Canadian Underwriter

Adjusting for the Future

April 1, 2007   by Craig Harris

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A rapidly changing marketplace requires a nimble, responsive approach from professional loss adjusters and their national association. Today’s challenging scenario of lower claims frequency and insurance company emphasis on expense management may just represent “the new normal,” as one source puts it. If so, many adjusters argue they have to fight back with an aggressive agenda designed to keep the independent professional at the forefront of the customer claims experience in the property and casualty insurance industry.

One could well forgive professional independent loss ad-justers for wanting to take a breather after a dizzying pace of change and turmoil over the last five years. Key trends have left virtually no adjusting firm, large national company or small regional player, unscathed. From dwindling claims volumes to increased use of unlicensed contractors, the natural ebb and flow of business has changed – many say for good.

At the same time, adjusting firms have the bar set quite high in terms of necessary technology investments, specialized knowledge in areas of auto, property and casualty lines of business and customer service. They also have to be able to respond quickly to catastrophic events across the country – even though provincial licensing standards do not allow “portability” from jurisdiction to jurisdiction. It is, in short, a daunting situation.

But far from taking a breather, today’s adjusting firms, represented by their national association, the Canadian Independent Adjusters’ Association (CIAA), are pushing forward with an ambitious lobby campaign designed to maintain, some say restore, the leadership position of independent adjusters in Canada. That campaign features a prominent effort to harmonize licensing across provinces, set minimum standards for continuing education, work with emergency management organizations in various jurisdictions on a common framework for handling disasters and attract new talent into the adjusting profession.


One of the main fronts on this agenda is the lobby for harmonized licensing across provinces. Not a new issue by any means, it is one the national association wants to push on the regulatory radar screen, according to CIAA president Miles Barber. “We have targeted this as a moderate to long-term project,” he says. “We would like to come through the end of this process in the two-three year range. We are just now over a year into discussions with regulators.”

Those discussions, mainly with regulators on insurance councils in Western Canada and the Canadian Insurance Services Regulatory Organization (CISRO), have focused on how harmonized adjuster licensing can be a plus for all those involved in the claims side of the industry – independent professionals, consumers and regulators.

“We think the practice of independent adjusting is relatively homogenous across the board,” Barber says. “A harmonized approach would allow for quicker response of adjusters attending to catastrophic events and a more seamless flow of outside adjusters from province to province. It could also bring the regulators cost savings, less paperwork and fewer background checks and consistency in licensing levels across all jurisdictions.”

Adjusters’ stories of red-tape delays associated with cross-provincial licensing are legion in the marketplace. “Years ago, I didn’t think it was that much of an issue, but it seems more difficult to license people today,” says Patti Kernaghan, president of Vancouver-based Kernaghan Adjusters. “It can take up to six weeks to get someone licensed. When you are in the middle of a catastrophe, you don’t have that time.”

Portability is a big concern, says Crawford Adjusters Canada CEO John Sharoun. “Whether it’s for career advancement or responding to a CAT situation, mobility from province to province is a key component. The ability to quickly mobilize CAT resources to the affected areas ends up enhancing the consumer’s insurance experience. “One clear standard across the country just makes sense.”

“Harmonized licensing and a common standard for continuing education would be good for the adjusting profession, good for insurers and good for the public,” notes Fred Plant, president of New Brunswick’s Plant-Hope Adjusters.

So why isn’t it happening faster? Barber says the main reason is the complexity of various provincial insurance regulations. “I don’t think there is a lack of political will; it is rather that each jurisdiction has its own nuances,” he notes. “For example, are the regulations in the Insurance Act or are they separate? How easily can they be modified? What about step licensing? How comfortable are provinces in moving to a common benchmark? It is a complex initiative.”

Others contend the issue of harmonization slips on and off the radar screen of governments. “It is a matter of each region having to deal with their provincial regulators,” says Carol Messervey, shareholder and partner, Marsh Adjustment Bureau in Nova Scotia. “Sometimes other issues take priority. I don’t think harmonization of licensing is a top priority with a lot of governments.”

Rob Seal, president of Cunningham Lindsey, says harmonized licensing is equally important to his firm, but it may also be helpful to enlist the help of other groups. “I think we would get more progress if we could get the support of insurance companies and the Canadian Insurance Claims Managers Association (CICMA),” he says. “They (staff adjusters) do not necessarily have to be licensed, but they would feel the effects of the current licensing situation in a disaster when they required the services of independent adjusters.”


Consistent requirements for continuing education are an integral part of harmonized adjuster licensing across Canada. As it stands now, provinces have significantly differing standards for minimum hours of mandatory education, with Alberta (at 15 hours for first-year reporting period) and British Columbia and Manitoba (at 8 hours per year) representing the most onerous requirements. Ontario and Nova Scotia, by contrast, have no standards at all for continuing education.

“Continuing education should be tied into harmonized licensing,” says Marguerite Locke, vice president, client services for McLarens Canada. “We need to ensure the capability and knowledge of adjusters. We have to know about changing legislation in various provinces, especially auto insurance, which is a moving target in Ontario and the Atlantic Canada regions. I think this is an issue that is getting more attention.”

