Where is the doctor's report? Where are the medical bills? Where are the expenses? Where is the report from their employer?
B. The myth of the negotiating table.
Let me first say that I recognize that all of you have many many claims to handle and there are constant demands on your use of time. I would suggest however on the largest cases to block out some time and get out of the office and to get away from the telephone "negotiating table". Meet the claimant at a coffee shop and size him or her up. Why not meet the plaintiff attorney, claimant or both at a restaurant (each side pay their own) and talk in a casual setting. You eat lunch everyday anyway, why not make the suggestion to talk about a case over lunch? Even if they do not accept your offer, you have shown a willingness to negotiate and to be fair and if they are not willing to show their face then there might be something wrong.
Better yet, meet them for breakfast! More than likely they will not even be out of bed by that time. While a neutral place is probably the most desirable it may the plaintiff attorney office or the home of the claimant. Whatever works but get out from the negotiating table into an informal casual setting to obtain information and size up the other side and not around the negotiating table.
C. Go with your gut instincts, but go with care.
1. Is it a gut decision or a gut reaction?
A gut decision is a choice you face after you have collected and digested all the facts. A gut reaction is the same choice after you have only heard one fact. Do not make gut reactions but rather do make gut decision. That is, if it feels right "in the gut" after your analysis of the information you have go with that gut reaction.
2. Do you have a private set of rules?
What I mean by this is to establish a private set of rules that make you feel comfortable and work more often than not. The tough part is sticking to your rules. If you have a rule about gut instincts you might apply a second rule one would call the "one missing piece" rule. That is look for one missing piece in the puzzle. If you have a big question mark about something have that question answered.
3. Are you being forced into a gut decision?
The best example of this is a rush by the other side to take action. It may be they intend to file a lawsuit or they will take their demand off the table. Do not be pressured into anything. Apply your own rule of "going slow".
4. Act confidently after you go with your gut.
Do not look back. If you go with your gut instincts then it is implicit that you must trust your gut instincts. Do not second guess the outcome. Move on to another file.
D. The reverse of "talent" should never touch the money -- claimants should see the money.
McCormick makes a big deal about keeping the "talent" out of the negotiating or seeing the money. He tells his superstar athletes that he does not tell them how to read a nickel defense or hit a topspin lob and he would appreciate it if they do not lecture him on how to structure a deal or sell their services. Just because Tiger Woods can hit a golf ball better than anyone around does not mean that he can negotiate and cut the best deal with Rolex, particularly when he is in his early 20's.
The reverse of this may be that you want to dangle the money or the check in front of the claimant to show him or her that you can pay the amount immediately or tomorrow or the next day or before that Christmas holiday. Negotiate with them with a checkbook in hand if possible. Again to paraphrase Tom Cruise, "Show them the money".
E. Knowing your negotiating style - and the other side's, too.
What is your negotiating style? Do you have to have all of the eyes dotted and t's crossed before you have a deal or are you comfortable agreeing to broad outlines? There is nothing inherently right or wrong about either negotiating tactic so long as you recognize what you are doing.
F. Is the other side guilty of "perfect math"?
McCormick uses an example of company personnel discussing cost cutting in the operation in one of their offices. They were discussing an apartment that was kept in time for visiting clients. One contended that they could make money on the apartment if, as she said, "they could put a client in the apartment everyday of the year and charge them $500 a week. Multiply that by 52 weeks and the $26,000 would cover the rent."
His associate cut him off by saying, "that sounds good, but you are using perfect math. I seriously doubt it if the apartment will be full each week."
Thus, the phrase perfect math means that it is based on false or inflated assumptions that pollute our decision. The numbers look rosy but the assumptions are casual.
Perfect math might be the claimant saying they will have to see the doctor x more number of times for y number of dollars or they will be off work for the next x number of weeks at y number of dollars. This makes assumptions they will in fact be off work and what their pay will be. Be very careful about making assumptions in the future based upon past or current circumstances. Circumstances change for the worst sometimes as for the better.
G. When there is nothing to do, do it brilliantly.
I have mentioned patience before and this is what I am talking about now. Patience may be the most vital negotiating skill, in its absence, the most deadly error. The best example is that you have made an offer and the claimant has not accepted it and you take that to mean it is rejected and for some unknown reason you rush in and increase your offer to see what they will take. Be patient. Wait for a response in terms of a counter. Be patient, the old phrase "don't bid against yourself".
XII. THE THEORY AND PRACTICE OF THINKING BIG:
As I mentioned earlier on, the one overriding and overall principal should be to "think big". Again, by this I do not mean think big in terms of giving big money away. I mean to look at the big picture.
A. Start high or start low, but do not start in between.
Once again, if we view this as the seller/buyer transaction you are the buyer. Thus, always start low. I have touched on this before. Do not be afraid they will not like you when you make an outrageously or insultingly low offer. You can never go back down unless there is a drastic change of circumstances. You only go in one direction, that is up. So start at the bargain basement.
B. The "insulting offer" is not insulting.
You are in the business of handling claims. You probably have a much better idea than the claimant as to "what the case is worth". Thus, what you might consider to be "insultingly low" might be a lot of money to the other side. Keep in mind they can only say no. It is doubtful they will come out to your office and shoot you or set a car bomb. You do not know if it is insulting until you make the offer. If they act insulted do not say you are sorry but rather that was what the value was on the case. Urge them to come up with more information as to why you should make a higher offer.
