In an era when losses are beginning to be adjusted by algorithm, there is growing concern about the changing role of the human loss adjuster.
The feature, Are you keeping up, which appeared in the last issue of Claims Canada, generated a discussion with CIAA president Fred Plant about significant changes in approaches to claims handling and how they will affect the role of the independent adjusters in years to come.
Plant, (ClaimsPro’s Senior Vice President, Atlantic Region) shared the concern, raised by many senior adjusters over the past several years, that these changes will mean a drastic reduction in the opportunities for young, developing adjusters to gain on-the-job experience to learn the finer points of what he calls “the art of loss adjusting”.
Plant calls this the closing of the training room, and seeks to build a dialogue within the p&c insurance industry to develop approaches that will help to ensure young adjusters can get the exposure they need to develop sophisticated claims adjusting skills.
The training room
The traditional trajectory for someone to reach the level of a senior, or Executive General Adjuster, was hands-on exposure to adjusting, starting from taking statements on basic and simple claims and gradually moving to more complex claims and learning all the facets of adjusting a major loss.
It’s generally acknowledged that it takes several years to gain the level of expertise that affords an adjuster the ability to work independently on major cases. For example, according to Rohit Trivedi, Vice President – Claims Manager, at AXIS Reinsurance Company, who works primarily in the professional liability area, “it takes a few years to get the skill set. The typical learning curve in the professional liability space, if you’ve never done it before, is a minimum of three to five years.”
And these are not skills that come through academic learning. “To take an adjuster and develop them from start to finish requires many years of handling different types of loss,” concurs Albert Poon, CEO, Cunningham Lindsey Canada Claims Services Ltd.
Plant elaborates: “The best adjusters in this business have 30 years of claims experience because that is the most effective way to be trained in this business. You could take all the theory courses you want-we all have to go through that-but what’s written in those books versus what happens in the field is quite different and it’s a lot deeper. If you just want people who are taking the theory courses and following the manuals, then you’re just going create adjusters who are driven by process and not by outcome.”
So, for the development of senior people with the skills to handle major, complex losses, there need to be plenty of opportunities to observe, practice and learn by doing, in the field.
Shrinking the room
The scenario Plant foresees, where these opportunities are scarce, stems in part from the siloization of the adjusting process. With different parts of the process being handled by individuals who only see one piece of a claim, over and over again, there is no opportunity for them to gain the broader perspective on the how the claim is handled from start to finish.
And it frustrates him because they are expected to be good at their job without “any other experience in the rest of the claim, to know what other questions should be asked. We should just somehow know that by osmosis,” he says. “It doesn’t happen.”
This loss of “crosspollination” means what the industry is creating is, “instead of insurance adjusters with twenty years of experience, they’re creating insurance adjusters with one year of experience, twenty times,” Plant asserts.
Taking the siloization one step further are companies like WeGoLook.com. It’s Uber for investigation, with a network of agents who will attend a scene and complete on-site data capture, take photos, and complete reports with no adjuster training at all.
Whether you call it siloization or commoditization, it points to a major factor playing into the shrinking of the training room: an increasing focus on cost and efficiency by insurers. Their bottom-line considerations determine whether adjusting will be done in-house, by independents, or even by algorithm.
“At the moment the industry is at a crossroads as to whether it’s more efficient and effective to service that business internally as opposed to outsourcing it,” says Ashley Lawrence, Head of Claims, Everest Lloyd’s Syndicate 2786, a member of Everest Re Group, Ltd. “From my point of view as a Lloyd’s entity, the outsourcing option works for us. For some carriers that are writing household business in particular territories they may feel they’ve got enough business to justify servicing it internally. If there is more insourcing then there are going to be fewer opportunities for the independent adjusters.”
The cyclical nature of the business also impinges on the independent adjuster. As Trivedi notes, some insurers go through phases where they try to bring adjusting in-house, but then there is a restructuring and they let them go, and then “try to rebuild when their underwriting volume is increased”.
The penetration of technology into the insurance sector is also creating knock-on effects for independent adjusters. As software becomes more and more sophisticated, it is becoming capable of processing the variables of claims as they are received. While this is not replacing the services of a senior adjuster who investigates complex losses, we have arrived at the point where “the small value claim may be handled basically by a computer-very similar to how they renew your auto insurance-using algorithms,” says Cindy LeBlanc, Manager, National Claims Operations, The Sovereign General Insurance Company. “It’s futuristic but I don’t think it’s really that far off.”
