Is there a shortage of claim adjusters? It depends on who you talk to. Anecdotal evidence seems to point to one, but that's mostly chatter at conference sessions or among colleagues over dinner. Data to verify, or refute, a dwindling number of adjusters is lacking. This is unfortunate, because numbers would go a long way to settle the dispute over whether or not there is in fact a shortage. For the past few years, the talk has been about those aging baby boomer adjusters exiting employment with sights set on retirement. The insurance industry specifically has expressed concern about the low number of fresh college graduates seeking careers among its ranks. Consensus on which age group is the linchpin to the adjuster shortage is nowhere to be found.
Others say the plight of the claim adjusting world is temporary, caused by recent major disasters. Measures were put in place to respond to the abundance of claims, and other measures have recently been instituted to prevent future problems at the onset of catastrophes.
Perhaps the crux of the issue is not whether there is or isn't a shortage, but that all the major players affirm there is a changed environment for the claim adjuster.
HURRICANE DEVOURS ADJUSTERS
Just as Katrina swept through coastal homes leaving people helpless, with no idea where to begin, that 2005 hurricane and other storms around that time blindsided carriers. Where would they get the army of adjusters needed to take on losses of that number?
"What we noticed during Katrina was the industry hit the bottom of the adjuster pool in nothing flat," says Bill Beach, senior vice president of training at third-party administrator Crawford & Co. "We had to bring in people and train them to handle the lower level, less complex claims so that we could free up the experienced adjusters to handle the serious claims."
So this claims administrator was forthcoming about the strain placed on its adjuster load, but carriers seem a bit more reticent about any pressure experienced by their staff following in the hurricanes' wake.
"When the storms hit we relied primarily on our internal folks but we did need to augment them in places with partner resources that we had with various companies that we work with," says Patrick Gee, senior vice president, Travelers Claim Services. "We were primarily responsible for the response, but we did get some assistance as many other companies did."
The spattering of catastrophes posed major challenges for the insurance industry, but were those challenges a sign of an adjuster shortage that was already there on a day-to-day basis, or was this a temporary problem that would eventually subside?
"I think the shortage is emphasized when you have major disasters--the Katrinas, the Ritas, the Wilmas--that was an indicator that we had some shortages," says Tom Crawford, CEO of Crawford & Co. "I think day in and day out, probably the industry wouldn't say there's a huge shortage."
Crawford says just about every major insurance company leans on large claims administrator companies like his own, as well as many small independent adjusting firms, to provide additional adjusters needed to handle claims when there is a major catastrophe. It would be unproductive, and unnecessarily expensive, to employ a massive adjuster gang to wait in the wings until the next Katrina comes along.
"You couldn't possibly keep the staff of thousands of adjusters just standing by, waiting for a storm," he says. "Last year was a great example of why--there were no storms."
CARRIERS TRIM BACK
Nonetheless, some industry experts say these storms shed a spotlight on a shift in how the industry handles claims, one that had been occurring over the last few decades or so. Those who have been around since the 1960s can see the change in the number of adjusters employed and trained by insurance companies versus those who work for small firms contracted by the insurance companies.
"I just see that there is more of a growth in the independent adjuster as opposed to the company adjuster," says Arnold Mascali, executive vice president, claims consulting, Aon Horizon Consultants Inc. "It used to be they were all company adjusters and they had their 10 claims per handling. Now it's one person managing the independent adjusters--VeriClaim, Crawford, companies like that. Less and less adjusters are actually employed by AIG, Chubb or Hartford."
Mascali, whose background is in property claims, says his is "an observation that most people who are in this business would agree with." He takes his standpoint one step further, saying recent major disasters have illuminated the drawbacks of this shift, the most glaring of which is that adjusters born and bred through thorough insurance company training are becoming extinct. Some insurers have scaled back training efforts over the years, as they begin to outsource adjusting work to independent firms. For insurance companies, he says, there is a shortage of experienced executive general adjusters.
