Independent adjusters across Canada can expect to face a wide range of issues over the coming year. Those anticipated developments, though, fall under some familiar themes: the effect of consolidation, not only among IA firms, but among insurers as well; the need to attract talent to ensure the sector remains healthy and sustainable; the role of technology to make the claims-handling process as efficient and customer-friendly as possible; the effect of a possible decrease in auto claims resulting from improved technology; how best to manage peaks and valleys to adapt to current conditions; identifying the balance between producing revenue and controlling expense; and determining how to address fluctuating claims volumes. Claims Canada asked leading adjusters at top-ranked firms across the country what trends and developments they expect to unfold in 2016. How should claims professionals and their firms best prepare? Read on to find out what those leaders had to say, presented in alphabetical order by last name.
Dara Banga, FCIP, CFEI President & Chief Adjusting Officer DSB Claims Solutions Inc.
How will consolidation impact Canada’s independent claims adjusting landscape?
In all, 59% of surveyed Canadian executives plan to actively pursue acquisitions in the next 12 months, placing mergers and acquisitions (M&A) appetite at a six-year high, according to EY’s 2015 Canadian Capital Confidence Barometer. While this statistic reflects business in general, the insurance industry is following the trend.
Supporting that view are findings from a 2014 survey by Towers Watson that 86% of North American insurance executive respondents expected to see an increase in M&A activity in the next three years, and 78% were actively considering acquisitions. But M&A activity is not involving just insurance companies and brokers. Consolidation is also happening among vendors, including tech companies, claims adjusters and restoration firms, which are buying companies to help expand their service offerings and broaden their reach.
Recent insurance M&A examples include ACE Limited’s acquisition of The Chubb Corporation; the Towers Watson and Willis Group Holdings merger; Hub International’s acquisition of two home warranty companies; and SCM Insurance Services’ acquisition of Granite Claims.
What does all this M&A activity mean for independent claims adjusting services? Two words: buyer beware.
While acquisitions may yield positive results five years down the road, the transition period – while two companies struggle to integrate goals, people, systems and processes – can be nothing short of chaos. And the biggest losers during the transition period tend to be clients. Just ask Comcast/Time Warner Cable customers following their failed merger. Customer satisfaction scores dropped 10% and 9%, respectively.
In the serious and time-sensitive business of claims management, there’s simply no room for error or ambiguity. People’s lives, assets and futures are at stake. Insureds trust that the policies they’ve diligently paid for will deliver in spades when they need them most. They are 100% reliant on an adjuster’s rapid response, investigation, reporting and action.
Then, there’s the bottom line to consider. Insurers and self-insured organizations rely on adjusters to defend their profits and reputations with quality claims services – keeping policyholder retention levels high and fraud and claims leakage low. These goals may be difficult to achieve with an adjusting partner who is in the midst of merger chaos.
Independent adjusters need to take charge of change.
Smaller North American brokerages outperform larger ones in overall satisfaction according to J.D. Power’s 2015 Large Commercial Insurance Study. Smaller brokers received higher satisfaction ratings in three key areas: quality of advice, guidance provided and reasonableness of fees, Canadian Underwriter recently reported.
Likewise, if policyholder satisfaction and profitability are important goals, insurers and self-insured organizations may want to choose smaller, service-driven adjusting firms rather than larger firms in transition.
They should look for adjusting firms that are focused on clients and the crises at hand, that aren’t burdened by satisfying shareholders’ expectations. They should insist on adjusters who aren’t inhibited by big-company bureaucracy or unclear protocols, who can respond to changing needs with speed and agility.
Taking charge of change is necessary to prevent change from taking charge of organizations’ claims results.
Ross Betteridge, CPA, CA President ClaimsPro
2016, holds many opportunities and a few challenges for the independent adjusting industry.
The industry has just finished one of the most benign weather years in recent memory and, with that, came a significant drop in frequency of property-related claims. This is far different from the 2013/2014 period, which saw Canada experience some of the most catastrophic weather in recent memory.