C. The first number is the most dangerous.
I have touched on this before. The most dangerous number in any negotiation is the first dollar figure mentioned by either side. It is either the "dollar anchor" the high or low number that frames the entire discussion that follows. For example, if the claimant is asking $100 and you are truly prepared to pay $60 or for that matter $50. Start at $20 or $30. By increasing the distance between the other side and you, you have increased the amount of room you have to move on price. At the same time you have increased the room the other side has to move down.
XIII. ADVANCED TECHNIQUES TO ADVANCE YOUR SIDE OF THE BARGAIN:
A. How to break an impasse.
We have all been there. There is simply no further movement. They are no coming down off their last demand. Here are a couple of ways to try and break the impasse.
1. Change the players.
This may sound extreme but it may be simply a matter of personality. Have a co-worker look at the file or better yet deal on the telephone with the claimant or if you have met already have someone else do it. The impasse may be because of who is doing the negotiation as opposed to the subject matter.
2. Bring in a mediator.
There is such a thing as pre-suit mediation. There are no rules that say you cannot have a third-party neutral to help implement a settlement. It may be worth it for the insurance to agree to give the claimant or opposing counsel a list of three names or so to sit down and mediate the suit before a lawsuit is filed. If the claimant has an attorney, suggest that both sides pay the mediation fee. Maybe it should simply be a half-day mediation. Again, this is when you have reached an impasse and there is no further movement. Not only is it a change of personalities but you have the neutral like mediator to bring his or her talent to the table to break the impasse.
B. Turning concessions into victories.
At some point you will be expected to make a concession. There is nothing wrong with that but keep in mind negotiation is after all, give and take. Giving in is simply part of the drill to get what you want. The trick is to concede the negotiating point and recognize it as a golden opportunity to get something greater in return. There are basically three approaches to concede a point in a negotiation.
1. Concede but get nothing in return.
If a contractor is renovating your house and asks for a thirty day extension, you would not simply grant it without getting something in return. If you do grant it without something in return that is what I am talking about. It is the path of least resistance. You have made the other side happy. Other than gaining good will what do you have to so for it?
2. Concede but only for something of equal value.
In a business transaction the buyer may want better payment terms and in return the seller says he will agree to such if the buyer will place a bigger order. The buyer wants a reduced price, the seller wants a commitment today. The examples could go on and on. The point is that if you make a concession and give up a certain number of dollars think of something of equal value to get in return.
3. Concede but get more in return.
This is the perfect negotiation from your point of view. Sometimes people equate the value of a concession with how hard they had to work for it. In truth, the cost is the same no matter how long it took to get there. Always think of what you can get in return by making your concession. Your concession will have to be to go up on your offer. See if you can not always couch it in terms of I will go up to x if you will do y.
C. The right to say yes is very valuable.
Once again with the buyer/seller analogy the seller is saying, "You can have this product for x dollars." That is a stronger position than the seller saying, "What will you give me for this?" By doing that the seller gave up the right to say yes.
In your situation, you must always say I am willing to pay x to get this claim settled not asking "What do you want for your claim?" You set the parameters. You say what you are willing to pay. Do not turn it over to them for you to respond to.
XIV. CONCLUSION
Without doubt everyone of you have heard or used these principals either consciously or unconsciously in your career. Hopefully, I have added to your arsenal of weapons to use in negotiation. If you do not remember anything else I say today, remember to have fun in the sport of negotiating. It is what you do for a living. The better your competition, the more exciting it is. The idea is to be fair but that means fair to both sides. Who can argue with "playing on a level playing field". Who knows one of these days it might be you negotiating the next set of endorsement rights for Tiger Woods or that high school athlete you know who goes on to college, maybe even your son or daughter when they decide to turn pro. I promise before this day is over you will be negotiating with someone about something. I know I will. That's right. Negotiating with my wife as to whether I can sleep on my back or my left side. Thank you very much for your time and attention.
Human beings are uniquely different from all other creatures great and small if in no other terms the way in which they settle their differences. It is highly unlikely that any other creature has the physical capabilities of communicating offers and counter offers, highballing and lowballing to reach an agreement. Only man (and that term is used generically) has formalized the negotiation process to the nth degree. Only man negotiates as an alternative to the use of brute force. Unfortunately, we sometimes feel like we must resort to that but very rarely do, only in war.
Those of us in the claims and litigation profession deal with negotiations each and every day, from the time we get to the office until the time we get home. In addition, we negotiate with our spouses, friends, co-employees and loved ones literally from the time we arise until the time we go to bed. Even after I go to bed, my wife and I negotiate as to whether I sleep on my back or left side to prevent my snoring.
Time does not permit me to cover today all the procedures on negotiating everything in life, from negotiating with your spouse about where you want to go out to eat, to negotiating with your teenage son about the use of the family automobile. Also, I will not include at this time, but would for a small fee later on, negotiating with your boss for a pay increase. My point is, the negotiation process is with us all our waking hours. Man creates rules and procedures, either consciously or unconsciously, about how we should talk to each other when we want what someone else has. Negotiating in business and in the claims practice sometimes may appear more complicated than it has to be. In the end, every negotiation decision should be guided by the Golden Rule: Do unto others as you would have them to unto you. I would like today to identify some key elements in what keeps negotiating from becoming stale or predictable. To talk about some aspects of negotiation that perhaps will excite you and enthuse you to come to work every day and to negotiate with the claimant and/or with plaintiff counsel.