Getting 13 different jurisdictions to agree on a common standard, however, is no simple task, according to Craig Walker, director with Maltman Group International. “Continuing education should be a big part of licensing agreements, and we have talked with regulators on this issue,” he says. “Their (regulators’) attitude is that they get virtually no complaints about independent adjusters so we are not really on their radar screen. We need regulators to take this to another level, particularly the CE requirements. What that number should be, though, is anyone’s guess.”

Adjusters have to take at least some responsibility for the lack of focus on continuing education, according to at least one source. “There are far too many people that get into this profession, do the minimum necessary to get a licence and suck on the teat of the industry for the rest of their careers,” says Plant. “Your career is like a bank account. You have to keep putting into it, you can’t just keep taking out of it. I hate to use the word ‘force,’ but eventually that is what mandatory education does – it forces people to constantly upgrade their expertise and service.”

The importance of harmonized licensing and mandatory continuing education stands out in bold relief to one trend that many independents see in the marketplace: unlicensed adjusting done by contractors or service suppliers. While much of the in
formation on the prevalence of unlicensed adjusting is anecdotal, regulators have been monitoring who does what in the claims handling process more closely in recent years.

“While the issue has been around for awhile, I know from certain contractors that they are being asked by insurers more and more to do what I would consider loss adjusting,” says Bob Pearson, senior adjuster with HBA Adjusters in Alberta. “I think many of them don’t want to be doing it and they recognize it as dangerous. It is not a sound claims practice and I can’t believe insurers would condone it. It is penny wise and pound foolish.”

A major concern with unlicensed adjusting is the lack of consumer protection. “The minute you have someone step into that forum and hang out a shingle that they are adjusting, there is a concern — whether they are representing the insurance company or policyholder is immaterial,” says Barber. “If they aren’t licensed, there is no guarantee to the client that they have the educational background and practical experience that is required.”

Many adjusters note that it all comes down to the expense versus indemnity dollar – in other words, are insurance companies really saving money or merely robbing Peter to pay Paul? “Insurance companies are putting the work and cost of independent adjusters in the expense column; they should be putting it in the indemnity column,” says Kernaghan. “The indemnity dollars are going up (through use of contractors) because the losses are not being controlled. I think independent adjusters used to be called the eyes and ears of the company, but that has changed. There is more and more reliance on other vendors.”

Another issue related to consumer interest is the fact that unlicensed contractors do not typically carry errors and omissions insurance. “I think this issue should be more of a concern to the consumer,” notes Messervey. “If you are dealing with a contractor and a policy interpretation is given, or if incorrect advice is given, if something happens, if it goes off track, and the consumer takes legal action, I wonder if [consumers] are aware of this potential and if they actually have coverage.”

As a professional adjuster, Plant adds, “I have the brand of that insurer stamped on my forehead. I am there to provide the even hand of empathy and restitution so that the insurer delivers through on the promise of the policy they made when they took the premium. When insurers abrogate that responsibility to contractors, they are not filling the bill. It is not just that [consumers] are not sent to someone who is a specific adjuster.” Contractors, he adds, “are not providing people with the investigation necessary to secure the legitimacy of that claim.”

Sharoun says adjusters have to demonstrate to insurers why they should be used for these types of smaller “commodity” claims. “The question is: How do we, as adjusters, add value to that type of claim? I think we do and can. But we have not done enough homework to show the insurers the specific numbers and metrics around how we add value. As adjusters, we can manage the supply chain as efficiently as anyone else.”

Some say unlicensed adjusting is a symptom of a broader problem in claims management – the trend to commodity adjusting or flat-fee billing. This stands in contrast to the traditional adjuster remuneration of time/expense billing. “Adjusting for a flat fee is problematic in our view,” says David Porter, president of British Columbia’s Advance Claims. “It is arguable whether the indemnity is accurate or not. In some ways, it stems from the same focus on expense management as insurers using contractors. It is doing consumers just as much disservice as a contractor.”

In terms of flat fees, “I don’t think the client or insured gets full bang for the money spent on adjusting,” notes Walker. “They don’t get the full service when they are paying a flat fee. My feeling is they may get short-changed and my gut feeling also says the insured are usually paid more than entitled to.”

Larger adjusting firms, in contrast, contend that flat-fee adjusting and the focus of insurance companies on expense management is simply a reality of the property and casualty marketplace. “It depends which side of the fence you look at if from,” observes Sharoun. “The insurance company is looking for cost certainty; they want to put a fixed cost number on all their claims. Adjusting firms have done thousands of claims, and we have a reasonably good idea of how much it costs for the majority of claims. The cost has to be factored into the pricing model for any service agreement to work.”

Seal says the flat-fee structure is common in other marketplaces such as the United Kingdom, Europe and United States, and is “here to stay in Canada. It was being driven by the large carriers, but now it is virtually all insurers that are either doing it or looking at it. These can be good deals when an adjusting firm works closely with the insurer so that the company understands its costs base and structure. We need to have a return for our shareholders as well.”

