No one is happy about the rising costs of insurance. Certainly, a driving factor is the rising costs of paying claims. Paying claims is the product we sell and the reason we are in this business. While most claims settle easily and fairly, there are those that ‘go off the rails’ and increase the overall cost of insurance.
The basic premise of insurance is to put the insured back to where they were before the loss. An insured should not better themselves or profit because they had a claim. However, for some that is the goal. These unrealistic expectations can cause the insured to be unhappy with the outcome of a claim.
Are there times when we, as adjusters, shoot ourselves in the foot? Absolutely! When these situations arise, our team is focused on quickly addressing and resolving the issue with minimal impact on the dollars paid.
Many of the problems that arise with property claims often involve public adjusters. An insured may assume (or be advised) that without outside representation, the insurance company will take advantage of them.
Public adjusters (like plaintiff’s attorneys) do not work for free. They are paid based on a percentage of how much the insured collects. Most public adjusters are paid 7-12% of the insured’s recovery. There is an inherent motivation for the payout to be higher, otherwise the insured has collected less than what they would otherwise collect.
How does a public adjuster increase the cost of a claim?
They may bring in unnecessary outside vendors.
A new trend we are seeing is bringing in ‘Environmental Hygienists’ after a large fire loss. These ‘experts’ are often hired to determine whether invisible smoke damage presents a health and safety risk to employees and patrons. They determine if the fire produced invisible cancer-causing agents that must be removed and ‘professionally’ cleaned, often at a cost that is 2-3X the cost of the traditional method of wiping down surfaces and deodorizing them to remove the smoke smell.
They may coach contractors on inflating estimates.
Often the public adjuster has connections with the contractors they recommend. Sometimes the public adjuster is also the contractor doing the work!
They may use delay tactics to put pressure on the carrier.
A great deal of aggravation and frustration can be generated by these outside parties, whose primary motivation is to make the most money, not to settle the claim quickly and fairly. Insurance companies are often portrayed as ‘the enemy’ and the blame for claims problems are most often directed at the carrier, whether that is accurate or not.
Public adjusters can provide a legitimate service to an insured. Good public adjusters can help bring a claim to resolution by helping their client through the difficult process. However, when the motivation is to inflate the cost of the claim settlement, a claim can ‘go off the rails’ very quickly.
Please contact your ICC Agent with any questions or Find an Agent in your area.