In both of these scenarios, however, a key success driver of independent adjusting (IA) firms is borne by its people, its financial strength and the flexibility to provide the service that our clients need, when they need it.
Helping our clients deliver at the “moment of truth,” in a manner that meets all stakeholders’ needs, is a key challenge to which independent adjusting companies must respond. Insurers are increasingly measuring their own success in this regard, through key performance indicators such as handling costs, cycle times and net promoter scores (NPS).
Delivering cost-efficient claims handling will require IA firms to invest in technology that not only reduces the administrative burden of claims handling on the adjuster, but allows IA firms to seamlessly connect with insurers’ claims management systems. Our adjusters’ professional experience, training and opportunity to interact on-site with the end-customer, when required, will be important to delivering the excellent customer experience that translates into positive NPS scores.
With consolidation expected to continue among property and casualty (P&C) insurers, IA firms will need to ensure they have the scale and presence to not only serve clients across the entire country, but also to deliver the breadth of specialty services increasingly called upon by clients. In order to successfully grow and meet these scale and skill set needs, IA firms must invest in robust succession planning facilitated by strong recruiting and retention programs, training and mentoring, and clarity of career path options.
Due to the regulated nature of the industry, P&C insurers are increasingly faced with strict governance requirements. This, in turn, puts additional pressure on IA firms to ensure they, too, have the appropriate control environment in place as they act in partnership as a true extension of the insurer/customer relationship. Education, monitoring and reporting on compliance will also be important to provide our clients with the confidence to fully use our services.
ClaimsPro has recently joined the Canadian Independent Adjusters Association (CIAA) and is excited to be working with all members in prioritizing the industry’s goals for 2016. These goals include working with provincial regulators to gain support for relaxing restrictive legislation that requires adjusters to hold a license from a province in order to adjust claims in that territory. This will dramatically improve our ability to respond and help Canadians during catastrophic events.
Other priorities include further support for education and training, as well as better promotion of the profession and the career opportunities it provides.
While no one can predict what Mother Nature will bring in the coming months, IA firms, including everyone at ClaimsPro, are prepared and eager to respond to meet the needs of our clients!
2016 started with a soft market and low interest rates. Both have an effect on the use of independent adjusters, as insurers not only look to tighten their underwriting practices, but also to streamline their claims practices.
One positive development is that the industry is very strong on leveraging technology. This is important since consumer expectations are very high around the use of technology. If one can use Craig’s List to buy and sell items and transact immediate payments using e-transfer technology, can the insurance industry harness better technology processes to keep insureds happy during the adjustment of their claim?
Workflow issues could be solved through increased use of technology. Consumers will drive that change and independent adjusters must be ready to embrace new ways of using technology.
Independent adjusters will need to keep current not only with what they themselves are doing, but also with how they can be affected by what others are doing. For example, one of Canada’s larger insurers was recently quoted as saying it is developing a “once and done” claims service for customers, and that its new platform will include self-service claims for very quick settlements.
Where does this leave IAs? Will they need to incorporate new technology processes to reduce their cycle times? This is an opportunity for independent adjusting firms to differentiate their service by creating workflow efficiencies for their adjusters.
Catastrophic events are the biggest unknown in the industry. Typically, the industry waits for an event and then decides on a course of action according to the event’s location and severity.
Overall, 2015 was slower than usual for storm claims. However, weather events come in cycles and adjusters cannot afford to be complacent.
In 2016, we need to prepare ourselves and undertake more training, develop new processes to shorten storm claim cycle time, and be prepared to increase the size of our storm teams – thereby allowing us to respond to weather events with fast on-the-ground service, using fully licensed professionals, to control the claims.
Tammie Norn, FCIP Chief Executive Officer ProFormance Group Insurance Solutions
The world of independent adjusting has undergone plenty of changes over the past number of years and continues to evolve at a rapid pace. There is something to be said for consistency and stability, but in this day and age, if an adjuster is not continuing to develop, change and grow in concert with society, technology and industry trends, then it will be difficult to continue to operate a sustainable business.