The fear with flat-fee deals is the claims adjusting might not necessarily be as diligent, adds Locke, “but in my opinion, we are selling a service. It simply depends on how you manage it and structure these arrangements.”

No doubt the insurance claims landscape is changing and becoming a tougher market for independent adjusters in which to survive and thrive. While there are pockets of claims activity or frequency in certain areas (such as the aftermath of B.C. storms), there are few signs of a full-scale rebound after the hard market and consumer reluctance to report small losses. Coupled with auto insurance legislation in several Atlantic Provinces and Alberta that puts caps on soft-tissue injuries, the trend of insurance companies to take smaller claims in-house has spelled a sharp reduction in business for many adjusting firms.

“I think the frequency is down, but that is the new normal,” says Sharoun. “There used to be things you could count on every year, such as furnace blowback. We used to get several of these every winter, years ago. Now we drive safer cars, property construction is better, and there has been significant emphasis on risk management, safety and loss control — all contributing to lower frequencies. The loss ratio for commercial property last year was 50% – the lowest in the last 10 years. It is the same with the liability loss ratio. There has been no significant upturn in frequency. And I don’t expect to see one shortly.”

Plant says after changes in New Brunswick auto legislation were enacted in 2003 — including a cap on soft tissue injuries and direct compensation — “50% of our business just disappeared. We have 10 adjusters on staff, and we have to keep them busy. Necessity is the mother of invention, so we have found markets we didn’t even know existed, such as municipal liability, and we are able to service them now.”

Market conditions have prompted smaller adjusters to focus on specialty areas and to be flexible in their approach to business. “The greatest value we bring is on the specialty type claims, outside the commodity box,” says Porter. Walker similarly notes that “we have built up expertise over the years in areas like professional liability, environmental claims and casualty. We are a specialist firm, but we do work across the country. We get our fair share of claims.”

For the larger firms, efficiency and increased transparency though investments in technology seem to be the focus in a competitive market.

“In terms of technology, I would say the biggest efficiency benefit is quality assurance,” notes Seal. “In other words, we have systems that can measure quality across every file in our organization — measure reply time and turnaround time for every file — to ensure we are delivering a consistent service and continue to meet service level agreements. As well, we allow all customers access to our systems for progress updates and look-ins.”

Sharoun agrees that client accessibility is a m
ajor issue for clients in today’s market. “From our point of view, the main driver is that clients want to look at claims online,” he says. “They want access to data, they want to know their claims numbers and have the delegated authority to view claims on-line. It also gives us the ability to measure performance.”


Each adjusting firm pursues strategies according to their size and perception of market potential. But one thing affects the future of the profession regardless of any strategy a company might pursue: recruitment and training. There is a trend toward declining numbers of adjusters across the country. Messervey cites statistics in Nova Scotia that show the number of licensed independent adjusters decreased from 170 in 1995 to 80 in 2005.

With insurance companies taking smaller “commodity” claims in-house or going straight to contractors, the kind of claims that junior adjusters “cut their teeth on” are no longer there, according to Pearson. “So where do young adjusters start?” he asks. “Now it is more typical for loss adjusters to go after people with some experience and try to bring them on board.”

Several sources say times have changed. “Recruitment and training is a critical issue,” notes Kernaghan. “This company has been in business for 54 years. The way my father did business in the first two decades was to hire junior adjusters and train them. You can’t afford to do that today because it is just too expensive; it is very difficult to recruit new people into the new business.”

“We have noticed at CIAA that there has been a downturn in the volume of licensed adjusters across jurisdictions in Canada,” says Barber. “It is that shrinking base — a lot of the older strata of seasoned adjusters are retiring, leaving the business, and there doesn’t appear to be the same volume of replacement coming in. We have identified this as one of our concerns. The broader the base, the better the professionals coming in, the better for us as a profession. We want to present ourselves in a new skin.”

To that end, the CIAA will be gearing up recruitment programs targeted at postsecondary students and new entrants to the labour market. “We want to attract the college and university graduates who want to take the next level of insurance courses and then go through training by seasoned, veteran adjusters in the field. We want to attract those who see this as a career and develop and maintain the professionalism that comes with it,” Barber says.

Indeed, the goal of CIAA is to do the best job possible for all members in perpetuating the role of the independent adjuster in the property and casualty insurance industry. Given the diversity of firms within CIAA membership, this task is a double-edged sword: a wide membership base gives diverse viewpoints, but also brings potential tension of regional firms versus national firms, as well as divergent opinions about what professional loss adjusting is and what it should look like in the future. That can be a healthy tension, several sources note.

“I think we are broad enough minded to listen to the different perspectives out there, whether it is from a small member firm or a director of a national company,” concludes Barber. “I think we all gain as an organization from the benefits of the different areas of focus that each of our members brings to the table. In the many years I have been involved with CIAA, it has never been a deterrent — it has been an asset.”

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