Filed Under:Risk Management, Public Sector Risk

Are your adjusters getting proper training?

Insurance adjusters require continual learning.
Insurance adjusters require continual learning.

The business of insurance, in recent years, has attempted to reduce expenses by eliminating training programs to produce and maintain a professional claims staff. The expense reduction efforts are a perfect example of penny wise and pound foolish.

Insurance contracts are nothing more than a group of promises to the insured. The insurer promises that in the event of a loss to the insured's property it will pay to repair or replace the property with material of like kind and quality. The insurer promises that in the event a claim is made where the insured caused someone injury, it will protect the insured and, if necessary, will defend the insured against the allegations and if the insured is found liable, it will indemnify him or her.

The standard Insurance Service Office (ISO) policy wordings do not explain how the promises will be kept. Insurers learned centuries ago that an insurance adjuster was needed to work with their insureds to do what was necessary to effectively keep the promises.

The insurance adjuster is required to be a person knowledgeable in insurance retained by an insurer for the purpose of assisting the insured in proving a loss to the insurer. A person who expresses to the insured the fidelity and good faith of the insurer. In California, a statute defines the adjuster as:

A person who, for any consideration whatsoever, engages in business or accepts employment to furnish, or agrees to make, or makes, any investigation for the purpose of obtaining information in the course of adjusting or otherwise participating in the disposal of any claim under or in connection with a proof of loss, or engages in soliciting insurance adjustment business. [California Insurance Code § 14022.]

Like most professions, insurance adjusting requires continual learning. The more the adjuster learns, the more effective his or her negotiations will be. The adjuster should consider attending courses given by the Insurance Educational Association, the Certified Property and Casualty Underwriters (CPCU), the Insurance Information Institute, and continuing education seminars at colleges and various private firms like the General Adjustment Bureau (GAB) training or Vale Training Solutions.

Related: Here are 4 ways to give your claims professionals better training

Scientific principles can be applied to the process of evaluating a claim. However, evaluating claims — particularly the insurer's exposure — is more an art than a science. The more training and experience an adjuster accumulates, the more adept he or she becomes at ascertaining the value of a given case.

training

A properly training claims adjuster will have on-the-job training and annual follow-up education.

Insurance adjusters, unlike members of other professions, must be jacks of all trades and masters of some. For example a property damage adjuster — working first-party or third-party property damage losses — must know the basics of construction, the differences between reconstruction of damage property and new construction, and the local costs for labor and material. A material damage adjuster must know the costs of repairing automobiles while a third-party liability adjuster must know and understand medical terms, the costs of medical and other health care services, and the types of verdicts that can be expected from juries in the adjuster's territory.

The new adjuster gains this expertise in two ways:

  1. By training from his employer or various continuing education providers.

  2. By working in the field with an experienced adjuster.

As, a trainee adjuster in 1967, my employer took a multi-faceted approach to create professional and effective insurance adjusters. They did so by:

  • Introducing insurance adjusters to an insurance adjusting book like “Insurance Claims: A Comprehensive Guide” [available from National Underwriter Co.] so we would understand the basics of insurance adjusting.

  • Trainees then rode on claims with experienced adjusters in every field of business written by the company including:

    • Fire and other property claims adjusters.

    • Workers’ Compensation adjusters.

    • Workers’ Compensation hearing representatives.

    • Bodily injury adjusters.

    • Property damage liability adjusters.

    • Fidelity and surety adjusters.

    • Commercial property adjusters.

    • Commercial liability insurers

    • Catastrophe adjusters.

  • This was followed by time in the insurer's home office and attending 30 days of classroom training covering every possible subject an adjuster needs to know including:

    • Medical terms.

    • Investigation techniques.

    • How to rebuild a damaged dwelling or commercial building.

    • How to read and understand an insurance policy.

    • How to fix a car and knowledge of all its parts.

    • How to fix a broken person and all of his or her parts.

    • How to read medical records.

    • Tort law.

    • Contract law.

    • Equitable remedies.

    • The red flags or indicators of fraud.

    • How to deal with a suspected fraudulent claim.

    • How to deal with an insured with empathy and professionalism.

  • After the training was complete, trainees were then allowed to adjust minor claims by telephone and show the employer that they had obtained and absorbed the training.

  • After a year of close supervision it was time to meet with insureds and help them prove their claims and/or obtain the defense and indemnity promised by the policy.

State insurance departments across the country are attempting to micromanage the business of insurance with various statutes and regulations. Failure to comply with the continuing education requirements can be used as evidence of an insurer's failure to require its employees to comply with the covenant of good faith and fair dealing. Insurers should not only ensure that their training programs conform to those required by the relevant states, but also consistently apply excellence in claims handling training.

Insurers who have failed to properly train their adjusters find that claims are paid that should not be, claims are paid for more than the amounts promised, claims are denied that should be paid, and insureds are dissatisfied with the service they receive. Ignorance and lack of experience can be very expensive for an insurer who will see loss ratios approach or exceed 100% and the number of suits by insureds seeking punitive as well as compensatory damages increase logarithmically.

Insurers who desire to maintain a professional claims staff will find their profits increase and their customers satisfied with the service provided if they insist that their claims staff be well trained and experienced. That means they must have the basic training like that described here, and every year they should have at least an additional 12 hours of training.

Related: Adjusters to the rescue: Trash can still be treasure, when properly restored

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