Residential Property Adjusting
March 2004
Handling personal lines claims for residences
takes knowledge and finesse. In this new IRMI.com column, procedures and scoping
the loss are explained.
by George
Epps
Epps & Assoc.
Inc.
Adjusters for personal lines claims face a unique combination of challenges
from insureds, who might be quite upset or angry about their losses, and from
the losses themselves, which may or may not be covered by the insureds' policies.
To effectively oversee personal lines claims for residences, adjusters must
possess a great deal of technical skill and knowledge, as well as public relations
and interpersonal skills. The procedures the adjuster follows can ensure a successful
claim result that will satisfy the insured as well as the insurer.
Making a Good Impression
When meeting with the insured to inspect the damages, the adjuster should
be aware that perception goes a long way in settling the loss. The adjuster
should have the proper dress of a businessperson and portray confidence. The
insured will likely not know if the adjuster is experienced or a rookie. If
the adjuster is poorly dressed and acts with indecision, the insured will question
if he knows what he is doing and question his decisions.
The adjuster should be courteous and friendly and above all, a good listener.
An effective adjuster allows the insured to talk. The adjuster's job is to get
the facts of the loss, determine the damages, and settle with the insured. If
the adjuster creates an adversarial situation, completing the settlement becomes
more difficult. Sometimes, the adjuster is so busy telling the insured what
he is going to do, that he doesn't let the insured talk. In many cases, if the
adjuster listens, the insured will tell him how to settle the claim.
Conducting the Investigation
For an adjuster to perform a successful claim, the inspection needs to be
thorough in order to accurately determine if the loss is covered. But perhaps
just as important is the interaction he has with the insured as he inspects
the damage. Depending on the size and scope of the loss, the adjuster may wish
to take one of several different approaches.
If the loss is a small loss, say a water leak, the adjuster should let the
insured show him the damages. Once he has seen the damages, he should confirm
with the insured this is all of the damages.
The adjuster does not want to get back to the office only to discover there
were additional damages he did not see.
If the loss is a larger loss, say a grease fire, then the adjuster needs
to walk and look before assessing the damages. By walking and looking, he will
get an overall view of what will be involved in the claim. He will also learn
about the insured. Are conditions neat and tidy or are conditions messy? Does
the insured have nice expensive contents or do they appear to be second-hand
contents? These are all factors that will assist the adjuster in settling the
claim.
If the loss is more extensive, say a larger fire or extensive vandalism,
it will probably be necessary for the adjuster to make a diagram of the risk.
This is often made more difficult, though, because on a large loss the insured
often wants to follow the adjuster around and talk as he is trying to work.
Since the extent of the damages is large, and the insured has probably already
explained what happened, the adjuster does not need the distraction. Yet the
adjuster should not be rude and bluntly tell the insured to go away. One easy
way to solve this problem is to give the insured something to do. If there are
contents damaged in the loss, the insured can be asked to start an inventory.
The adjuster can explain to the insured there will be certain information needed
to settle the claim. If all is done in a nice orderly manner, the claim will
become easier to settle. The adjuster can explain that by both doing their jobs,
the insurer will get what it needs faster, and the insured will receive a check
quicker. This will usually suffice. The adjuster can then make his diagram and
take measurements of the rooms.
As part of the investigation, photographs of the damage should be taken.
They are a way of showing the damages (or in some cases, the lack of damages).
In some instances, the adjuster may not be sure about how to restore an item
to its original condition. If this happens, the adjuster can take extra photographs,
which can later be shown to a contractor or another adjuster to determine how
to handle that item.
The adjuster should end his inspection by reviewing the damages with the
insured. He should find out if the insured has any questions, and answer them.
Determining Coverage
To determine the loss settlement, it is the adjuster's responsibility to
examine and answer three questions.
- Are the damages covered? The adjuster
must be very familiar with and able to accurately interpret the insured's
policy provisions. Damage must be assessed in light of those provisions,
and decisions made accordingly. There are many cases where the insured has
suffered a loss, but the damage is not covered by the policy. An example
might be water leaking at a roof flashing with damage to the ceiling below.
If an insured peril did not create an opening in the roof, there may be
no coverage for the interior damages.
- How much will it cost to settle the loss? The adjuster's role includes determining the dollar amount of the loss.
The settlement of the loss for an amount that seems fair is probably the
insured's biggest concern. The adjuster must be skilled at making a fair
and reasonable assessment.
- Is there any way to get money back? If
another party possibly contributed to the loss, this must be determined
in case the insurer wants to recoup the loss payment, or subrogate. Therefore,
it is important for adjusters to have a working knowledge of residential
construction. For example, if an insured has a leaking roof, did the roofer
hired to make repairs complete the repairs properly? Are the improper repairs
the cause of the leak, and thus the cause of the damage to the interior?
Such questions need to be answered in order for the insurer to subrogate.
Scoping the Loss and Settling the Claim
When scoping the loss, the adjuster is determining what will need to be done
to return the insured's property to its original condition. There are only five
options.
- Replace. The item is damaged and must
be replaced. For instance, the insulation has smoke and soot damage and
will have to be replaced.
- Repair. The item is broken and can be
fixed. As an example, there is a hole in the wall sheetrock. It can be repaired
rather than having to replace the sheetrock.
- Paint or Refinish. Consider that a door
was damaged and was replaced. The door would then be painted and refinished.
- Remove and Reset. For example, a vinyl
floor in the kitchen is damaged and will have to be replaced. There is a
stove on the vinyl floor. Before the vinyl can be replaced, the stove will
have to be moved. After the vinyl floor is replaced, the stove will have
to be put back. There will be a cost for moving the stove.
- Clean. Assume there is very light soot
damage to the carpet. It is not necessary to replace the carpet. By cleaning
the carpet, it will be returned to its original condition.
As in the earlier stage of investigation, the adjuster must maintain a good
relationship with the insured. In order to settle a claim, the scope of work
has to be agreed to. For example, if after a hailstorm the insured wants his
roof replaced, and the adjuster says the insurer only owes for repairs, the
scope is not agreed to; thus no settlement can be made.
Conclusion
The adjuster who presents himself in a professional manner, listens carefully
to insureds and notes the information, and appropriately applies his technical
expertise to loss situations will be successful in arranging satisfying settlements
for insureds. Not only will this make insureds feel they are being treated well,
but it should also ensure customer retention for the insurer.
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