Last year, after the now-infamous quartet of Hurricanes Ivan,Jeanne, Frances, and Charley finished their tours of the state, 2.3million insurance claims were reported in Florida, according toInsurance Services Office, a supplier of claim data for theproperty and casualty industry.

Because claim adjusting dramatically affects the bottom line ofan insurance carrier, quickly finding good adjusters to manage amassive number of claims like this is not just recommended, it isvital to the survival of insurance companies and their reputations.Good companies get quality adjusters on the scene quickly not onlyfor the benefit of their insureds, but also for themselves.

How do carriers staff for such a sudden and dramatic increase inworkload? What kind of planning goes into being prepared for MotherNature's latest creation? And most importantly, as this year'shurricane season finally comes to a close, what kind of reportedclaim numbers — and staffing expectations — are insurance companiesdealing with for this year's hurricanes of Katrina, Rita, andWilma? By looking at different strategies and their results, anunderstanding of how the industry reins in such staggering numbersbecomes evident.

Beginning in the Backyard

When a hurricane strike appears inevitable, insurance companiesactivate their own internal catastrophe units and prepare callcenters for the increase in claims. However, having hundreds, eventhousands, on their payrolls is not a realistic, nor intelligent,business decision. “There's no way to build a response team andkeep them sitting on the sidelines waiting for a storm,” said TomCrawford, president and CEO of Crawford & Company, one of thelargest independent claim management service firms.

Carriers overcome this by having adjusters who can handle avariety of claims. “Most companies have a small, permanent staff ofcatastrophe adjusters,” said John Eager, senior director of claimsfor the Property Casualty Insurance Association of America. “Indown times, these people help train temporary adjusters. Manytimes, these adjusters also handle auto claims and work commercialclaims. The key is cross-training.”

Jim Flynt, an independent adjuster who has worked propertyclaims for 34 years, agrees. “If a storm is large enough, likeAndrew, Hugo, and even Katrina, then a company like State Farm willbring in not only their property adjusters, but also theirliability and auto adjusters as supervisors, managers, or supportpersonnel,” he said.

After analyzing and comparing the predicted path of a hurricaneagainst the projected number of policies at risk, carriers estimatethe number of claims they expect to receive and in what areas theymost likely will occur. If supply outstrips estimated demand, acarrier has to look elsewhere for adjusters.

Finding “Warm Bodies”

For instance, many carriers rely on third-party adjustingcompanies as resources to supplement existing staff when there is asurge in demand. Most major insurance carriers establish contractswith third parties prior to a catastrophe such as a hurricane, butcalculating how many adjusters are needed before a disasteractually occurs presents a problem in and of itself, not to mentionthe limited pool of talent available immediately after an event.For third parties to connect with potential candidates, they haveto get creative.

“Katrina presented a unique opportunity for us because so manypeople were displaced,” said Crawford. “We actually advertised insome of the centers where people were living and would offerprofessional training for a job in adjusting for those who chose tochange their careers. Our other source was college graduates andthose just getting out of school.”

How does a firm such as Crawford ensure that these potentialadjusters receive the training that they need in order to handleclaims in the same way as a seasoned adjuster? Recruits go throughan intense training regimen that involves working 10 consecutivedays to learn entry-level property adjusting. This type of focusedtraining emphasizes the basics and alleviates the glut of simplerclaims that deal with roof damage and water leakage, which allowsmore experienced property adjusters to focus on the complex floodand commercial claims. Although not perfect, it is one realisticway to handle the increase in the need for adjusters following acatastrophe.

“You cannot be totally prepared beforehand to address an eventas large as Katrina,” said Crawford. “We made a decision toconstantly train and turn out adjusters every 10 to 12 days. Wejust try to build up the group that is eligible to work an eventlike this.”

Once initial training is completed, new adjusters spend severaldays working in the field, trailing experienced adjusters beforegoing off to review and adjust claims on their own. “We feel veryconfident that we can put solid people on the scene when dealingwith less-complex claims,” said Crawford. “Our obligation is toprovide quality claim service.”

