– March 2, 2011
Let’s face it, claims is as much about negotiating as anything. It is a significant part of our jobs as claims professionals, yet little real time is spent honing those skills. I had always considered myself a pretty good negotiator despite having never had formal training. I mean I am an attorney, I could argue with the best of them, and I knew my cases.
All this changed when I finally did take a class on negotiation during my first insurance job at Zurich. Like many training classes, this one involved role playing. Like many, I was not a big fan of role playing, however this particular class changed my view. The role play had been set up with each party given a specific set of instructions as to how to manage the negotiation. Despite it being staged, the emotional responses were fairly real and opened my eyes to techniques to become a better negotiator. I learned to take the emotion out of the process and to follow a very set, repeatable, procedure.
From that point on I had always entered a negotiation with all of my offers written out in advance and rarely did I stray from that framework. It was a huge change in the way I managed negotiations and it paid off on numerous occasions and led to what I believed to have been some very good results.
Avoid These Five Things To Become A Better Negotiator
Recently I came across an article in Inc. Magazine that listed the 5 Things You Should Never Say While Negotiating. These 5 suggestions are a great framework to to help become a better negotiator.
As I have done in the past with other business suggestions, I am reprinting much of this article in its entirety with comments as to how they relate to claims. The article also gives great links to more detailed information on the specific technique.
1. The word “between.” It often feels reasonable—and therefore like progress—to throw out a range like “I can do this for between $10,000 and $15,000.” But that word between tends to be tantamount to a concession, and any shrewd negotiator with whom you deal will swiftly zero-in on the cheaper price or the later deadline. In other words, you will find that by saying the word between you will automatically have conceded ground without extracting anything in return.
TCS: We have all used the “meet in the middle” technique. It really can lead to one party being entrenched on the higher side. Stick to you offers and decrease the amount as you increase the offer. For example if you want to settle the claim for $70,000 first offer $25,000 then $45,000 then $55,000 then $62,500 and so on. Every time you decrease the offer you send the message that there is an end and you are coming to it. Believe me, by the third offer they will may even say to you “you are trying to get this at $70,000.” Use this and you remain in control and help direct the outcome. Be comfortable with your valuation and don’t be afraid to get to it.
More Insight: The Art of Effective Negotiation
2. “I think we’re close.” We’ve all experienced deal fatigue: The moment when you want so badly to complete a deal that you signal to the other side that you are ready to settle on the details and move forward. The problem with arriving at this crossroads, and announcing you’re there, is that you have just indicated that you value simply reaching an agreement over getting what you actually want. And a skilled negotiator on the other side may well use this moment as an opportunity to stall, and thus to negotiate further concessions. Unless you actually face extreme time pressure, you shouldn’t be the party to point out that the clock is loudly ticking in the background. Create a situation in which your counterpart is as eager to finalize the negotiation (or, better yet: more eager!) than you are.
More Insight: Creating Win/Win Negotiations
TCS: Just as you need to be prepared to walk out, you need to be prepared to stay as much as needed. You are never in a rush and as long as you let them know you are happy to stay till an agreement can be reached. Remember, it’s about maintaining control of the negotiation and arriving at a fair price for the damages claimed.
3. “Why don’t you throw out a number?” There are differing schools of thought on this, and many people believe you should never be the first person in a negotiation to quote a price. Let the other side start the bidding, the thinking goes, and they will be forced to show their hands, which will provide you with an advantage. But some research has indicated that the result of a negotiation is often closer to what the first mover proposed than to the number the other party had in mind; the first number uttered in a negotiation (so long as it is not ridiculous) has the effect of “anchoring the conversation.” And one’s role in the negotiation can matter, too. In the book Negotiation, Adam D. Galinsky of Northwestern’s Kellogg School of Management and Roderick I. Swaab of INSEAD in France write: “In our studies, we found that the final outcome of a negotiation is affected by whether the buyer or the seller makes the first offer. Specifically, when a seller makes the first offer, the final settlement price tends to be higher than when the buyer makes the first offer.”
TCS: I am so glad there is actually research on this subject, and I cannot agree more. Too many times I have heard claim handlers say they didn’t want to be the first to throw out a number. I strongly believe that offering money first puts the negotiation off to a good start. For me it comes down to how comfortable you are with your evaluation. If you have sufficient facts and information to believe a claim is worth $35,000 then what is the harm in starting off with a number that you would be thrilled to settle for? They know what they want for their case and if it is some wild number then start preparing for trial. More often then not your end number will be closer to theirs.
While it is possible to real get a case for a better number than you would have thought, that doesn’t happen as often as you might think. If you are not comfortable with your evaluation then you are probably shouldn’t be negotiating in the first place.
More Insight: Bargaining for Advantage
4. “I’m the final decision maker.” At the beginning of many negotiations, someone will typically ask, “Who are the key stakeholders on your side, and is everyone needed to make the decision in the room?” In negotiations, particularly with larger organizations, this can be a trap. You almost always want to establish at the beginning of a negotiation that there is some higher authority with whom you must speak prior to saying yes. The point is, while you will almost certainly be making the decision yourself, you do not want the opposing negotiators to know that you are the final decision maker, just in case you get cornered as the conversation develops. Particularly in a high-stakes deal, you will almost certainly benefit from taking an extra 24 hours to think through the terms. For once, be (falsely) humble: pretend like you aren’t the person who makes all of the decisions.
TCS: This is a great one and is very important even in the larger cases. Going back to get authority is a great technique even when you have all the authority you need. When I used to attend trials I would always come dressed casually and sit in the back so no one would think I was the one with the authority to settle. If the settlement is right, make the deal. If not, take the extra time to make sure the decision is sound.
More Insight: 7 Tips for Masterful Negotiating
5. “F-U.” The savviest negotiators take nothing personally; they are impervious to criticism and impossible to fluster. And because they seem unmoved by the whole situation and unimpressed with the stakes involved, they have a way of unnerving less-experienced counterparts. Whenever you negotiate, remember that it pays to stay calm, to never show that a absurdly low counter-offer or an annoying stalling tactic has upset you. Use your equanimity to unnerve the person who is negotiating with you. And if he or she becomes angry or peeved, don’t take the bait to strike back.
TCS: I love claims professionals that take their job personally and feel they have a stake in the claim that goes beyond their corporate fiduciary responsibility. Nonetheless, this is not the place to let those emotions get the bet of you. Know your claim, go in with a plan, and don’t panic because you are in control.
More Insight: The Ultimate Guide to Negotiating
Some final thoughts
As with any list, there are always more suggestions that can be added to make them better. In reviewing the five above there is one clear message that rings true for all of them: Know your case and be comfortable with your evaluation. If you have a good work up and know what the value of a case is, then you will never be wrong if you can settle the case for that number. You also have to be prepared to do this when the other party is not as prepared.