Clearly cost reduction is a major driver in finding efficiencies in claims handling and loss adjustment. But cutting costs in certain areas may actually contribute to wasting resources, with a resulting hit to the bottom line.
A recent study by PwC called Stopping the Leaks, looks at claims leakage-the difference between what insurers should pay in claims and the amount they end up paying-as a key area for potential savings.
The research found that insufficient training is actually a significant source of leakage. The report cites major leakage due to errors in payments to clients, resulting from lack of appropriate training provided to employees, and the assignment of claims to adjusters with inappropriate skill levels that result in their inability to recognize and deal with critical issues.
Failure to seize on opportunities is another of the areas the report found created leakage. Both inconsistencies in individual claims handlers’ approaches in setting case reserves and settlement values, and the repeated re-assignment of files across various claims handlers were cited as causes.
In suggesting solutions to prevent claims leakage, the report’s first recommendation is “refreshing training curricula quarterly to reflect latest industry issues, factoring in the lessons learned from the results of a claim review process.”
It also suggests: “Using efficient claim allocation workflow models to ensure the right assessors are involved early in a claim.”
While neither of these in-house approaches directly impacts the role of the independent adjuster, both highlight the importance of having the right, properly trained, and analytically sophisticated people for the job in order to ensure good bottom-line results.
And that’s definitely what the insurers who use the services of independent adjusters are still looking for. With customer experience becoming ever more important, and companies judging success based on client reviews, the drive for service excellence often comes down to being able to rely on the outside service provider-namely the independent adjuster.
At Sovereign General, Leblanc notes that they seek out the best independent adjuster for the file. “They have to have the personality, they have to have the people skills and they have to have the knowledge,” she says. “Clients are very demanding, and speaking from the commercial side, time is money. They want to keep their businesses up and running, so when the adjuster goes to see them on the initial visit they have to be well versed on their policy coverages, be able to give them instructions, and not dilly-dally around. They’re showing they have the knowledge the insured expects them to have.”
Rohit Trivedi says the independent adjusters AXIS hires are their eyes and ears that help them connect the dots on complex cases. “We deal with a set of skilled adjusters to investigate these losses, and there will always be a need for that. We are a specialist company, and we have a very sophisticated claims department.”
At Everest, “we are heavily reliant on the independent adjusters in order to function,” Lawrence says. “What we see is very much a partnership with the adjusting firms we use. We are also working with them to make the process more efficient and seeking feedback from customers on how they found the experience. Being able to learn from their feedback helps us perfect the experience even more.”
The coming skills shortage
But if the training opportunities are shrinking, where are these skilled adjusters going to come from? The much-feared coming skills shortage is not merely an imagined bogeyman. It’s a recognized threat.
As Lawrence notes, more insourcing means fewer opportunities for independent adjusters. “Certainly that means there will be fewer new people coming into the business and making a career, which has the knock-on effect for catastrophe situations so that in 10 or 20 years’ time we won’t have that depth of capability to service the larger claims.
“The people that are currently dealing with the larger claims are getting towards the end of their career and there is not the young blood coming through the ranks to take those positions. That’s my concern-there’s going to be a skills shortage because it’s not seen as a viable career path at the moment.”
Trivedi concurs: “So, in our world, we will continue to need services of savvy independent adjusters, and hopefully they’re grooming younger people to come up, because the ones that we deal with are quite seasoned, and they’re very good in their space.”
The new training room
Specialized claims will likely always require a depth of skill that really does need to be acquired through years of field experience. And it’s true there is a demographic shift happening that will mean those who can teach it are going to be retiring in the next 10 to 15 years. In fact, up to 25 percent of existing claims adjusters will be of retirement age in the next several years.
However, while there is no doubt that the ‘training room’ adjusters used in the past is getting smaller, there is another one opening up beside it. And it probably looks more like a computer lab than a field station or an executive general adjuster’s office.
Both the subject matter of claims and methods of adjusting them are feeling the influence of IT’s penetration into all aspects of daily living.
“The impact of technology has created claims in the cyber space,” Trivedi says. “Just looking at the impact of technology-created claims in the cyber space, that alone is fuelling the need to have skilled adjusters. And, as an offshoot of the professional liability space, we have technology playing a role in seeing such claims. Insurers are combining GL and E&O policy or coverages, and that’s creating claims we didn’t see before.”
In a recent article, “Modernizing Your Claims Operation”, on insurancethoughtleadership.com, Jose Tribuzio, CEO of Systema Software, claims administration alone costs the property and casualty industry $40 billion, “and it’s a process that would significantly benefit from an investment in IT infrastructure improvements.”