I. TWO RECURRING THEMES
A. Question everything
One theme throughout my talk today is to "question everything." Develop a healthy skepticism. Keep in mind no two negotiations are the same. What you did two weeks ago may not work today. How you handled yesterday's claimant may not necessarily apply to the one today.
B. Think big
The second theme is to "think big." Now I do not mean to "think big" by giving away "big" money. What I do mean is that people should shoot for the moon on every deal to get the best situation from your side of the negotiation table. Strong positions, whether it means quoting an "outrageously" high price or making an offer, in our situation, that is "insultingly" low, makes people feel uncomfortable. From our side of the table, I urge you to start negotiations with "insultingly" low offers. Negotiating down the middle is splitting the difference. Any four year old can figure that out pretty quickly. Six Hershey bars on the counter and Tommy wants all six. Mother says he can have one so he says he will settle for three. The deal is done. This requires a very modest skill for a negotiator to simply split the difference. Thus, I say to you to "question everything" and "think big."
II. THE PERFECT NEGOTIATOR
I say at the outset that many of the principles and concepts of this book I attribute to Mr. Mark McCormick from his book Mark H. McCormick On Negotiating. I recommend it to you without reservation. If you do not know him, let me tell you who he is. He runs a sports marketing company which he started 35 years ago with $500 in Cleveland, Ohio called International Management Group ("IMG"). His first client was some golfer by the name of Arnold Palmer. He now represents hundreds of well known athletes such as Arnold Palmer, Jackie Stewart, Jean-Claude Killy, Bjorn Borg, Chris Everett, and Andre Agassi. His company also manages and creates events, everything from the Tokyo World Match Play at Wentworth, to a Jose Carreras concert in Singapore, to the Detroit Grand Prix Motor Race, to "Jesus Christ Super Star" in Sidney, Australia. They represent the Nobel Prize Foundation. They helped develop the commercial interest of Wimbleton and the Royal and Ancient Golf Club of St. Andrews. Most recently, he took on some freshman golfer by the name of Tiger Woods. If you do not happen to read the sports pages, which I doubt, read the business pages. I read the other day that Tiger Woods will make $60 million this year from endorsements. For example, recently he signed a lucrative contract with Rolex Watches, or I should say, Mark McCormick did. No doubt, McCormick negotiated a good deal for him.
McCormick's television arm has represented the International Broadcasting rights of sports properties such as the Olympic Games, the World and European Figure Skating Championships, the National Football League, and all the major golf and tennis championships. IMG now has more than 2,000 employees in 69 offices and 28 countries around the world.
If you have not seen the movie, Jerry McGuire, I strongly suggest you do so. Not just for the acting of Tom Cruise and Cuba Gooding, Jr., although it was excellent, nor simply to hear the classic phrase, "Show me the money," but to see a great film on the art of negotiation in the sports arena.
Just think about it, each day you and I negotiate claims. While they are not, unfortunately or fortunately, in the realm of the Tiger Woods' fee arrangement with Nike, or what the fee might be for the next Garth Brooks concert, we do negotiate deals and try to reach agreements every day. Why? Because that is our business and also because you know more about the particular claim than twelve people off the street collected as a jury might. I believe in the jury system with all my heart and soul and I am glad we have it. I believe we have the finest judicial system in the entire world. I negotiate, mediate and litigate cases every day and still believe that the parties who know most about the dispute are the ones best to reach a reasonable and fair solution for all concerned. When a case goes to a jury, it is simply because the parties or the counsel, including myself, are overlooking or misjudging some of the facts or the law or the risk and benefit in their analysis. Let me also say that I do not intend to get into detail "risk/benefit analysis" such as occurs in mediation. I understand you have had that speech and I will save that for another date. What I do intend to discuss are broad principles of negotiation that are applicable to not only claims handling mediation and lawsuits, but to selling your residence or your automobile, or negotiating for a pay raise.
I suggest to you that the perfect negotiator needs at least one or more of the following personal traits:
A. A perfect people sense: Knowing what makes people tick and how far you can push your position before the other side resists or resents it.
B. Strong competitive streak: Enjoying the hand-to-hand combat that is the essence of negotiating.
C. A wide field of vision: Seeing the big picture, the long-term consequences as well as short-term gains.
D. An eye for details: Being able to spot the thorny issues that everyone else overlooks.
E. Unimpeachable integrity: Meaning what you say. You don't have to be hounded to keep your promise.
Of all of these, I believe unimpeachable integrity is at the top. Everyone respects honor and fair play.
F. Examples of knowledge I would prefer the other side not to have:
1 My client really wants to settle.
2. I need to settle the case to keep some third party happy: Boss, peers, a quota, a goal, or some artificial deadline.
III. NEGOTIATING TOOLS AT YOUR DISPOSAL
A. Do not need to be liked: Getting others to like you because of your brains, charm, honesty or sense of humor is a strength but needing to be liked is a weakness if it compels you to sacrifice negotiating points. Some negotiators are infinitely more pleasant than the other fellow. They will work with you to resolve an issue rather than work against you. Overriding strength as a deal-maker may be likability. Have one talent or personality trait that can help you in negotiating. The key is to learn to recognize that quality in ourselves and let it prevail.