"On the property side it used to be that the insurance companies trained their own people," Mascali says. "Back in the 1980s there were many different training programs. I was familiar with the one at Crum & Forster, which was a great training program. I know FM Global still has some very good training for their folks. But now, many companies have now outsourced adjusting. They look to the independent adjusters--and they don't control the training."
The impact this shortage in the upper echelon of adjusters has on policyholders is that claims are taking longer to get settled than they have in the past, especially after 2005's Hurricane Katrina. Mascali, even considering last year's quiet hurricane season, points out there are more catastrophes every year, the number--whether man-made or natural--is going up, not down.
Insurance companies need the adjusters to get out to the site, evaluate the loss, help set a reserve, and start the adjusting process, he says. Without many experienced adjusters out there insurance companies are not in a position to indemnify policyholders as soon as the policyholder would like.
"It's because of the fact that," Mascali says, "there has just not been enough training on the insurance company's adjusting side where you have experienced folks with 20, 25 years of experience doing this--they just doesn't exist anymore."
The experience gap is widening, more visible during catastrophes that cause multimillion-dollar commercial property losses. The difference between what the experienced catastrophe adjuster can handle comfortably is leaps and bounds from the $50,000-fire-losses a seasoned property adjuster normally handles.
"I think what has happened is there is a different generation of adjuster now who wasn't trained at the insurance company level by insurance companies on the best procedures and practices," Mascali says. "That's been outsourced. Right now I think the industry is suffering from it."
A new generation does mean fresh faces, fresh opportunities to hook in enthusiastic, talented individuals to hopefully mold into veteran claim adjusters. Some industry players are taking that optimistic stance and backing it up with sizeable investments in training programs and facilities.
In late April, Travelers held a grand opening of its new training facility in Windsor, Conn., Claim University. The facility, 108,000 square feet and expanding, will host about 8,500 Travelers employees each year for training in auto, property, heavy equipment or liability claim appraisal. The university's labs feature two full-scale furnished homes, a full-size convenience store, cranes, backhoes, bulldozers, cars and a couple dozen smaller construction mock-ups--many of which can be strategically damaged to train adjusters how to estimate repairs or replacement costs. This educational facility replaces Travelers' decentralized training program and is expected to attract new claim professionals to the company and to the adjuster world.
"In terms of getting new people in the door, we can really build a strong level of interest on the part of new folks," says Travelers' Gee. "The university is really here to help train our current adjuster force, but this facility itself is a strong pull for people who have any interest at all in this subject matter."
Folks just coming out of school who have an interest in construction or motor vehicles tend to have a strong affinity for adjusting, he says, because it allows them to engage in a subject that was previously their hobby in a professional environment where they can apply their skills in working directly with the company's insureds.
Having a state-of-the-art training facility proves to the claim adjusters that the insurance company is dedicated to continuing education and advancing its employees higher up the adjuster ladder, Gee says. Improving and expanding the adjuster force is a priority in certain lines, namely property and catastrophe. Gee says the storms of the early 2000s motivated Travelers to increase its ability to respond to catastrophes by increasing the size of its catastrophe response team and redoubling its efforts to finish planning and constructing a catastrophe management center on site at Claim University.
"We have even trained a large proportion of our non-property claim operations in the basics of property claim adjusting so that they can help handle some of the very low-severity claims that result around the periphery of these events to give them some expandable capacity," Gee says. "Claim U here is a big part of that and the level of training we can provide here we really think is unmatched."
A step beyond investing in adjuster training is investing in services to support the insured, which ultimately helps the adjuster and insurance company. Like those who have bolstered their efforts for training adjusters responding to catastrophes, Aon has addressed the shortage of experienced catastrophe adjusters by releasing a new disaster recovery/loss mitigation tool that sends people onsite immediately after a property loss to collect the business income loss information and details and present it to the insurance adjuster who's coming to the site.
