What or who is a loss adjuster? What is his role in the insurance industry? Most of us who have never been involved in a major insurance claim would probably not be aware of the existence of loss adjusters. Nonetheless, loss adjusters are important players in the insurance field and Mr Nehemiah Neo Lian Sun, Managing Director of the Insight Adjusters Group, enlightens us on the role of loss adjusters in insurance claims.
Loss adjusting is a relatively young profession in Singapore with an expatriate Chartered Loss Adjuster first establishing a practice here almost 30 years ago. There are now 80 individual practitioners, including 5 Singaporean Chartered Loss Adjusters in the local fraternity.
Not many people have heard of loss adjusters unless they have encountered an insurance claim. Loss adjusters are insurance claims specialists. Chartered Loss Adjusters must operate in accordance with a strict code of conduct and are largely members of the Chartered Institute of Loss Adjusters, the worlds premier claims institute which runs professional examinations open only to student members who have practised under the tutelage of a qualified adjuster for a minimum period of two years, and who already hold another professional or insurance qualification.
Loss adjusters are usually engaged by insurance companies. As the loss adjusters fee is paid by the insurer, it is untrue to say that he is independent. However, the loss adjuster is expected to be impartial given that adjusters fees are paid out of the common pot of premiums paid by policyholders to insurers. The claimant can also engage his own adjuster, but he will have to bear the charges himself. Some insurers may take exception to loss adjusters on their panel acting against them, while other insurers would welcome the participation of another adjuster, provided he helps in presenting a realistic claim.
Loss adjusting firms also employ other professionals, viz accountants, engineers, legal officers and the like, recognising the fact that to provide a professional and top class service, a multi-disciplinary approach to claims handling is needed. My firm has done two ground-breaking recruitments by employing a Chartered Accountant (CPA) and a Professional Engineer (Civil and Structural).
The Work of Loss Adjusters
Loss adjusters are engaged by insurance companies to help find the answers to certain questions, including the following, in the event of a claim:
The loss adjusters first duty is to ascertain whether, and to what extent, the insurance company is liable under the insurance policy. In other words, the loss adjuster will have to comment on whether the loss has been caused by any of the insured perils under, say, a fire insurance policy or whether any of the exclusions apply under an all risks policy.
The loss adjuster will also enquire into other aspects which would affect an insurance companys liability, such as the operation of conditions, warranties or limits under the insurance policy.
The loss adjuster plays a crucial role, particularly at the outset of the loss. Many loss adjusters either directly or indirectly provide damage reclamation services. These range from independent technical advice, through expert guidance on loss limitation opportunities, to specific options to recover and restore damaged property, thereby preventing wastage. At the initial stage, procedures are agreed by the loss adjuster with the policyholder for the repair or replacement of property, and the continuation of the business to limit any claim for loss of profit, thereby enabling the policyholders business to return to normal in the shortest possible time. For goods that will have to be written off, a loss adjuster will have the skill to dispose of them at the best salvage value, thereby mitigating the damage.
The loss adjuster reports to insurers immediately after the initial visit, particularly on the loss reserves to be created so as to enable insurers to fulfill their statutory obligations. Thereafter, he will ensure that insurers are kept fully advised. His reports will incorporate facts, opinions and recommendations when appropriate.
The loss adjuster will advise the insured that it is the latters duty and not the adjusters to submit a claim and to provide full and prompt information and supporting papers, eg repair estimates, invoices, receipts, proof of ownership and value, etc.
When the claim has been presented, the loss adjuster will check it for quantity, description and pricing and, after agreeing on any necessary adjustments with the claimant, the loss adjuster will present the final report to the insurers recommending settlement.
An Acceptance Form confirming the amount of the adjusted loss will usually be issued by the loss adjuster for the policyholder to sign. The form will make it clear that the proposed figure is subject to the insurers approval under the terms and conditions of the policy.
Another main task of the loss adjuster is to consider whether someone else may have been responsible for the loss and, if so, he will obtain statements and physical and photographic evidence to use later in negotiations when recovery of the insurers outlay from a third party is sought.
As part of his initial enquiries, the loss adjuster must satisfy himself that the policyholder has an insurable interest, and that the risk is anticipated by insurers.
The loss adjuster will also check whether there are any other policies which may be brought into the apportionment of loss and, if so, he is the expert for apportioning the loss to each policy.
It is the tendency for some claimants to inflate their claims, as they may have the notion that insurers will never pay in full. The policyholder will often perceive the loss adjuster as the agent of the insurer with a single purpose to avoid paying the claim or some part of it. It is not, however, the brief of a loss adjuster to chop claims and insurers do not engage the services of loss adjusters for that purpose. The loss adjuster will endeavour to win the confidence of the policyholder at the earliest opportunity. It is, however, the loss adjusters duty to see fair play where there is doubt over values or some other aspects of the claim. He is expected to discern the merits or demerits of the point in issue and report to insurers accordingly. In other words, the loss adjuster needs to develop the skill to match human optimism.