B. Tolerate ambiguity and conflict: Learn to deal with a discussion when it takes a 90 degree turn and circumstances change. You can deal with chaos and ambiguity. You can scramble.
C. Have a lot of integrity.
D. Negotiate anything: Negotiators love to negotiate. If they do not, they will always be outgunned by someone who does love it. The best negotiator regards everything as negotiable. Everything is on the table. He/she devotes the same enthusiasm and care in negotiating for a wristwatch as he/she does in negotiating $1 million lawsuits. It is talent of all successful negotiators that they consider negotiating a sport they love. Like athletes, they do it constantly so they are never out of shape. This is very important.
E. Do not need to be the smartest person in the room: When negotiating, always discuss each major point as if starting at ground zero. This may put the other side off balance. They don't know what you actually know, so they often attribute more street smarts to you than you actually possess.
IV. A GREAT NEGOTIATOR NEEDS TO BE GOOD AT ONLY ONE THING
Four Traits Which Can Turn An Average Negotiator Into A Great One
1. Patience: Patience may be a virtue, but in negotiating it is a weapon of incalculable power. The patience to wait for a second, third or fourth discussion to have conditions improve.
2. Clarity: Ability to express themselves clearly and succinctly. Simply build your case logically and quickly and make things easy to understand.
3. Mastery of details: Quite often the one who has the greatest expertise and mastery of details has the upper hand.
4. Administrative skill.
V. WAYS TO NEGOTIATE WITHIN A HOSTILE, IMPERFECT WORLD
A. Stay in the match: Negotiating with an ornery claimant or attorney is a lot like playing tennis with a powerful opponent. The key is to stay in the match. There is no clock, no time limit, only the final judgment in the lawsuit. As long as you don't lose match point, you have a chance to win. Your opponent may lose his or her stroke or concentration or may tire while you gain a second wind. You should not self-destruct just because the other side takes a surprisingly aggressive attitude. Think of the Rockets and the Jazz in the playoffs. Do not let personalities scare you away.
B. Keep your walkaway number to yourself: This is the absolute maximum you would be willing to pay to settle a case. Do not broadcast this number. In a hostile negotiation, if the other side knows the maximum you will pay, why should they accept any less? On the other hand, work to find out what their acceptable minimum is.
C. It is not always the price: Look for other aspects of the case such as timing on payment. Search and pry for what will help to get the claim settled.
D. Be hypothetical: If the opposition wants to get you to increase from $80,000 to $100,000, you might respond "What if we were to pay $80,000 but we were to throw in the following ingredients? For example, quick payment, etc."
E. Look for deal makers, not deal breakers: Do not use the term "deal breaker." Use the term "deal maker." "I'll do that but that has to be the deal maker." "I might agree with those terms if you unequivocally tell me we have a deal."
VI. NEVER LET THE OTHER SIDE KNOW WHAT YOU WOULD NOT DO
I heard an associate attorney one time come back from a negotiation and tell the partner that the other side was making some tough demands, then added, "Of course, I told them they were out of their minds. We would never even consider those terms." The partner cut him off and said, "Never tell them what you wouldn't do! The more options and the longer you can keep them, the stronger your position." This is a valid point. I am reminded of the moment in the movie The Godfather, when the Don tells his hothead son, Sonny, "Never tell anyone outside the family what you're thinking." This rule can apply in business and in our practice just as well. For example, the claims person may say, "I'd never pay more than X number of dollars to settle this claim." Conversely, the other side might say, "I won't take less than X number of dollars for this case." Ultimatums can backfire as often as they work. Ultimatums can stop discussion dead in its tracks. They are potential deal breakers, not deal makers. Most times, people abuse the "Never tell them what you wouldn't do" rule because of weakness or because of some misguided ego.
VII. A WORD TO INSURANCE CLAIMS MANAGERS: EVERYONE IS A NEGOTIATOR, EVERYTHING IS NEGOTIABLE
Let's think of it in business terms. Are we the buyer or the seller? We are the buyer. We have the money, and they want to sell us on what a great claim they have, how valuable it is. It is no different than us looking for a new home, come upon a "For Sale" sign and then talk with the owner to find out what a great house it is and why it is worth their asking price.
Buyers generally fall into two camps. One camp of people insist on negotiating everything. To them, the list price is nothing but a reference point, and absurd base price that, through shrewdness, persistence, and sheer nerve, they intend to lower. In our profession, that would apply to the initial demand made by the claimant or his/her attorney.
The second camp consists of people who never question "the rate card." They always pay the quoted price. They are constitutionally incapable of negotiating.
Needless to say, as a manager, you should prefer claims handlers who fall into the first group. It would be frightening to think that the claims handler comes anywhere close to paying the initial demand made by either the claimant or the plaintiff's attorney. There are simple management principles I suggest you impart to emulate the fierce negotiators as opposed to being at the other end of the spectrum of those who pay the initial asking price.
A. Make an attitude adjustment: Becoming a zealous negotiator first requires an attitude adjustment. You have to rethink your standards for what is and what is not negotiable. For example, it's ingrained in us to negotiate with certain people and not with others. You're supposed to negotiate with a used car dealer or a merchant at a flea market. Everyone knows that. On the other hand, you don't negotiate at a restaurant. If the menu says the steak cost $27.00, you don't tell the waiter, "I'll give you $24.00." Everyone knows that too. In our business it is in the company's best interest to always remind employees that bargaining chips should exist and should be aggressively used.
