The insurance industry has seen a vast array of natural catastrophes over the last 20 years, however no catastrophe has generated such unquantifiable loss as the coronavirus pandemic. In this article, we look briefly at the role of the loss adjuster, the recent challenges they have faced in light of remote working, and the potential for an increase in future negligence claims.
The role of the loss adjuster
Loss adjusters are adept at investigating and settling claims or losses on behalf of insurers. They are responsible for establishing what has caused a loss at an insured’s premises or business, and for determining whether it will be covered by the policy in place. During the investigation process, a loss adjuster will examine the policy wording and carry out a physical (now generally virtual) site inspection.
Claims and complaints against loss adjusters are rare, but do occasionally arise when mistakes are made. These can include:
- Under/over settlement of claims
- Failure to consider underlying contractual arrangements (net contribution clauses, exclusions, indemnities, collateral warranties etc.)
- Failure to involve, or delay in instructing, experts
- Delay in adjusting leading to additional loss/damage
- Failure to consider recovery options.
- Failure to check the scope of an insured’s cover
- Failure to check exclusions
- Failure to consider or properly consider policy conditions
- Errors in interpreting extensions
- Failure to consider or properly consider underinsurance
- Waiver of policy defences.
Coverage claims against loss adjusters are less common than defence claims because coverage issues are generally picked up by the claims handler. Complaints can also be made to the Chartered Institute of Loss Adjusters (CILA) where there is a breach of the Guide to Professional Conduct.
The challenges currently faced
COVID-19 has presented a unique set of challenges for loss adjusters. As a profession that has traditionally favoured physical site inspections, social distancing has made the move to virtual inspections a necessity. Loss adjusting firms will need to ensure that they have sufficient technology to safeguard a diligent and accurate site inspection.
Whilst virtual site visits present many advantages, such as time savings, there are certain benefits to physical site visits, particularly where there may be concerns as to whether there is a fraudulent or exaggerated claim. Mark Pierce, operations director at Criterion, said when loss adjusters undertake physical visits they are “better placed to assess the moral and physical hazard” (Claims Media, May). It is far more difficult to pick up on almost imperceptible behavioural signs of dishonesty when a loss adjuster is not seeing an insured face to face.
The frequency of fraudulent claims often increases in times of economic hardship, so it is important that loss adjusters stay alert to new risks. Crawfords has reported a 40% increase in fire claims during the UK wide lockdown, with 36.1% of outbuilding fires considered to be arson (Insurance Post, July). A loss adjuster’s failure to investigate potential fraud may lead to a claim against an adjuster for recovery of an insurer’s full outlay.
In spite of the potential drawbacks to remote working, loss adjusters across the landscape are praising the use of virtual visits and marketing their pioneering technology. Applications are being developed which enable clients to upload photographs of their claim, plus drone technology is increasingly being used. McLarens UK has even implemented a discrete COVID-19 complex technical team of senior adjusters to lead the claims arising from the pandemic and ensure consistency in approach.
Loss adjusters could find themselves in the firing line if they have accepted cover was triggered, despite the lack of physical damage or the lack of damage by a specified peril. Similarly, they could face scrutiny if they have not applied certain exclusions, for example the “contagious illness/infectious diseases” exclusions, some of which may be construed to exclude COVID-19 (depending on the policy wording). The recent FCA Test Case (judgment handed down on 15 September 2020) highlights how the wording of any business interruption clauses will need careful analysis based on the specific facts of the claim.
Businesses may also find themselves under-insured. Adjusters must be alive to this possibility and take it into account in their approach to future adjusting.
These are challenging but exciting times for loss adjusters. The move to remote working will require innovative technologies to maintain both site visits and client relationships. However, these new technologies may give rise to new risks.
Insurers will need to take extra care when instructing loss adjusters, and loss adjusters themselves will need to be even more thorough when investigating a claim. In light of the FCA test case judgment, loss adjusters should also review applicable policy clauses carefully.