Small independents rely largely on specialization, relationships and the ability to be agile and responsive to change, whereas nationals have an advantage due to the size, breadth and scope of coverage they can provide. I believe the industry needs both nationals and the boutique firms to respond to various needs.
From a personal lines perspective, I anticipate the industry will see a decrease in claims throughout 2016 and ongoing into the future, largely due to technological advances in society such as smart homes, autonomous vehicles and telematics. Our homes are safer because of the security and monitoring systems consumers are purchasing, as well as the apps and programs that can alert homeowners to smoke and intruders in real time.
On the roads, many drivers choose to install telematics devices into their vehicles for purposes of reducing their insurance rates. This not only provides the insurer with data on the driver’s behaviour, but also serves to curtail poor driving habits. Drivers tend to consciously attempt to improve their habits to reduce their insurance rates, which, ultimately, leads to fewer accidents.
Accident avoidance systems have been around for many years and can be as simple as a light on the side-view mirror that flashes if a vehicle in the next lane is in the driver’s “danger zone”, or as complex as automatic braking features if the car senses the driver is too close to an object in front of the vehicle.
All new cars these days come with some form of safety features that help reduce driver error and resulting accidents. Let’s take this one step further and look at autonomous cars.
Ontario will be the first province in Canada to allow the testing of self-driving cars. Testing was to start in January 2016 at the University of Waterloo, which is home to a lab dedicated to self-driving vehicles. By 2040, the Institute of Electrical and Electronics Engineers reports that it expects 75% of all cars on the road will be automated to some extent. The experts further believe that this change will come quicker than we think. There are already almost 100 companies in Ontario working on technology in this field.
These are all great transformations for society and insurers. However, some experts anticipate as much as an 80% reduction of car accidents within the next decade, which will have a significant impact on the independents who deal with personal lines claims.
As an optimist, I like to see the opportunity in every challenge and choose to believe that this considerable reduction, if realized, may lead insurers to rethink their business models and outsource personal lines claim departments all together.
Furthermore, independent adjusters are often used for their expertise in a certain field. With so much change and innovation, there will be a shift in liability from personal lines to commercial products.
It is an opportune time for IAs to further develop investigation skills to adjudicate claims involving disruptive technologies such as drones, autonomous vehicles, smart homes and 3D printing. As specialists in these fields, IAs will be able to coordinate experts, investigate and evaluate at a superior level than that of a general adjuster.
Albert Poon Chief Operating Officer, Cunningham Lindsey Canada
The independent adjusting business is coming off a year of lower claims outsource volumes due to a lack of weather-related events. The outlook for 2016 does not appear to be any different, as long as the weather remains benign.
As in the past, this mild environment represents a challenge for the industry. IA firms are continually faced with the need to right size their organizations for the current conditions, while also ensuring resources are available to meet customer needs, especially should claim volumes spike.
Managing peaks and valleys has – and will continue to be – a primary challenge for any independent adjusting firm and this is not expected to change.
What has evolved is how IAs manage resourcing when major events do occur. As global expansion continues in the industry, it affords access to resources from other parts of the global community. Sharing adjusting resourcing and expertise from within Cunningham Lindsey’s worldwide operations, for example, has become an effective way of quickly bringing in trained and knowledgeable people.
Technology is also a key area to support major loss events. The IA industry is looking at a wide range of ways to leverage innovation – everything from smartphones to tablets, video adjusting and drone technology – to better manage catastrophe events.
Our operation in the United Kingdom, for example, has been using drone technology for several years now in a variety of scenarios. When a major event occurs, a drone is deployed to survey the area and build a picture of the general area to determine how many people need to be deployed in a certain area. This helps separate fact from fiction in terms of where to send people and resources.