B. Create policies that encourage negotiating: I will not expand upon this, but obviously it has to do with settling claims at the lowest possible "fair" price.
C. Treat good claims handlers as corporate heros: Think about it in the sales world. If a salesperson at a company closes a huge deal, word quickly spreads through the company. The salesperson is hailed as a hero and often rewarded with a bonus. The same hero treatment should be given to employees who make great buys. Sometimes stellar negotiating efforts go unnoticed and unheralded. Most companies don't send out memos hailing Jane Smith for the great lease she re-negotiated. Buying is not perceived as glamorous or heroic as selling. The honor of saving the company money rarely matches the glory of bringing it in. If you recognize and honor people for negotiating great buys, you're employees will not only learn from them, but will take pride in emulating them.
D. Attack the little deals as well as the big ones: Not everyone is in a position to negotiate multi-million dollar lawsuits. Not everyone handles brain injuries and paraplegics. Sometimes it takes as much brains and initiative to negotiate the little deals where the dollars are closer. The point is, no deal point should be too small to question or fight for. Obviously, taken individually, no individual small claim settlement will make or break the company, but instill the attitude and multiply it by the dozens and dozens of claims one deals with in each of the offices of the company and the economic effect can be substantial. Most importantly, it does not cost the company anything to instill that attitude, even with respect to negotiating small claims. They add up. As an investment, it is all reward and no risk.
VIII. WHAT YOU CAN LEARN FROM NEGOTIATING WITH YOUR SPOUSE
Considering all the mutual decisions married couples have to make each day as a result of negotiating with each other, the spousal relationship may be the most efficient negotiating situation in the world. A messy marriage on the brink of divorce is surely the least efficient negotiating situation. Whether they are negotiating little items such as who gets the shower first in the morning, or major items as where to go on vacation, couples maneuver, yield and assert themselves in fluid, effortless, and sometimes wordless ways. We can learn about negotiating simply from analyzing conditions that force us to behave that way. Can you create the same conditions when you get to work? It reminds me of the line in Mark Chestnut's song, "Divorce", "I got the Jeep and she got the palace!"
A. Couples have to see each other again: No matter how heated the debate, a couple knows they will have to face each other again when they turn in at night -- unless they intend to divorce or separate. That fact alone tempers how extreme and firm their positions are. When people know they will have to "do business" with someone in the future, they tend to be more agreeable and less willing to pick a fight. It is quite likely you will be seeing the same plaintiff attorney, even if it is not the same claimant. In the workplace, knowing you will have to deal with the other side again on other matters not only makes people more agreeable, it makes them less desperate.
B. Couples respect each other's turf: There are "no trespassing" zones in every marriage. It could be a touchy subject that automatically upsets the husband, an area of expertise particular to the wife, or an exclusive relationship that one partner has developed. It might be tough to emulate the same sensitivity in a business negotiation or claim settlement. After all, you probably do not know the other side one-tenth as well as you know your spouse. But a little homework should tell you what the other side regards as inviolate turf.
C. Couples really need a mutual benefit: A lot of business people pay lip service to the "win-win" ideal in negotiating. The same applies to claims handling. Think about it. I do not know any skilled negotiator who isn't looking to win a little more than the other side. That should apply to the plaintiff attorney or to the claimant if they are awake and alert and worth their salt. It is nice when both sides walk away equally happy, but that is not absolutely necessary. Pushing for that edge is what makes a talented negotiator. It is also what kills a lot of deals. Push the envelope but try not to tear it open. It is different negotiating with a spouse. If either the husband or wife gets the better end of a negotiation, both of them might lose.
IX. DO NOT FORGET TO LOOK AT YOUR HOLD CARDS, I.E., YOUR CLAIM FILE
What do I mean by this? In all areas of business negotiations and dealings sometimes people fail to do basic research. For example, some might make investments and plunge their money into a stock without researching a company, based upon a whim or the unsupported enthusiasm of a friend. Many people invest in a way similar to playing poker all night without ever looking at their cards. No doubt all lawyers and claims handlers are guilty of this to some extent. They do not know the full value of the hand they are holding because they forget to study their cards.
What are your cards? Your cards are your file. I guarantee you your file material is far more organized than that of the claimant and probably that of a plaintiff attorney. You have the luxury of having all of that file material in front of you and updated. If not in front of you, get them so you can comment and respond intelligently. Thus, base your decisions on facts and figures that you know. Again, think of an analogy of you being the buyer. The claimant or plaintiff attorney is trying to sell you on their case. If you are missing certain information or have certain questions ask that it be provided. If it is not provided then you have a basis for sticking to your opinion as to your evaluation of the claim. Again, think of buying a house. If the seller does not tell you the condition of the roof or the last time the house was inspected for termites or produce certain certificates, you certainly have basis to not pay their asking price. It is hard for the seller to quarrel with this rationale.
A. Do not catch the virus of desperation.
Sometimes there are external pressures; a supervisor pushing you to settle cases, a quota or deadline to be met, a rival in the office who is performing better than you on closings. Do not get desperate to get a deal done and make a bad deal. Such negotiating objective is no longer to get the best deal but rather to make sure any deal does not disappear. Again, if you were a manager, instill in your subordinates this philosophy. Do not pay more than a claim is worth just to close the file. A dollar here, $500 there, $1,000 here, $5,000 there adds up in the big picture of things. Inoculate your people against this philosophy.