In 2005's hurricane season, both the Gulf Coast and Florida werepummeled within weeks of each other. When multiple catastrophesoccur, the need for an expedited training approach becomes evident.“Carriers are looking for a lot more [adjusters] than they probablycan get,” said Crawford. “At a normal event, most companies arelooking at 100 to 500 adjusters in a contract. Katrina wasabnormal; carriers were looking for more than that.”

Kevin Hromas, an independent field adjuster who has worked as astaff and cat adjuster for nine years, said that the demand couldhave been even greater. “If Rita would have come in around theGalveston area as a Category 5, it would have made Katrina looklike a summer squall, just in the magnitude of damages that wereprojected,” Hromas said. “It would have been 100 times worse thanwhat Katrina did. In that situation, vendors really were scramblingbecause so many adjusters were already deployed. Warm bodies weregetting hard to find.”

Experience … or Lack Thereof

A look at expected claim numbers for this year reveals even moreabout the need for adjusters. The Insurance Information Instituteexpects approximately 1.6 million claims to be made in the wake ofHurricane Katrina. ISO projects the damage from Hurricane Rita toproduce 403,000 claims and, although no official estimate had beenpresented for Hurricane Wilma at press time, industry speculationputs the number of claims in the 600,000 range. In total, claimsfor this year's three major storms could top 2.6 million, a 13percent increase over 2004.

Can the estimated 15,000 adjusters in the Gulf Coast area andFlorida handle this kind of workload, given their condensedtraining? Some experienced catastrophe adjusters have theirconcerns. “Many adjusters feel like there is a lot of resentmenttoward new people coming into the field,” said Hromas. “Thebusiness is tremendously technical when you get intointerpretations of policies; that is one area that we feel isshortchanged when new people come in.”

“It is tough to teach policy, teach estimating, even thecomputer estimating software, in a week,” said Flynt. “As thedemand for personnel increases, there comes a point where it isdifficult for vendors to find adjusters who are doing catastropheadjusting on a full-time basis. So they bring in people likeroofers or carpenters. This certainly happened during this stormseason.”

An experience gap can have dramatic effects on insurancecarriers, which is why third parties try to keep newer adjustersbusy on entry-level claims. While an experienced adjuster willanalyze a claimant's insurance policy to accurately determine thelevel of coverage, a new adjuster may not have the level ofexperience necessary to interpret it the same way. “If a [lessexperienced] adjuster overpays the client, that hurts the insurancecompany. If he underpays the claim, it hurts the insured,” saidFlynt. “It increases the demand for public adjusters and plaintiffattorneys to come into play, and hurts the image of us all.”

Flynt went on to say that this could lead to an outbreak of“neighbor-itis,” a tongue-in-cheek reference to the chatter thatoccurs among neighbors and community residents after adjusters havemade their estimates. This contagious situation is exacerbated insubdivisions with similar homes and models, where comparing lossesis relatively simple, and brings an entirely different meaning tothe phrase, “keeping up with the Jones.” It creates difficultiesbetween new adjusters and veterans because while one homeownerreceives a claim for the policy limit, another might only bereimbursed for a portion, depending on how the policy is writtenand interpreted. The result may involve reopening a claim after ithas been closed, which not only slows down the settlement processand increases costs, but also can lower a claimant's satisfactionwith his insurer.

Eye on the Prize

Staffing for catastrophes takes preparation and a sense ofurgency, and finding several thousand well qualified adjusters onshort notice is a daunting task. Although insurers may prefer tohandle all claims from within their own organization, it is clearthat third-party companies play a vital role in training andpreparing hundreds of new adjusters in a short amount of time. Theyalso alleviate the costs of keeping a fully staffed catastropheteam on an insurer's payroll and ensure that a carrier's customersmake contact with adjusters as quickly as possible. Despite someweaknesses in the system, the dedication in getting the job done ina timely manner is apparent.