Technology is definitely changing how independent adjusters do business. Data and analytics are now fundamental to service offerings. Providing meaningful claims experience data can significantly assist corporations with their risk management programs. And, for insurers, it means claims can be paid more quickly, which fits into the “customer experience” mantra that is echoing throughout the industry.
Greater innovation through process improvement and technology will help to deliver a better service model.
Low insurance premium rates have led to record levels of mergers and acquisitions activity in the industry and insurers are looking to achieve savings through these deals, often through in-sourcing claims. Faced with this challenge, independent adjusters understand they can play a key role as a provider of specialty services. Cunningham Lindsey anticipates the need for increased expertise in specialty lines to remain core to our business, and the strategy remains to grow in large loss and specialty lines capabilities through recruitment and organic growth.
While the IA industry has and will continue to change, it brings with it new opportunities. 2016 should be viewed with great optimism and excitement.
John Seyler, CIP President Integrated Insurance Resources Inc.
In 2011, there was an article in Claims Canada written by my friend and colleague, Terri Mitchell. In that article, she said, “Unfortunately, I have heard rumblings throughout the independent adjusting community about us being a dying breed.” It seems we have been falling out of style for years.
From the perspective of a small adjusting firm owner, these firms do face challenges that are not unique to small business in Canada. The bureaucracy of government and administration of businesses big and small detract from our ability to focus on serving our clients and, specifically, the insuring public.
In conversations with fellow adjusters, a common lament is, “I just need to find time to deal with the issues of my company like payroll, benefits and human resources.”
I think every business owner simply wants to be free to handle files and market clients. Let’s face it. Producing revenue may be the easy way to succeed, but controlling rising expenses is where the long-term success lies. It is apparent that the resulting pressures facing small IAs has led to consolidation of the industry and demise of the independent operator.
As is the case with property and casualty insurer consolidation – where the bigger-is-better philosophy prevails – that this trend will continue to extend into the claims industry. With the implementation of restrictive vendor lists as opposed to the model of using the best vendor in a market, the small general adjusting firm may be a thing of the past. It seems the idea of a thorough investigation by insurers is disappearing.
Combine these issues with the advantage that a national firm has thanks to economies of scale and access to national vendor managers, this can make any small operator jealous.
Yes, I can hear three or four national CEOs bemoaning my comments, pointing out that I haven’t walked in their shoes, but little is more distressing than finding out how little big operations pay for office supplies, insurance and equipment in comparison to a small volume purchaser.
With all that said, I believe that while the general claims business is fading for small independent adjusters (IAs), we still have a lot to offer the industry. So, Terri, I would say that in 2016 the rumours of our death have been greatly exaggerated, but do offer food for thought.
Like vendors large and small, IAs need to keep investing in technology and keep searching for the niche market where our intellectual property has value to insurers. Unless you operate in a remote location and are the only game in town, it is necessary to handle the type of claims the competition doesn’t, or to do it better.
Small independent adjusters looking to compete with a national independent company or the company adjuster must provide a better product. It is essential to constantly add value in exchange for the use of your firm. Having niche capabilities can overcome the restrictions of the exclusionary vendor list.
There are many problems facing independent adjusters in general. In-sourcing by insurers is a key factor. This only makes proving our value proposition every day – without creating an hourly rate race to the bottom between competitors – all the more important.
Automation of the claims process looms and the interface of technology with our clients is inevitable, but at what cost? With the addition of ClaimsPro to the CIAA, this coming together provides an excellent opportunity to make our single voice heard. The opportunity to be heard by insurers and regulators as a true national representation cannot be squandered.
However, capitalizing on the opportunity means we need to develop – first at a grass-roots level – pride and enthusiasm in the IA profession. It seems we have an industry-wide self-esteem issue.
Building confidence and strength starts with every adjuster being proud to hold a license. Whether grinding through mundane physical damage claims or an industry leader working a multi-million-dollar loss, adjusters deserve the recognition by principals of large and small firms alike.