B. Do not be distracted by a pot of gold.
Once again, using the poker analogy, it is not unlike playing against someone who has a massive pile of chips. You are looking at the strengths of the other side rather than the strengths of your case. You focus on the strengths that the seller/plaintiff/claimant is telling you and not focusing on their strengths which are in your file. Do not be distracted by their sales pitch. Do keep it in mind but again, assess your hold card, assess your own file. Point out the weaknesses which you have documented in your file about their claim.
C. Do not be dazzled by the fine china.
I use this point for dealing with very successful plaintiff attorneys. Try to get out of your office and go to the office of the opposition but once there, do not be distracted by their physical signs of success; the brochures, newspaper articles framed on the walls, furnishings that would not even appear in the private offices of chief executive officers of the highest corporate officials in Houston. Again, focus on your hold card, focus on your case. All of those trappings of success have nothing to do with this particular case. Think of the Rockets vs. the Jazz. The fine china is the same as playing at home. Part of the purpose of the crowd is to distract the out of town players, get their mind off the game. Focus on your case. Think of the focus that Charles Barkley or John Stockton has. Think of the focus an out of town player has when lining up for a free throw and hundreds of people are waving balloons in his face behind the goal. All is a distraction from what one is about. Do not be distracted by the fine china, focus on your hold card.
X. THE TOOLS AT THE OTHER SIDE'S DISPOSAL:
A. What pattern is the other side weaving:
1. The concession pattern.
Everyone, consciously or unconsciously, has a pattern of conceding points in a negotiation. Some people stair-step their concessions. They give away points in increasingly larger increments, starting out small and holding back on the big concession they hope you never ask for. Other people reverse that pattern, shrinking their concessions as the process drags on. There is no single ideal concession pattern but it is a sin not to be aware of it -- in yourself, as well as others.
2. The accession pattern.
This is the flip-flop on the stair-step concession. On the stair-step for example, you are literally going up the steps, perhaps taking one step at a time or two steps at a time, increasing the amount of your offer in the same amounts or increasing amounts. Keep a record in your file so that you know what you are doing and keep a record of what the other side is doing.
What is the accession pattern? Take an obvious example, if you were to walk into an auto showroom and ask about a car listed at $20,000 and accepted the salespersons opening quote of the list price. After you and the salesperson shake hands you slightly add, "that includes leather seats, of course? and anti-lock brakes? and dual airbags? and an extended warranty doesn't it?" Perhaps it does not but perhaps the salesperson goes ahead and agrees to everything without adding the increased amount for those items if it did not include such. You might have grabbed on to $4,000 worth of free features.
What about the claim? What if you say you will settle a case for $10,000 and the claimant accepts and they then say that means I can have the check tomorrow doesn't it? How about next Monday? That does include payment of my medical expenses, does it? Perhaps there are certain points where you will obviously say no but there might be points that you had not intended to include but you accede to those because you know the deal is done. Perhaps you are not giving away anything of value but obviously if you did not intend to include it as a part of your original deal and you do now include it, you have added something of value.
3. Splitting the difference.
One would think this would be the easiest pattern to spot. It is how most of the world "negotiates". You want $20,000, I offer $10,000 and we settle at $15,000. Perhaps both sides end up not entirely happy. Some people simply live to split the difference. Their first offers are intentionally so extreme, high if they are selling, low if they are buying, that splitting the difference is an excellent and desirable result for them. Constantly check to see if this is the pattern. See if it is the dominant pattern of a negotiation and determine if that is one you want to adopt or not. If the claimant is strategically exaggerating their position, waiting for you to split the difference, they will whip you every time. We all know on personal injury claims that in addition to the hard specials, there are the general damages that either the attorney or the claimant decides on. Do not let them quote $30,000 with the view to get to $15,000, unless you think the case is worth $15,000. Keep in mind also that as concessions are made on both sides there will probably be a point where one will want to split the remaining difference or that is suggested at least. Again, do not split that difference unless you think that is moving to the true value of the case and you are not being whipped.
B. Block that tactic:
As indicated above, the claimant may be using certain negotiation tactics. If you are well prepared and have a good idea of what the other side is doing, be ready for every question they throw at you. Try to transform the negotiation process into a pleasant dialogue rather than be confrontational. Negotiation tactics are like moves in a chess game. You do not over react or get angry when someone makes a daring move in chess so do not over react in negotiation either. You should be familiar with the move and know what your next move should be. The following are some examples of how to deal with tactics from the other side of the negotiation table.
1. Do not accept the negative attack.
This is the person that immediately comes in and starts making disparaging remarks about your insured and their conduct and is the crudest negotiation tactic at all. There might be various reasons for this. They may think you would be intimidated by the assault. They certainly might believe in the truthfulness of their statements. They may be wanting to make you feel guilty or responsible for what your insured did. The tactic is designed to break down your position. Listen to it but do not give in to it.
2. Do not accept their ultimatum.
How many times have we heard "take it or leave it" or "you have to do better than that"? Sometimes these phrases really work. Perhaps with a trained attorney in mediation that truly is their bottom line but do not necessarily believe that to be the case with the claimant; that their ultimatum is the end. Rarely are ultimatums the end, they are only the beginning.