As noted above this is already taking place, and it’s penetrating into the adjusting space. As Lawrence noted, people are using technology to buy insurance and when it comes to reporting, there are more opportunities to make claims online. “Embracing new technology speeds up processes and allows the customer to follow their claim right the through the cycle,” he says.
In a recent blog, “Training the future claims adjuster” on insurancethoughtleadership.com, Ernie Bray, chairman and CEO of AutoClaims Direct, shared his vision of the kinds of skills the new adjuster will require:
“In the future, we’ll see fewer claims adjusters in the workforce, but this smaller pool of talent will be trained in a different way and in different skillsets than previous generations. Tomorrow’s adjuster will not possess -and will not need-the wealth of experience, knowledge and (to some extent) skills as today’s adjuster. Instead, new technologies will provide them with the tools to instantaneously obtain that knowledge, experience and skill.
“Rather, the adjuster will have to be tech-savvy…Future adjusters will need to tap skills and knowledge that their forbears never dreamed of.”
A bright future
If Bray is correct, and he certainly isn’t overstating the impact that technology will have, then the future looks promising for a new generation of loss adjusters.
The question then remains how to attract them to the field, and also how to continue populating the more traditional loss adjuster positions that are jeopardized by the triple threat of siloization, cost cutting and the superannuation of the current pool of available mentors.
As Leblanc notes, “it’s hard to get kids interested in insurance”.
With only about five percent of millennial students “very interested” in a career in insurance, according to a study by the Griffith Insurance Education Foundation, she is right.
But Bray thinks that technology is the answer to changing that perception.
“Technologies like cognitive computing will change the very nature of the claims adjuster’s job…to one that places much more emphasis on analysis, creative problem-solving and people skills. So adjusters of the future will be people who are very customer-oriented, very tech-savvy, very intelligent and very skilled at interpreting mountains of data…they will have to know how to optimize new technologies to deliver superior customer service and the best possible outcome to every claim.”
But, he cautions, it will take a lot of enthusiasm from existing adjusters to successfully market the field as a rewarding place to work.
A helping hand
“I don’t know how the independent companies are identifying their stars for the future,” Leblanc says. She’s seen a number of up-and-coming adjusters who’ve had to move around from one independent firm to another to get the experience they need.
But the ones who succeed do so because “they’ve taken control of it, the individuals themselves have taken control of it because they know what they want,” she says.
You have to be proactive in getting the education you need to pursue a career as an adjuster, she says, because it’s not offered too freely. “You have to show the wherewithal as well.”
Trivedi believes the independent firms have a role to play in guiding the new crop. “I think the message should go out to the firms that they better start building a succession plan so when some of the senior adjusters retire, they’ll be ready,” he says.
This is already happening. As noted in the “Are you keeping up” feature last issue, mentorship has been recognized-and even formalized-in some firms as a means of ensuring the pool of talent is kept full.
Building a relationship
While it may not be a comfortable conversation between the independent adjusters who feel their services might be less valued, and the insurers who are dedicated to providing quality service to their customers at the best price, it’s an important dialogue for the future of the independent adjuster.
“It’s imperative that the independent adjusters and service companies liaise with the clients and the carriers to get a proper understanding of what carriers are looking for, what the drivers are, and how carriers differentiate themselves from their peer group,” says Lawrence. “It’s only by having a joined-up, team approach that you get the best outcomes; it’s a two way process. Rather than just the independent adjusters saying ‘you people aren’t using the service’, they’ve got to make more of an effort to actually engage with the insurers as far as understanding exactly what their demands are and trying to come up with solutions that actually deliver a service that the carrier is interested in buying.”
Fred Plant agrees: “It’s our responsibility to be relevant and to provide services that they need, and right now we’re capable of doing that.”
However, since practically all the insurers use independent adjusters, they need to step up and take an active interest in the future development of the talent pool, he says. “With that they should want to protect, encourage, enhance, engage this service that is important to the execution of their mandate, to their policy holders, and to their shareholders.”
To stay capable is key for the industry; and there is reason for optimism.
First, says Leblanc, if there does turn out to be a skills shortage, supply and demand will dictate that those who ensure they have the skills will have their choice of assignments: “Relationships are going to become key; the adjusters will have their choice of which insurance companies they want to work with, and they will be very selective.”
Second, for those with the vision-the young and up-and-coming adjusters-there is going to be a massive opportunity if they can carve their way through and plan their career to get the experience that they need.
“They have to take control of their own destiny,” Leblanc says.