The work of the independent adjuster is changing as a result of an ever-changing environment. I, for one, plan to scuttle the rumours and adapt to a new reality where IAs can continue to offer insight and value to clientele.
Pat Van Bakel, BA, CIP President & Chief Executive Officer Crawford & Company (Canada) Inc.
It is the time of year where everyone is looking into their crystal balls and trying to predict what the year ahead will deliver – in the way of both challenges and opportunities. The same applies to the claims industry and the role of the independent adjuster.
It seems nearly impossible to go a full day where there are not multiple headlines highlighting the profound changes that have taken place or are about to come into effect, all of which lead to significant and irreversible effects on the independent adjusting industry.
Throughout 2015, we witnessed considerable merger and acquisition activity within the insurance industry. The 2016 large-scale acquisition of RBC General Insurance Company by Aviva Canada signifies that mergers and acquisitions may continue to play a significant role in shaping the landscape of the insurance market.
With a single transaction, a carrier can significantly increase both its market share and competitive advantage. The ripple effect of such a transaction has considerable impacts on supporting service providers and business partners, such as IA firms.
Within a split second, two of your larger clients can become your largest client. The reverse could also be true, whereby you lose a large client as a result of an acquisition and are left with a significant loss within your business portfolio.
Adaptability within an ever-changing landscape is key to the success of an IA firm. Being flexible in terms of altering short and long-term strategies to adapt to current conditions, as well as the needs and expectations of your client base, is vital. The diversification of clients and service offerings is one way in which a successful IA firm counteracts the risks associated with M&A activities.
The insurance industry is in the midst of a digital transformation. From brokers to carriers to IA firms, we are all striving to use technology to drive improved processes and create efficiency gains, better manage our businesses, increase engagement with clients, enhance the insured’s experience, and better interact with our business partners.
Carriers are rapidly shedding legacy systems, unlocking the potential for more agile, strategic and integrated partnerships with IAs. This serves to solidify the business partnership between the two, as IA firms become the true variable extension of a carrier’s internal capabilities, with both service and data being closely integrated.
These factors will impact our industry in a significant way. But so, too, will the advancements in technology and developments in insurance products currently being tested in research and development labs across the globe in areas like autonomous cars, drones or unmanned aerial vehicles, the Internet of Things, cyber risk, data analytics, self-service and video streaming, telematics and usage-based insurance, and the emergence of sharing economies.
Through these advancements, it is almost possible to peer into the future, which upon first glance, bears little to no resemblance to the past.
Parallel to this is the increased industry demand placed on IA firms to develop first-class talent in these new disciplines so that carriers and risk managers have the confidence to underwrite or confront these risks.
As an industry, we are always trying to define the “new norm”. At a macro level, we look at the “claims economy” and the fact that it is in an extended period of benign weather in Canada with low claim frequency. This presents an opportunity for carriers to strengthen their solutions with IA partners and prepare for the inevitable return to higher claims frequency or catastrophe events.
The timing is ideal for carriers to work with IAs to redefine their field service strategy, be more prescribed with respect to service proposition and segmentation, implement effective triage practices, leverage best-response resources, develop strategies on how to use technology to deliver a more cost-effective and service-oriented approach to claims, and obtain alignment on what the expectations of that service proposition will be in the short and long term.
As IAs, we need to be culturally and operationally aligned with the changing competitive dynamics of our clients, who are facing rapidly evolving service expectations from personal and commercial policyholders alike. Technical skills in claims investigations and coverage analysis are as critical as ever, but are now overlaid with an equal focus and priority around customer experience and more predictable service outcomes.
Ultimately, IAs need to be students of the industry, rethinking corporate orientations from the inside-out to the outside-in. It has never been more important to stay on top of emerging trends and products as we face unprecedented changes in core property and auto products.
Whether it is rapidly changing property coverages in response to demand for flood cover, or yet again more regulatory changes on the horizon for Ontario automobile insurance, IAs need to keep abreast of these evolutions and assist clients in their quests to adapt to new landscapes.