Declaring They're Independents

But the public expects that all of those marketing slogans that carriers use to sell them their policies — feel-good phrases like "Good Hands," "Good Neighbor," and "Putting You Back Where You Belong," — are going to be delivered upon in times of disaster. Those independent adjusters who respond as storm chasers are the ones out there who are delivering on those promises. But the industry's response seems to be, "Let's cut the fee schedule or eliminate paying mileage allowances. The people who show up at policyholders' doors are easily interchanged with any warm body who has sat through a three-day licensing class." Note to carriers: Gas prices went up another dollar while this story was going to press.

Let's consider a little history. In the late 1980s and early 90s, it was generally found that the top-level catastrophe adjusters could reasonably gross $200,000 to $300,000 annually. Those top-level adjusters would be away from their homes for 10 months out of the year, work 80-90 hours in a seven-day work week, and cover all of their own expenses. Crunch the numbers and that equates to about $30,000 — or little more than $10 per hour. That rubs most of the bloom off of that rosy six-figure number. But this part of the scenario is conveniently left out when vendors begin their recruiting pitches to bring new people into the business.

New adjusters coming in get caught up in the big-money pitch that is typically reserved for those paid advertisement programs found on cable television stations in the middle of the night. They go out and buy the big truck, fifth-wheel trailer, or recreational vehicle, only to stick a for-sale sign in the window a few months later.

It would be disingenuous to assume that the dollar amounts being tossed around by some vendors are ignored by the carriers themselves. It is hard to believe that they would buy into those pipe dreams, but it appears that they have because the carriers have responded by looking only at the bottom line of their claim divisions and decided to eliminate that "high" cost of using independent adjusters by beefing up their companies' catastrophe teams. The results? Carriers found themselves with a bloated catastrophe division in which costs were constant but actual need was fluctuating. The cycle started once again with a renewed commitment to using independents on a consistent basis with proper oversight from within the carrier. The strength of that focus was that there was a readily available and highly trained, capable workforce that could respond to a major catastrophe anywhere in the country.

Addressing Other Concerns

One other issue at the heart of the matter is the apparent refusal by domestic carriers to hire former catastrophe adjusters for staff positions when there are openings. Many experienced catastrophe adjusters spoke to me about their frustrations in trying to land a carrier position over the past couple of years. This was not just from the newly trained; these were men who had multiple years of very diverse experience in handling claims They understood that the positions available would not start at a high level of compensation, but most of the time they would not even receive the courtesy of a response. Or at best, it would be a canned e-mail that said, "Thanks but …."

One response that I received from a very experienced adjuster who happened to land a carrier position went like this: "It was like pulling teeth to get someone to even interview me. I went months and applied for many jobs in which carrier catastrophe teams should have jumped at the chance to have someone with actual knowledge and experience work for them. Oddly, most of the positions advertised had a limit on the level of experience they wanted — three-to-seven years of experience preferred! And they really seemed to mean that they would not consider those with more than seven years of experience. Go figure!"

In our post-Katrina reality, it is also critically important that both carriers and independent companies sit down and address the fallout from the "moles" in the independent adjusting field. The reality exists in our world that there will always be individuals who lie in wait for an opportune moment (read: big payoff) to come forth with what the media and public considers undisputed proof of the insurance industry's dirty tactics. Whether it is a contract adjuster for an independent vendor or one of their own staff who guilty of this, insurers must realize that ignoring these types of people does a huge disservice to everyone.

Concrete Solutions

Independent vendors and catastrophe companies must do a better job of pre-qualifying individuals for training and deployment as catastrophe adjusters. Promises of financial riches cannot be the only sales pitch. There should be accurate and realistic information provided about the costs involved along with reasonable assurances of payment for claims that are completed properly. Companies should not bury the 50-60 percent apportionment deep inside the contract, and they should be very explicit about the hold-back. They must be clear about the expected workload and the living conditions that will likely be found in a catastrophe zone.

As part of the qualifying process, vendors must realize that just being a roofing salesman does not make someone a competent adjuster. The fact that the condition of a roof may be attributable to other factors not related to a covered peril is too often overlooked. Someone whose livelihood is dependent on convincing someone that his roof has to be replaced cannot be objective about properly applying the policy conditions and requirements without adequate training.

While the talk of a national system of licensing raises loud objections from the various state insurance commissioners and associations who seek to protect their turf, the need for a national database of licensed adjusters is long overdue. Common practice calls for catastrophe adjusters to sign up with as many vendor companies as possible to ensure they are called when needed. The lists of available adjusters supplied by vendors in their contracts with carriers are overblown with redundant names found across multiple companies. When companies cannot meet "body requirements," the three-day mills get cranked up and the public is left with a false sense of security that their claims will be handled properly. (Does the scenario of 3,000 suddenly out-of-work casino workers being run through adjuster classes ring a bell?)

The sad part is that vendors and carriers know good and well that using poorly qualified adjusters is a technique used only to buy time from their policyholders until someone else can get the file in a transfer. It is only a matter of time before Congress takes note of what is going on, and we all know what happens when politicians start thinking they have the answers.

As for carriers, they must realize and accept that the usage of independent adjusters is crucial to the cycle of providing a high-level of efficient claim handling. Having a qualified, readily available workforce with the capacity to respond to events such as Hurricane Katrina requires that there be enough work in the off-season to earn a living during those inevitable slow periods.

Hopefully, this report will initiate frank discussions about the state of the independent adjusting field with the result being that reasonable solutions are found. The alternative? Let's not even go there!

Kevin Hromas is an independent executive general adjuster from Houston, Texas. He has experience as a carrier adjuster, independent catastrophe adjuster, and as a claim manager with an independent adjusting vendor. He can be reached at (713) 416-8044, kevin@prodajuster.org.