The need for loss adjusters is often highlighted at the time of a major loss or catastrophe. Whether the loss arises due to a large fire outbreak or flooding or a major environmental incident, the loss adjusting profession has resources available to respond within hours to meet claimants needs. This may involve working unsocial hours, often in dangerous circumstances but, nonetheless, Chartered Loss Adjusters are used to providing both a rapid and professional response on both a national and international basis. It is common for loss adjusters in Singapore to travel to many countries on behalf of insurers. Several of our loss adjusters have, in fact, worked abroad on hurricane, earthquake and riot claims.
While a new instruction is just another job to the loss adjuster, it is likely to be a disaster for the policyholder. Loss adjusting is, in essence, concerned with people and, furthermore, people in times of crisis. Half of the job is done for the loss adjuster if he shows regard for the feelings of the claimants at the outset. There is therefore a critical need for the loss adjuster to hone his people skills. He will endeavour to establish a rapport with the policyholder given that the loss adjuster will normally have been introduced to him after the loss has occurred. The claimant is usually in a state of shock after, say, a fire or break-in, and he is further confused as to why a loss adjuster and not his insurer with whom he has the insurance contract, has shown up. It is thus important for the loss adjuster to communicate his role to the policyholder and to spend some time in breaking the ice rather than to rush right into obtaining the cold facts of the case. The time spent by the loss adjuster on this soft approach will thus reap dividend.
In the event of fraud, the claimant will lose the goodwill of the loss adjuster who will, in the course of natural justice, side with the victim.
The role of a loss adjuster could be, perhaps, best summarised by quoting from someone who has left the profession:
To be an Insurance Loss Adjuster, one must be courteous, diplomatic, shrewd, persuasive, an expert jollier, of an equable temper, slow to anger, a Sherlock Holmes, up to date, good looking, with honest eyes and willing hands, a good memory, good cigars, acute business judgment and the embodiment of virtue, but with a good working knowledge of sin and evil in all its forms.
An Adjuster must understand insurance, electricity, chemistry, mechanics, physics, bookkeeping, banking, merchandising, selling, shipping, contracting, law, medicine, real estate, horse trading and human nature.
He must be a mind reader, a hypnotist and an athlete. He must be acquainted with machinery of all types and materials of all kinds and he must know the current prices of everything, from a shoe-string to a sky-scraper. He must know all, see all, and tell nothing, and be everywhere all at the same time.
He must satisfy the insurance companies, the Claims Manager, the Claims Examiners, the Underwriting Department, the General Agents, the Local Agents, the Lawyers, the Insured, the Claimant and the Insurance Commissioners Office.
Having heard of only one man with the above qualifications and finding out that he was crucified some 2000 years ago, and though some, in their daily lives, try to emulate him, I now feel that it is impossible for me to ever reach that state of perfection. So without further ado, and to the benefit of all, I herewith relinquish all rights, claims and titles, past and present and future, as a Loss Adjuster.
Loss Adjusters Working with the Legal Profession
Many insurance claims have been settled without legal recourse as insurers were able to rely upon the loss adjusters skills to negotiate fair settlements and to provide information to support the proposals made.
Having said that, it is never the loss adjusters role to usurp the function of legal counsel. In fact, in the event that a claim is fraudulent or in cases where there is doubt on policy liability because of the possible application of a warranty or an exclusion, or where the policy coverage is open to interpretation, a loss adjuster worth his salt would not hesitate to recommend that insurers obtain legal advice.
I have had the privilege of working with several reputable members of the Singapore Bar on many occasions involving complex and dubious insurance claims and, together, we achieved considerable success in protecting the interest of our mutual clients and also of the innocent insuring public.
Nehemiah Neo Lian Sun
Managing Director, Insight Adjusters Group
[Editorial Note: Mr Nehemiah Neo Lian Sun is the Managing Director of the largest adjusting practice in Singapore with worldwide representation. He is the Vice-President of the Singapore Insurance Institute and a past President of the Loss Adjusters' Association (Singapore). Nehemiah is also an Associate of the Chartered Insurance Institute and a Fellow of the Chartered Institute of Loss Adjusters. Nehemiah has been a Loss Adjuster for 27 years. He was the first person in Asia to qualify as a Chartered Loss Adjuster 18 years ago, and was also appointed by the Chartered Institute of Loss Adjusters (UK) to sit on its Executive Council for the year 1999-2000.]