When a loss occurs; an adjuster’s view

Like so many of us, Peter Crosa accidentally entered insurance during his college years when he got his start as a part-time clerk working in the filing department. Fast forward and Peter Crosa is the founder and CEO of Peter J. Crosa & Co., a Tampa Bay-based independent adjusting firm for commercial and personal P&C lines. He is also the former president of the National Association of Independent Insurance Adjusters (NAIIA) and a member of several other national and international claims associations.

When I asked him how his business changed over the year, he immediately responded with ‘it sped up.’ Adjusters, he told me, are supposed to write their own repair estimates. In the past, this assignment may have taken between 1-2 weeks. Today, it can be completed in 3-5 hours. But while email substituted mail, mahogany furniture is still being handed down from the production teams to the underwriting teams to the claims teams, says Peter who points out the only chain of command he’s witnessed; emphasizing that throughout his entire career ‘claims’ has been at the tail end of innovation.

“And the customer? Has he changed?” I asked. He did. He is more demanding, more sophisticated, possibly in financial strife. However, it is the public and its distrust in insurance that insurers need to be mindful of.

My Q&A with Peter, below.

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Your background

I was a liberal art major in college and a rock musician. I only mention that to establish my penchant for communication and perhaps a bleeding heart for humanity. I started with one of the larger personal lines carriers and underwent their training. I eventually became an independent adjuster who by definition represents insurers, self-insured corporations, and their defense counsel for the investigation and resolution of 1st and 3rd party claims.

Independent Adjusters market their services to insurers who may not have local representation in areas where they sell policies. This contributes to my entrepreneurial bent. Independent adjusters don’t pray for more losses to happen. Enough losses already happen. We just strive for a greater market share of assignments for field investigation. I’ve represented hundreds of insurers throughout the U.S. and Latin America in as much as I am bilingual; fluent in both English and Spanish.

How does one differentiate in the field of ‘service’?

I naturally developed a knack for emotional intelligence and would say I’m very good at reading people. I love meeting people and find them interesting. I find it easy to empathize. Sometimes I’ve felt like these were not the best qualities for an adjuster. At times an adjuster has to be confrontational and even adversarial and while I’m capable, I don’t prefer it. Conversely, based on the people (in my industry) I’ve met over the years, I’ve often wondered if one of the hiring criteria for adjusters was “must not like people.”

I don’t say this lightly because I believe it is a noble but misunderstood and unappreciated profession. In some cases, there are abuses (not unlike a small percentage of police officers who manifest unethical or inequitable behavior) leaving the rest in the profession with a tainted image. I recall a broker needing my help on a large loss sustained by one of his clients. He believed his client was not getting fair treatment from the adjuster. The first comment out of his mouth was “adjusters are Satan.” Other times I’ve heard opinions such as “adjusters are like used car salesmen; not very honorable.”

Adjusters are the gatekeepers; enforcing the conditions, limitations and exclusions written into the insurance policies. These policies were sold to consumers with a smile and a handshake or at lightning speed via the internet with happy graphics and little mention of “what we won’t pay for.” Let’s face it, you don’t sell insurance policies by telling prospects “what we won’t pay for.” The production and underwriting staff leave that to the adjuster.

Your observations regarding underwriting, service, and adjusters

Being an adjuster who teaches outsiders about our industry, I divide any given insurer into three divisions; production, underwriting, and claims. The following descriptions are somewhat exaggerated of course, but I’m trying to convey a perspective to make it easy for an outsider to delineate.

Production encompasses the sales division and includes agents and brokers. Visualize the “loving rainmaker.” They love everyone. They want to sell insurance to everyone. They drive revenue. You can count on them being gregarious, out-going, influential personalities who could sell ice to Eskimos. They thrive on customer service and policyholder retention.

If you were a fly on the wall of an agent’s office, you’d hear very positive stories about how they support their communities, helping people in need, taking care of the customer with a hole in their roof, or two feet of water in the basement, etc. For them, it’s all about the care and favorable treatment of their policyholder. They are “personal income” focused and that requires volumes of happy, trusting policyholders.

Then you have the second division – underwriting – staffed with what I call the “worried underwriter.” They establish the terms, conditions, and limitations they’ll offer in a policy. They define the demographic and quantify the values they’d prefer to underwrite and the premium they’ll charge. No one really meets their standards for underwriting and they’d prefer not to sell a policy to anyone. These are the insurance execs who stay up all night because a catastrophic storm is about to hit the eastern seaboard and they have 10,000 insured properties in its path.

The third division is the claims department. When the adjuster becomes involved in a claim, the policyholder has already experienced a whole series of “feel good” events. First, the customer seeks to buy the insurance policy out of prudent foresight, having a financial interest in the property or exposure and wanting to be protected in the event of a loss. They feel like they’re doing the right thing.

Next, while the consumer hopes never to need the insurance coverage, they may have been impressed by an advertisement or by an agent and decided to purchase the policy. Nearly every step in procuring the insurance will have been a reassuring, practical move generating a sense of security, trust, and control… until a loss occurs. Up until that loss occurred, that consumer may have felt like “I’m in good hands,” I’m being taken care of by a “good neighbor,” and now comes the adjuster who is going to tell me what’s not covered or what’s limited and that depreciation or coinsurance might be an issue.

