Managing Catastrophe Claims

Having recovery teams in place in the event of a disaster is an essential part of a disaster recovery plan for a global organization. A key component of that recovery team is an adjuster.

The role of a loss adjuster in the management of catastrophe claims is paramount. “As adjusters we have various different tasks,” Alan Buchfuhrer, executive vice president of Cunningham Lindsey International, told delegates during a Risk and Insurance Management Society, Inc. (RIMS) 2009 annual conference and exhibition seminar in Orlando, FL. “Obviously the most important is the investigation of the loss and the circumstances.”

This information is then presented to the underwriters so they can fully understand the loss, he added. Furthermore, adjusters provide advice regarding the loss and whether it is covered under the terms and conditions of the policy. Experts are brought in by the adjuster, if required, to assist in the mitigation of the loss and the loss is quantified by the adjuster, or with the assistance of an independent accountant, in the event of a large loss, to help schedule the different areas of the loss. The claim is adjusted through selective terms and conditions of the policy, the limits of the policy and the deductible.

But the job of an adjuster does not end there. An adjuster goes on to the settlement of the claim, Buchfuhrer noted. “Our job is basically to bring the two sides together: the insured and the insurers. Each individual party should leave the table at the end of the day knowing that the loss was settled fairly.”

Investigation Into Cause

When investigating into the cause and origin of a loss, an adjuster must identify the damage, determine what peril has acted, identify whether the loss is within the operative clause, and identify the proximate cause to ensure that it is a covered peril. If there is any question as to the cause, experts, such as forensic cause and origin experts, can be brought in to assist on determining a cause, Buchfuhrer said.

An adjuster can also help determine whether the loss was caused by negligence on the part of a third party and potentially help with recovery of the loss, he added.

Circumstances

An adjuster must ensure that the underwriters, who are ultimately going to be writing the cheque, understand the loss. Additionally, they should ensure that all the terms and conditions and warranties of the policy are complied with. Finally have all the policy conditions been observed? By determining these, an adjuster can help to ensure that there are no coverage conditions when negotiations begin.

Application of the policy

With application of policy, an adjuster must determine cause, exclusions, conditions and limits, to ensure that there are no issues down the road. This is especially important if there are (re)insurers involved in a large loss, he noted.

Mitigation and loss control

When it comes to mitigating loss control, an adjuster must determine if there’s property damage involved and if so, is it damaged beyond repair. Is the structure a total loss? Does it exceed the value of repairing? Can it be repaired? Can it be used for salvage to minimize the loss?

Quantification of the claim

When quantifying a claim, a team of observers, quantity surveyors or accountants might be required to quantify the claim and reach the bottom line. Additionally, market research might be required, he added.

When it comes to a catastrophe, often more manpower is required and therefore adjusters need to be brought in from elsewhere to help.

Policy Coverage

The adjustment reflects the coverage of a policy and an adjuster needs to take into consideration any indemnity, betterment, deductibles and average. All this gets put into the bottom line, he said.

Recovery

Last but not least is the recovery. Recovery is very dependent on quality of evidence and might require the assistance of lawyers. “If we can affect the recovery, that assists the underwriters and the insured, because it may well reduce the actual payment that was made and therefore when renewal comes, the rates will reflect the recovery,” he pointed out.

Basic Objectives

There are basic objectives an adjuster tries to achieve in a disaster situation, including:

• quick settlements

• accurate settlements

• covered by the policy

• consistent and fair throughout

• good communication with the insured and the underwriter so there are no hiccups at the end

• always work in a professional manner

When is comes to disaster response, adjusters are trained and have available resources throughout the world. Experts and other adjusters can be brought from around the globe to one specific disaster area as soon as it is feasible and allowed, Buchfuhrer said. “Anything and everything we can do to bring the insured as quickly as possible back to their pre-loss condition, working with them within the parameters that they dictate, [we do],” he noted.