"You're helping, you're actually helping the insurance adjuster prepare what's got to go to the insurance company," Mascali says. "Rather than sitting back and saying, 'ugh, it's going to be a slow process' and 'the insurance adjuster has got to do that'--do it for him. Do it for her. Help. You're the policyholder; it's to your benefit to do that."
These new efforts are heartening to those who kept an eye on the scaling back of training efforts at other insurance companies and independent firms over the last decade or so. Training adjusters takes money and a lot of it. Crawford & Co., known as the trainer of the industry for a long period of time, began cutting programs in the early 90s.
"We had a university and we basically almost abandoned the university," says Crawford. "When our company de-emphasized training for a period of time, it almost had a reflection in the industry."
This "de-emphasis" has gone beyond the adjuster world and permeated the perception of professionalism in the insurance industry as a whole, he adds. Some companies have contributed to this de-emphasis, and some haven't, but the overall perception of it has impacted the industry across the board.
"Many companies just looked at the benefit to the bottom line by cutting back on the investment in people, but my philosophy is you have just jeopardized the future of the company," Crawford says.
The need to get back to investing in training and recruiting was underscored by Katrina and the resulting strain on the adjuster community. It was clear that the company had a responsibility, an obligation to the industry to return to its roots as the "trainer of the industry." The university was rebuilt and its classrooms revamped in the process of relocating the company's corporate headquarters. The educational programs offered are as good as, if not better than before; classrooms are full again and recruiting efforts are underway at six schools of risk management.
The outlook for the adjuster pool may not be as dim as some would suggest, and surely the recognition of the problem is half the battle. Still, challenges are ahead.
A TOUGH SELL?
Leaders of the adjuster community know that more needs to be done to ensure there is a steady contingent of young people entering the field--and staying there. Challenges come in the form of turnover, competition among peers and recruiting. Holding onto employees is difficult in any business, but many would argue that spending money on staff development will pay off.
"When you cut out the investment on the front end, you're going after the experienced person at the competition versus paying for the development of a person," says Crawford.
His colleague Beach says it's "blatantly clear" that if companies invest in their adjusters at the front end, it will increase retention. Instituting training at the outset will pay for itself in lower turnover ratios.
Competition is an issue in any shortage of staff. One who knows this dynamic is Peter J. Imbrogno, newly appointed chief operating officer of Cambridge Integrated Services U.S., a claims and loss cost management subsidiary of Cambridge Solutions.
"It's constant pressure because it seems that wherever a large TPA has an office, several carriers and several other TPAs have offices in the same place," says Imbrogno. "The dynamic is that people are pulling from the same labor force."
There are several ways to retain employees--salary being the obvious measure. Imbrogno's strategy? Give them considerably good starting salaries and graduate those salaries over a period of two years, the results of which so far have been very encouraging. "We need to be competitive because now our competition is not just the insurance marketplace, it's the marketplace," he says. "To get a college grad with no experience we're fighting accounting firms, marketing firms--you name it--that's who our competition is."
Another component is providing the technology necessary to help the adjuster do his or her job better, as the job has become more labor and form intensive, he says. The most current technology will prevent the adjuster from becoming "a slave to the process." Finally, Imbrogno says paying close attention to the workloads and capacities of the adjusters is key. "By monitoring that constantly it allows us to make sure we're not burning people out."
Shortages or not, one lasting struggle is with the overall image of the insurance industry, which suffered a blow from highly publicized Katrina claim litigation. Crawford says recruiting and retention efforts might be improved if industry leaders committed to more public speaking opportunities, increasing awareness about the positive investments the industry makes in the community.
"We just went through a period of time where the industry was taking heavy criticism," he says. "I think we have to be speaking out. There are so many things that we do well, that contention only seems to form when there's a problem or a disaster."
ERIN FOGG is associate editor of Risk & Insurance®.
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July 1, 2007
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