The insurer’s dilemma

What type of adjuster does an insurer want to send into this scenario? A mild-mannered “milk toast” type who will roll over and concede to whatever their policyholder wants (be it covered or not) or would they prefer someone who is firm, uber-principled and Teflon coated to personal insults, threats of complaining to agents, state regulators, lawyers, or even policy cancellation. The answer can be found in how the insurance industry trains its adjusters. I once attended a conference that presented a panel of claims managers including one who happened to be a claims vice president for a small regional carrier. The audience was made up of independent adjusters wanting to know how to better serve insurance companies. The claims VP offered a “pet peeve.” His complaint dealt with how an adjuster would describe marks left on roof shingles. “Don’t write in your photo description that this is evidence of hail damage. Better to refer to it as an indentation of unknown origin.” The idea was that he didn’t want his defensive position to be compromised in the event he could develop forensic evidence to support a denial alleging that the damage should not be attributable to hail. Personally, for ethical reasons, I would not accept an assignment from that company.

Back to the original point. How does the insurance industry train it’s adjusters? One of the largest adjuster educational events supported by a myriad of insurers takes place annually and it also breaks into four regional events per year. It is attended by thousands of adjusters from around the country. If you take a survey of its sessions, you’ll find that 99% are about successfully defending (as in fight or deny) claims and 1% falls out of that category. That 1% is usually about how to write more literate reports but rarely will you find a class on empathy for someone who has suffered a catastrophic loss.

The notion of delighting customers vs. looking at a customer as a claim waiting to happen

If you are a fly on the wall of an adjuster’s office, you’ll hear people talking about how someone tried to rip them off or someone got caught in a lie. You’ll hear about fraud and you’ll see that after a period of time working as an adjuster, any rookie will adopt the mentality that every claim is suspect and the potential for fraud is everywhere. If you, as an adjuster, tell your manager or coworker that you “delighted a policyholder,” they’ll think you overpaid the claim.

I haven’t met anyone who believes a policyholder is a “claim waiting to happen.” But once a claim is filed, an insurer takes notice. Once a policyholder files a claim, they are statistically more likely to file a second claim, which then makes them, statistically, more likely to file a third claim. Claim frequency is exponential.

When I worked for an insurer, I knew that policyholder retention was important but not at the cost of retaining a serial claimant. It was important to deliver on the promise as advertised but equally important to enforce the terms, no matter what. Those are the rules by which adjusters operate. Most do not have policyholder retention at top of mind.

Personally, as an independent adjuster and business owner, I expand my area of concern to include the producer. We let them know our company’s realization of how important this client is to them. We tell them we’ll do our best to fulfill their promises and we’ll let them know, in advance, of any problems that may arise. The policyholder, producer, and insurer are all safe with me. Ethics is the utmost principle serving everyone’s interests.

Your motivation

Like any good cowboy (or claims investigator) I like to catch the bad guy. While I don’t take it personally (like many of my peers) I get satisfaction in not letting fraud get past me. Many may think of insurance as boring but many also have a hint of how cool it would be to be one of those investigators that catch people faking an injury, embezzling funds, or exaggerating damages. And adjusters do that diligently but there is also an opportunity (depending on your attitude) to help people. Who doesn’t want to help people? It can be very satisfying to make a displaced family whole again after a catastrophic loss.

I’ve become enlightened and have certainly met many wizened adjusters who give everyone a fair chance and refuse to see “fraud everywhere.” My approach is that I tell a policyholder that “I’ll do everything I can to take care of you within policy terms.” I promise to let them know upfront if I see any problems with how coverage will limit or even preclude their settlement. I speak with a reassuring voice and sense that they believe they’ll be treated fairly; good or bad news notwithstanding. If fraud hits me in the face, so to speak, then it becomes a different ball game.

Final thoughts

One thing I’ve been wanting to say for a while (because I am a fan of Coverager and listen to all your podcasts) concerns Insurtech. It’s very impressive how they go about figuring how to promote and sell a policy leveraging AI to the max; how quickly they can deliver a policy at the best if not the most competitive price. The way they present this to investors seems to be precision focused as to market share, policyholder acquisition, rate making, etc. But they say very little about their claims process. What do they expect their loss ratio to be and how will they manage the claims? To me, of course, it’s all about what happens when a loss occurs.

It seems to me that Insurtech assumes all policyholders are equal, organized, prudent, honest, creditworthy and will comply and cooperate with any request for documentation to support their claim. That’s not the world I live in. I may be wrong but I get a sense that Insurtech is a bit naïve when it comes to understanding the wider scope of who insurance consumers are and how they behave (or misbehave). Insurtech can offer the cheapest price but will they be able to service the real-life demands once claims start pouring in.

Recently I got a call from a relative discussing the results of his research into purchasing a Homeowner’s policy. Two companies offered the same coverage but one company’s premium was nearly 50% cheaper. He thought it was a no brainer and asked what I thought.

Quietly, I thought, I know how these two companies operate their claims department. The more expensive insurer limits each adjuster to a pending of 40 files. The cheaper insurer loads each adjuster with a pending of 400 files. That disparity is not an exaggeration, it’s the real world. You won’t see this in any of their advertisements.

If you have a claim and your company adjuster has 400 files pending, they will never answer your phone call. They don’t have time to respond to emails. It certainly is a “no brainer” as to the level of “no-customer service” you will (or will not) receive.

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