Over the last decade, businesses in the developed world have struggled to adapt to competitive pressures imposed by the globalisation of markets.
Over the last decade, businesses in the developed world have struggled to adapt to competitive pressures imposed by the globalisation of markets. As part of their response, organisations have reduced costs and improved control over losses by retaining increasing amounts of risk.
At the same time, companies are concentrating their resources and capabilities on their core businesses, outsourcing those activities that can be done better and cheaper by service specialists. These changes have had major impacts on the insurance industry and the adjuster’s role has had to cope with some major differences in working practices.
In the past, adjusters were almost always appointed by or reported to Insurers. The remarkable growth of the risk transfer market, driven by trends towards companies retaining more risk and outsourcing, has created an ever expanding market for adjusting services. The impartiality of the claims adjusting firms allow them to work for several customers simultaneously as information comes to light during the claims process. As the loss level increases, the adjuster will work for various layers, ranging from the insured business unit, to the captive and the excess layer insurers and/or reinsurers.
Most captives will have outsourced to captive managers whose main role is to handle the legal and financial aspects of the captive, unlike the traditional insurance company where insurers may have a substantial claims department presence in many corners of the globe.
The adjuster is therefore called on to provide extra services to captives that they would not ordinarily perform for commercial insurers. One of the most important of these services is to act as the first point of contact for claims instructions, either direct from the local business unit or from risk management. Many captives now provide the adjuster with the authority to take steps on their and the corporation’s behalf to approve immediate steps to mitigate the physical damage and potential business interruption. This can include assistance with the recommendation to the business unit of reputable contractors to conduct urgent emergency and protective works, debris clearance, assistance with the appointment of reputable restoration and salvage companies, and legal representation should there be subrogation issues.
These services are provided on a worldwide basis through the adjuster’s network of global offices, which have local knowledge of reputable building contractors, restoration experts, and attorneys.
With the advent of web-based services, local business units throughout the world are able to provide important claims data directly into adjuster-hosted websites from which information is instantly submitted or made accessible to risk management, captives, brokers and insurers, depending upon the pre-agreed claims procedures of the global programme.
The ever increasing use of web-based cloud services also enables the easy sharing of information among many parties involved in a claim. These web-based electronic tools considerably enhance the speed and efficiency of communication and, therefore, action, which is so important in the early stages of a loss.
The adjuster is therefore able to seamlessly provide information to a variety of clients as clients change, in effect working for several customers simultaneously and ensuring that they receive accurate and timely information. Adjusters are now routinely called on to maintain a database of all the corporation’s claims on a global basis from ground up, ensuring the provision of reliable data to risk management departments, brokers and insurers. The provision of accurate loss information from an impartial party is of great assistance when renewal negotiations commence.
The continuing trends of globalisation and higher retention levels by corporations coupled with continued outsourcing of non-core business means that there will be an increasing need for adjusters with the appropriate skills and extensive global network. The increasing complexity of global business is reflected in the complexity of losses that it produces, and the adjuster’s loss-related services have had to change rapidly to keep up with these changes and anticipated future changes.
Risks managers and captives are now looking to adjusters to provide a one-stop shop to handle many more aspects of their claims situations globally. Adjusters are tasked with more loss management functions for local business units in order to free up the local management so that they can focus on returning the business to normal operations.
The larger adjusting companies now have either in-house or through owned subsidiaries, building surveyors, engineers, and accountants, all of which are of enormous benefit to corporations and their captives in mitigating losses and freeing up local operational personnel.
International adjusting firms have considerable experience of disaster situations and can offer ideas and advice to local management, who are often world leaders in managing their particular operations under normal circumstances, but find themselves overwhelmed when faced with a serious loss situation. Local management will often lean on the international adjuster’s previous experience of similar situations, and appreciate the adjuster’s ideas for solutions, particularly to business interruption impacts.
The adjuster can offer suggestions to management for rearranging production when faced with reduced production capacity in order to focus on higher margin products. They can also offer suggestions for outsourcing, temporary repairs, temporary storage and the setting up of temporary production facilities in undamaged sections of the business unit site.
The adjuster will also work closely with local and global management to help put into operation existing global catastrophe plans that relocate production to other production facilities throughout the world, or work with management to refine existing disaster plans where these do not fully reflect the existing circumstances at the time of the incident. There is a growing realisation by risks managers of the importance of the services to be offered by global adjusting firms in assisting business operations’ management, most of whom have never faced the chaotic situation that can follow a catastrophic incident. This is resulting in the adjusting firm being looked on as an important arm of the total risk management service delivery to the organisation.
Adjusters are also increasingly being asked to provide clerk of works services to monitor material and labour utilisation, as well as and material contracts, which have to be entered into in emergency situations as there is not time for a formal bid process. The adjuster’s wealth of knowledge of local labour and material rates from their in-house building experts can remove this onerous and time consuming task from the local business unit or the global organisation as a whole, to enable them to focus on recommencement of the business.
The provision of the clerk of works services can be extended to monitoring the time and material utilisation of restoration contractors. Adjusting firms can also provide audit assistance either through their own resources or specialist, forensic accountants to supplement the huge amount of additional financial data that will suddenly be required by the numerous parties involved in a major claim. This assistance helps to prevent local management delays, incorrect data and improperly submitted data, which can occur due to lack of experience of claim situations or lack of time to properly concentrate on the additional workload.
Increasingly, corporations’ risk management departments, brokers and insurers are seeing the benefit of having one nominated global, impartial adjusting firm to undertake a greater range of services rather than the traditional scrum of multiple parties’ teams of experts, all with their own demands on local and global management bringing stress to an already stressful situation.
It is in the interest of all parties to a global insurance programme that the utmost is done to relieve stress on local business managers as their time spent on reinstating and recommencing business is a far better value proposition than diverting their limited management hours to communicating with myriad ‘experts’.
Global adjusting firms can therefore be anticipated to broaden the range of their service offerings to meet the above-mentioned demands from global corporations, as well as continue to expand their existing service offerings throughout their global networks.
The adjuster’s traditional role of coordinating these services from external sources is now of immense value in coordination of these sources internally. This, coupled with the employment of specialists with technical focus and experience of loss situations, offers considerable opportunities for adjusting firms and their clients in the better management of disaster situations.
