ANDOVER, NJ - OCT 30: An uprooted tree laying across the front porch of a home after Hurricane Sandy made landfall in the northeast region of the US in Andover, New Jersey on October 30, 2012.

A new survey highlights opportunities for North American property/casualty insurers to better utilize third-party services when adjusting property claims.

Commissioned by BrightClaim, a national claims services provider, and conducted by Ward Group, a provider of benchmarking and best practices studies to insurers, the survey highlights the use of outside vendors in several aspects of the claims process, including file adjusting, catastrophe management, contractor repair network and contents evaluation.

More than 70 carriers responded to the survey, with the results segmented by company size and primary line of business—personal versus commercial—and augmented by publicly available data.

The average combined loss and loss adjustment expense ratio reported was 58.7 percent, with carriers reporting loss adjusting expense ratios between 6 percent and 6.9 percent on average.

The average cost paid per property claim was $7,889, with 66 percent closing for less than $10,000.

Organizational Structure

According to respondents, the average carrier had nine field offices, with personal lines and larger carriers reporting more field offices than smaller carriers. The trend of field office consolidation continues, likely due to benefits such as lower costs, streamlined back-office operations and increased productivity.

Survey respondents reported that one-third of property staff adjusters work out of their home offices.

Customer experience ranked highest in carrier concern. And while 83 percent of insurers reported using post-claim customer surveys, only 23 percent reported using third-party surveys to validate results—a potential missed opportunity, said Matthew Ryan, director of the Ward Group.

The top three customer concerns were:

  1. Fair settlement
  2. Communication
  3. Quick payment

Respondents noted that higher pending property claims per adjuster correlated with longer claim cycles.

Independent Adjuster Usage

Of the carriers surveyed, 95 percent reported utilizing independent adjusters (IAs) in noncatastrophe claims handling situations. Forty-four percent assigned certain tasks to IAs; 27 percent relied on independent adjusters to handle claims to completion; and 29 percent reported utilizing IAs for a combination of the two.

High-performing carriers were nearly twice as likely to assign full claims adjustment activities to independent firms rather than task-based assignments. These carriers achieved loss and expense ratios six points lower than the overall benchmark.

Whether a vendor offers a one-stop shop or suite of services was the most important factor for carriers choosing an independent adjusting firm.

Carriers reported using the following criteria when conducting vendor evaluations:

  • Quality
  • Customer service
  • Productivity
  • Cost of service

Despite evaluating performance internally, only a third of carriers reported conducting independent adjuster performance evaluations.

The cost per claim for IAs handling claims to completion varied widely among carriers—between $500 and $1,351. The variance was found to be driven mainly by line of business and the carrier policy and procedures that independent adjusters needed to adhere to. For task assignments, the cost per claim ranged between $322 and $513.

Of the carriers surveyed, 17 percent employed full-time catastrophe adjusters, with larger carriers more likely to employ catastrophe adjusters than small carriers. The average catastrophe adjuster staff size was reported to be 11 employees.

The most common benefit offered for catastrophe claims handling was a flat-rate bonus; 42 percent of carriers reportedly offered this type of bonus, with the amount averaging around $147 per day.

As far as independent adjuster usage during catastrophe activity, 82 percent were utilized in the field, while others were used to complete investigations and to handle the overflow of daily claims.

Contractor Repair Networks

Contractor networks were reportedly utilized by 32 percent of carriers, while 46 percent indicated they had no intention of using them. Once referred to contractor networks, 80 percent of customers reportedly used in-network contractors.

Almost 90 percent of carriers reported their expectations being met with loss adjustment expense ratio reductions. The survey also found that carriers that used a contractor network reported a five-point reduction in loss ratios.

Contents Programs

Contents program for loss evaluation was the primary focus of contractor networks at 68 percent, with 52 percent of carriers reporting a companywide process for contents claims evaluation. Ryan said that centralization and standardization ensure consistent results. Of the carriers that reportedly used a companywide process for contents claims evaluations, 37 percent outsourced the function, while 33 percent were adjuster determined.

According to Ryan, the common factors of high-performing insurers were:

  • They consider themselves market-leading.
  • They operate fewer field claims offices.
  • Customer experience ranked as the top priority.
  • They reported higher pending workloads and longer cycle times.
  • They are more likely to rely on independent adjusters for full claims handling when needed.
  • Customer service was the No. 1 criteria for evaluating independent adjuster performance.
  • They didn’t rely on full-time staff catastrophe adjusters.
  • They are more likely to use or consider using a contractor network.

Topics Trends Catastrophe Carriers Claims Property Contractors