3. Do not fall for the good cop.
The "good cop/bad cop" tactic is one of the most familiar routines in negotiation. We have all seen it. Two people show up at the negotiation table. One of them is the designated bad guy whose job is to chew you up, wear you down and make outrageous demands. The other person is the good guy, usually a senior person whose job it is to apologize for his colleagues bad manners.
Obviously this might be the tactic with plaintiff attorney who is playing the roll of the good cop and the bad cop is the client who simply will not take less than a certain amount of money. It may be the claimant who is the good cop but claims his wife, spouse or someone else he seeks advice from simply is telling them to stand fast.
Focus all of your energy on turning the bad guy around to your point of view. If you cannot do that you have not lost anything - because you will not do any better with his partner.
C. Let the other side show you how it is done.
McCormick using the example of Bjorn Borg who hit the ball with such over powering topspin, his opponents had to enhance their repertoire, simply to stay on the court with him. The smart ones, however, were willing to adapt and play Bjorg and challenge him with a topspin of their own.
XI. QUESTION EVERYTHING:
A. Learn to ask, "Says Who?"
This simply means applying skepticism to the other side. Treat each of their assumptions and statements with extreme skepticism. When the other side outlines a position always think to yourself, "Says Who?" If they say it cost x to repair the car, "Says Who?" Where is the report from the bodyshop saying that? If they give a negotiating deadline, ask why there is such a rush. If they make a suspiciously high demand ask for proof of why the case is worth that much.
These examples could go on and on but I hope you get the point. Whatever is said think to yourself "Says Who?" as to that value. Who is the doctor they went to see? Where is the doctor's report? Where are the medical bills? Where are the expenses? Where is the report from their employer?
B. The myth of the negotiating table.
Let me first say that I recognize that all of you have many many claims to handle and there are constant demands on your use of time. I would suggest however on the largest cases to block out some time and get out of the office and to get away from the telephone "negotiating table". Meet the claimant at a coffee shop and size him or her up. Why not meet the plaintiff attorney, claimant or both at a restaurant (each side pay their own) and talk in a casual setting. You eat lunch everyday anyway, why not make the suggestion to talk about a case over lunch? Even if they do not accept your offer, you have shown a willingness to negotiate and to be fair and if they are not willing to show their face then there might be something wrong.
Better yet, meet them for breakfast! More than likely they will not even be out of bed by that time. While a neutral place is probably the most desirable it may the plaintiff attorney office or the home of the claimant. Whatever works but get out from the negotiating table into an informal casual setting to obtain information and size up the other side and not around the negotiating table.
C. Go with your gut instincts, but go with care.
1. Is it a gut decision or a gut reaction?
A gut decision is a choice you face after you have collected and digested all the facts. A gut reaction is the same choice after you have only heard one fact. Do not make gut reactions but rather do make gut decision. That is, if it feels right "in the gut" after your analysis of the information you have go with that gut reaction.
2. Do you have a private set of rules?
What I mean by this is to establish a private set of rules that make you feel comfortable and work more often than not. The tough part is sticking to your rules. If you have a rule about gut instincts you might apply a second rule one would call the "one missing piece" rule. That is look for one missing piece in the puzzle. If you have a big question mark about something have that question answered.
3. Are you being forced into a gut decision?
The best example of this is a rush by the other side to take action. It may be they intend to file a lawsuit or they will take their demand off the table. Do not be pressured into anything. Apply your own rule of "going slow".
4. Act confidently after you go with your gut.
Do not look back. If you go with your gut instincts then it is implicit that you must trust your gut instincts. Do not second guess the outcome. Move on to another file.
D. The reverse of "talent" should never touch the money -- claimants should see the money.
McCormick makes a big deal about keeping the "talent" out of the negotiating or seeing the money. He tells his superstar athletes that he does not tell them how to read a nickel defense or hit a topspin lob and he would appreciate it if they do not lecture him on how to structure a deal or sell their services. Just because Tiger Woods can hit a golf ball better than anyone around does not mean that he can negotiate and cut the best deal with Rolex, particularly when he is in his early 20's.
The reverse of this may be that you want to dangle the money or the check in front of the claimant to show him or her that you can pay the amount immediately or tomorrow or the next day or before that Christmas holiday. Negotiate with them with a checkbook in hand if possible. Again to paraphrase Tom Cruise, "Show them the money".
E. Knowing your negotiating style - and the other side's, too.
What is your negotiating style? Do you have to have all of the eyes dotted and t's crossed before you have a deal or are you comfortable agreeing to broad outlines? There is nothing inherently right or wrong about either negotiating tactic so long as you recognize what you are doing.
F. Is the other side guilty of "perfect math"?
McCormick uses an example of company personnel discussing cost cutting in the operation in one of their offices. They were discussing an apartment that was kept in time for visiting clients. One contended that they could make money on the apartment if, as she said, "they could put a client in the apartment everyday of the year and charge them $500 a week. Multiply that by 52 weeks and the $26,000 would cover the rent."
His associate cut him off by saying, "that sounds good, but you are using perfect math. I seriously doubt it if the apartment will be full each week."
Thus, the phrase perfect math means that it is based on false or inflated assumptions that pollute our decision. The numbers look rosy but the assumptions are casual.
Perfect math might be the claimant saying they will have to see the doctor x more number of times for y number of dollars or they will be off work for the next x number of weeks at y number of dollars. This makes assumptions they will in fact be off work and what their pay will be. Be very careful about making assumptions in the future based upon past or current circumstances. Circumstances change for the worst sometimes as for the better.
