Economy, Insurance Market from a Claims Adjuster’s Perspective

This economy is unlike any seen since the Great Depression. How does the current economic condition affect the insurance industry and claims?

1. Some people tend to not stay current with their premiums.

Insureds faced with economic difficulties may tend towards one of two decisions. Clients may: 1) put off paying their insurance premiums to the last possible minute, some not paying until the last day prior to cancellation. Unfortunately, some of these clients actually end up procrastinating to the point that they actually forget to pay, resulting in a lapsed policy; or 2) rethink their insurance needs and decide that they could/should retain the risk themselves and decide to let the policy lapse.

The problem with both of these approaches is that most people don’t realize the true value of their insurance – until they have a claim.

2. Some customers begin to shop around for insurance.

This can be good and bad (depending on which side the agent is on). On the negative side, today’s competitive market, the ease and timeliness of the Internet insurance market and hard economic conditions, makes it an appealing proposition for the customer to look around to ensure that they are getting the best “deal.” The problem is that many customers unknowingly sacrifice coverages for the sake of price. In addition, most clients do not realize the discounts (i.e. multi-policy discounts) they are giving up by changing carriers (negating some or all of the perceived savings). Lastly, the customer could also be sacrificing a certain level of claims /customer service to which they have become accustomed or expect. Until they have a claim many clients don’t realize the value of their coverage or their agent. Customers often return to their prior agent and carrier (even at a higher price) if the service was excellent.

I recently relocated and had to purchase insurance in our new area. I made a few phone calls to do some “rate shopping.” Automated attendants at two of the local agencies required me to leave a voicemail. Neither of the two called me back within a reasonable amount of time. One called back two business days later and the other didn’t call for over a week. This is unacceptable in today’s “on-demand” business climate – and it cost them both the potential for new clients.

Agents and carriers have the opportunity to demonstrate and provide great service during these times. When clients shop, they are looking at price and service. Current economic conditions create a great opportunity for agents to win and retain clients with more than price. The client perceives that the current market will result in a better price so they are letting new agents in the door; agents need to take the opportunity to impress them with their knowledge and service as well.

3. The number of claims increases.

Some would argue that insurance companies tend to lose customers during tough economic times which causes their claims volume decrease; I argue that claims volume increases. As people begin to examine their budgets more closely and determine that they do not have enough to make ends meet, they tend to look for alternative sources of funds. One of these would be to look for damage to their home, business or automobile that may or may not have been previously noticed but ignored.

Homeowners tend to be the most notorious for this type of behavior. Unfortunately, the way the insurance payment system is set up (i.e. putting the insured and the mortgagee on the check) some insureds decide to take claims money, forego the repairs and instead make the monthly mortgage payment. The likelihood of creating habitual claim filers increases, not only from the insured that got away with it, but for anyone who cares to listen and follow this path with their own carrier.

Other insureds decide, in the interest of “making/saving” money, they will do the repair themselves. This increases the likelihood of a future claim.

I experienced this behavior first hand in my duties as a claims adjuster. The customer claimed water damage to the interior of his kitchen cabinet. My inspection revealed the damage to actually be a grease stain from his stove-top vent. Inspection of the customer’s roof revealed that the shingles were “aged out” and the vent stack boot caulk had worn out. I informed the customer this loss was not covered due to maintenance/deterioration issues.

One year later, and following a significant hail storm, the same insured filed a claim for the same water damage – attributing it this time to hail. Upon arriving at the site, I felt a sense that I had inspected this loss before. The interior was still the same. The grease stain was still there. However, inspection of the roof did reveal some moderate hail damage. In order to mitigate the insurance carrier’s loss, I called my office and did a “previous claim review.” This allowed me to go back to the insured and advise him, once again, that the “water damage” was in fact a grease stain; however, the insurance carrier would have to pay for a new roof due to the hail damage.

It is important for carriers to be vigilant during these harsh times; but there are many things for the industry to consider. Above all – the customer should be of utmost concern.

Andrew J. Fields is an independent property claims adjuster working for a Roanoke, Va.-based company. For the past four-and-a-half years, Fields has worked as a multi-line insurance claims adjuster for various insurance carriers and independent adjusting firms. In 2008, Fields earned the Insurance Institute of America’s (IIA’s) Associate in Claims (AIC) designation.