Loss Adjusters at a Crossroads

The profession of independent loss adjusting in Canada is at a crossroads. How we got there is pretty simple. Which road we take in the future is critical if our profession is to survive.

When I began my career as an adjuster in 1978, independent loss adjusting was a proud profession. Not so any longer. We have allowed our service to be commoditized – purchased in bulk, based on price rather than product. We are generally regarded as overpriced and hired with reluctance.

Over the years, we abdicated many of our responsibilities to third parties such as contractors and consultants. We stopped preparing detailed scope-of-damage assessments; we called in contractors to price damages, often with no reference base for an estimate. We then passed the paper we received from the contractor or consultant on to the insurer and asked what they wanted to do next.

At one point, insurers started to question what value we were adding to the loss adjustment; understandably, they began to bypass adjusters and take their needs direct to the contractors and consultants. As this happened, adjusters stood on the sidelines, hands on hips, indignant that insurers would treat them this way.

Contractors and consultants were doing our job, we complained. We propelled our voice with a cry that the work being done was actually “adjusting,” and insurers were wrong to follow this practice. We complained a great deal amongst ourselves. We even went so far as to complain to regulators that people who were unlicensed adjusters were doing work traditionally regarded as “adjusting.” You see, it was much easier to complain about the symptoms than it was to diagnose the cause – the cause was us!

ADJUSTING v. PROCESSING

In a trade publication, the leader of one of Canada’s largest national adjusting firms stated in 1999 that the majority of claims were small; therefore, he said, the firm did not need “Einsteins” to deal with those claims. All it needed were processors.

In addition to implying that one did not have to be very bright to be a loss adjuster with that company, the message was this: the majority of claims need not be adjusted, but merely processed. If that is the attitude of one of the principle leaders within our profession, it’s no wonder that others were quick to accept this assessment. It further deepened their disdain and diminished appreciation for loss adjusters in general.

This attitude was compounded by the ill-guided notion that loss adjusting service can be purchased in bulk, as one might buy doughnuts – cheaper by the dozen, but still not good for you. All that you end up with is more that is bad.

FLAT-FEE PERIL

Another questionable pricing approach was developed – flat fees. No matter how much time was needed to handle a loss, the bottom-line cost of the adjustment would be constant. Whether an adjuster worked two hours or 20 hours on the file, the fee to the insurer would be the same. This has to be one of the most naive notions ever conceived. It is easy for company CEOs – usually people who have not been in the field adjusting losses for years, if ever – to sit in fancy boardrooms or at linen-covered lunch tables and agree to pricing arrangements such as flat-fee pricing. In the real world, however, such pricing strategies discredit all involved.

Most independent adjusters are paid based on the number of hours they work on files. Adjusters are subject to human frailty; they like to see as much reward for their effort as possible. Good adjusters do what is required on a file to do the job properly – no more, and no less. Even the most conscientious adjuster, faced with a situation in which he or she is rewarded for his or her effort partway through the file handling – with no additional consideration coming for what remains to be done – will not continue with the same attitude on the file than was the case in the beginning. This is not something unique to loss adjusters, this is basic human nature. Anyone who would argue different is not being objective.

And yet, even though flat-fee arrangements like these are made, the very people who make those arrangements proclaim publicly that the insurance industry needs to do a better job to raise its public image.

BACK TO BASICS

Claims service is what people buy when they pay their premium. Every insurer, if not simply for competitive reasons, should want their product to be the best it can be. Add to this the fundamental principle of treating people fairly and in good faith, and the need for capable loss adjusters widens. Insurers want to know what their costs will be; with that knowledge, they can try to fix adjusting costs based on averages and predictable parameters. Insurance does not function well in this environment: it requires what is appropriate in each and every unique situation. Pigeon-holing eliminates the need for “adjusting” and turns the claims experience into “processing.” There is a huge difference between adjusting and processing, and we need to get back to fundamental loss adjusting practices or the whole thing will go down the drain.

As is the situation with most aspects of the insurance industry in Canada, it is difficult to function in an environment that has different rules in each province and territory. Some progress has been made in standardizing the licencing regulations for adjusters in the various jurisdictions; however, a great deal more is required. We do not even have a set definition of what an “adjuster” is or does in Canada. The Canadian Independent Adjusters’ Association is vital in dealing with matters of education and in advancing the cause of adjusters across Canada yet there are a large number of adjusters who do not support and participate in that organization. How can we expect to be taken seriously when we do not have a united voice that speaks for all independent loss adjusters and that promotes and enhances this profession?

FUTURE HEROES

Few people are entering the independent loss-adjusting field today. There are a number of reasons for that; principle among them is the lack of assignments on smaller losses that traditionally served as the training ground. The smaller claims – and that seems now to reach losses as high as $50,000 – are mostly handled in-house by insurers through direct contact with contractors. As I said in the opening, responsibility for that rests with adjusters themselves for failing to add value and justify our involvement. As well, we have not maintained the previous high profile of independent loss adjusting. We have, by focusing on cash flow rather than quality of service, cheapened our profession so it is not the proud institution budding adjusters seek to enter. So it comes full-circle.

When I first set my sight on a career in loss adjusting, I met Doug Holmes. At that time, he was the president of Nova Scotia’s Marsh Adjustment Bureau – one of the strongest and most respected independent adjusting firms in Canada. He told me: “There will always be the need for good independent adjusters.” I remember that meeting and him speaking those words like it happened yesterday. I believed those words, and I worked to be worthy of a life-long career as an independent loss adjuster. I continue to believe what Doug said, but I do fear demand will outstrip supply as independent adjusters age and retire and are replaced by claims processors. Take a hard look. Where do you see tomorrow’s independent loss adjusters coming from?

Our profession is at a crossroads. Everyone who is part of the property and casualty insurance industry in Canada has a hand in shaping the future of loss adjusting. But nobody has a greater stake in doing this than the independent loss adjusters themselves. What direction will you take?