G. When there is nothing to do, do it brilliantly.
I have mentioned patience before and this is what I am talking about now. Patience may be the most vital negotiating skill, in its absence, the most deadly error. The best example is that you have made an offer and the claimant has not accepted it and you take that to mean it is rejected and for some unknown reason you rush in and increase your offer to see what they will take. Be patient. Wait for a response in terms of a counter. Be patient, the old phrase "don't bid against yourself".
XII. THE THEORY AND PRACTICE OF THINKING BIG:
As I mentioned earlier on, the one overriding and overall principal should be to "think big". Again, by this I do not mean think big in terms of giving big money away. I mean to look at the big picture.
A. Start high or start low, but do not start in between.
Once again, if we view this as the seller/buyer transaction you are the buyer. Thus, always start low. I have touched on this before. Do not be afraid they will not like you when you make an outrageously or insultingly low offer. You can never go back down unless there is a drastic change of circumstances. You only go in one direction, that is up. So start at the bargain basement.
B. The "insulting offer" is not insulting.
You are in the business of handling claims. You probably have a much better idea than the claimant as to "what the case is worth". Thus, what you might consider to be "insultingly low" might be a lot of money to the other side. Keep in mind they can only say no. It is doubtful they will come out to your office and shoot you or set a car bomb. You do not know if it is insulting until you make the offer. If they act insulted do not say you are sorry but rather that was what the value was on the case. Urge them to come up with more information as to why you should make a higher offer.
C. The first number is the most dangerous.
I have touched on this before. The most dangerous number in any negotiation is the first dollar figure mentioned by either side. It is either the "dollar anchor" the high or low number that frames the entire discussion that follows. For example, if the claimant is asking $100 and you are truly prepared to pay $60 or for that matter $50. Start at $20 or $30. By increasing the distance between the other side and you, you have increased the amount of room you have to move on price. At the same time you have increased the room the other side has to move down.
XIII. ADVANCED TECHNIQUES TO ADVANCE YOUR SIDE OF THE BARGAIN:
A. How to break an impasse.
We have all been there. There is simply no further movement. They are no coming down off their last demand. Here are a couple of ways to try and break the impasse.
1. Change the players.
This may sound extreme but it may be simply a matter of personality. Have a co-worker look at the file or better yet deal on the telephone with the claimant or if you have met already have someone else do it. The impasse may be because of who is doing the negotiation as opposed to the subject matter.
2. Bring in a mediator.
There is such a thing as pre-suit mediation. There are no rules that say you cannot have a third-party neutral to help implement a settlement. It may be worth it for the insurance to agree to give the claimant or opposing counsel a list of three names or so to sit down and mediate the suit before a lawsuit is filed. If the claimant has an attorney, suggest that both sides pay the mediation fee. Maybe it should simply be a half-day mediation. Again, this is when you have reached an impasse and there is no further movement. Not only is it a change of personalities but you have the neutral like mediator to bring his or her talent to the table to break the impasse.
B. Turning concessions into victories.
At some point you will be expected to make a concession. There is nothing wrong with that but keep in mind negotiation is after all, give and take. Giving in is simply part of the drill to get what you want. The trick is to concede the negotiating point and recognize it as a golden opportunity to get something greater in return. There are basically three approaches to concede a point in a negotiation.
1. Concede but get nothing in return.
If a contractor is renovating your house and asks for a thirty day extension, you would not simply grant it without getting something in return. If you do grant it without something in return that is what I am talking about. It is the path of least resistance. You have made the other side happy. Other than gaining good will what do you have to so for it?
2. Concede but only for something of equal value.
In a business transaction the buyer may want better payment terms and in return the seller says he will agree to such if the buyer will place a bigger order. The buyer wants a reduced price, the seller wants a commitment today. The examples could go on and on. The point is that if you make a concession and give up a certain number of dollars think of something of equal value to get in return.
3. Concede but get more in return.
This is the perfect negotiation from your point of view. Sometimes people equate the value of a concession with how hard they had to work for it. In truth, the cost is the same no matter how long it took to get there. Always think of what you can get in return by making your concession. Your concession will have to be to go up on your offer. See if you can not always couch it in terms of I will go up to x if you will do y.
C. The right to say yes is very valuable.
Once again with the buyer/seller analogy the seller is saying, "You can have this product for x dollars." That is a stronger position than the seller saying, "What will you give me for this?" By doing that the seller gave up the right to say yes.
In your situation, you must always say I am willing to pay x to get this claim settled not asking "What do you want for your claim?" You set the parameters. You say what you are willing to pay. Do not turn it over to them for you to respond to.
XIV. CONCLUSION
Without doubt everyone of you have heard or used these principals either consciously or unconsciously in your career. Hopefully, I have added to your arsenal of weapons to use in negotiation. If you do not remember anything else I say today, remember to have fun in the sport of negotiating. It is what you do for a living. The better your competition, the more exciting it is. The idea is to be fair but that means fair to both sides. Who can argue with "playing on a level playing field". Who knows one of these days it might be you negotiating the next set of endorsement rights for Tiger Woods or that high school athlete you know who goes on to college, maybe even your son or daughter when they decide to turn pro. I promise before this day is over you will be negotiating with someone about something. I know I will. That's right. Negotiating with my wife as to whether I can sleep on my back or my left side. Thank you very much for your time and attention.