Since April 20, 2010, when the Deepwater Horizon oil rig exploded and began to gush millions of gallons of oil into the Gulf of Mexico, we have been bombarded with information on the latest issues and events as they occur. For those of us in the insurance industry, it has provided an unprecedented event for which to develop an understanding of risk, coverages, claims, and litigation.
Now as we enter the middle portion of the 2010 hurricane season, we find ourselves faced with another issue to add to the mix: the possibility of a hurricane occurring amidst the oil spill. One of the greatest concerns being discussed within carriers and independents is the issue of having enough adjusters to handle a large catastrophic event when, and if, the need arises.
Major Players React
Darryl Willis, claim manager for BP, has stated that he now has about 1,400 adjusters working with 36 offices open and about 135 telephone call-center operators who are taking calls. BP has contracted with Worley Catastrophe to handle the claim-handling process. Willis stated that he will continue to use Worley Catastrophe, and he advised that Worley has competently proven to him that they would be able to provide up to 5,000 adjusters if that many are needed.
Ken Feinberg, the man appointed by President Obama and BP to oversee the oil spill payments from a $20 billion fund, told us that while he believes that BP has done a good job thus far, he is critical of the time that it is taking to get the payments to the claimants, and is critical of the process of handling the business claims. He stated that he will continue to improve the processes and add additional staffing as needed to adjust and pay claims.
According to Feinberg's spokesperson, Worley Catastrophe Response Company will continue to work with his office to assist with the administration of the Gulf Coast Claims Facility (GCCF), including the staffing of 36 claim office facilities throughout the affected Gulf region. The company ESIS will continue to work with BP, but will not be directly involved with the GCCF once the transition to the new facility has occurred.
When asked about the oil spill and staffing, Mike Worley, owner and president of Worley Catastrophe, advised that the adjusters being used for the spill are not property adjusters. Furthermore, he said the adjusters that are certified and trained for carriers in which he has contracts are not being used for the oil spill claims. Worley said that of the adjusters that he is using, about 10 percent came from other companies to work for him.
Worley said he is prepared and ready to supply adjusters to carriers should a major storm require him to deploy. It is his belief that there will be a sufficient number of adjusters to work any catastrophic event that may occur. He said that it will take about three years to conclude the handling of the spill.
Insurance companies may suffer this hurricane season as a large number of independent adjusters are being deployed to handle the oil spill claims and will not be available when called to be deployed during hurricane season. Most carriers, about 80 percent or more, rely heavily upon the independent adjusters and independent firms when preparing and planning for the storm season.
Interestingly, oil spill adjusters are making an above-average day rate and are being paid per diem. Many companies do not allow day rates or per diem, instead paying on a percentage or fee schedule. Independent adjusting firms and carriers may need to increase fees and percentages being paid to adjusters to not only attract them but also to retain them when or if another catastrophic event occurs. It is no secret that adjusters have been known to leave one event for another if it will benefit them. It may be difficult for the adjusters to leave the oil spill knowing that it will be a long-term assignment. That is not always the case when it comes to storms.
Planning for the Worst
Should the number of adjusters being deployed to handle oil spill claims continue to rise and hired adjusters near the 5,000 number mentioned by Worley, will other independent adjusting firms feel the pinch?
Paul Kottler, president of IAS Claims, an independent firm that handles property and casualty claims for catastrophes and non-catastrophic events, said he has contracts with some of the major insurance carriers.
Kottler said that while he believes only a few of their adjusters left to go to work oil spill claims, he does believe there will be a significant impact to the pool of independent adjusters that are available to be deployed.
Even if just 10 percent of the independent adjusters wound up working oil spill claims, it would leave a large gap in the number of adjusters from which to draw. Actions would have to be taken in terms of training others to handle catastrophe and property claims, or another source would need to be found (i.e. contractors). IAS Claims takes additional measures to ensure that they have a committed group of adjusters if needed for a catastrophe in regularly scheduled webinars, meetings, seminars, and surveys.
Pilot Catastrophe Services, an independent adjusting firm that has contracts to supply adjusters to Allstate, State Farm, Liberty Mutual, American Family, and others, has felt the pinch as many of their call center or temporary employees left to go to work for BP when they were offered a slightly higher pay. As for the adjusters, they say that many from their environmental division have left to go to work for Worley and BP, but they are confident that they will be able to fulfill their commitments and contracts with regard to their property, auto, and catastrophe services. They are constantly updating and adding to their list of qualified adjusters and asking for commitment letters from adjusters on their rosters
Will the pool of adjusters be somewhat depleted and will it be difficult for independent companies to fulfill their obligations? Will there be enough qualified and experienced adjusters to handle what Mother Nature may send our way this year? Check back on Dec. 1, when the 2010 tropical storm season officially ends.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.