After a commercial or residential property loss, the building’s physical damage is top of mind. But it’s equally as important to consider the contents inside that were likely destroyed and, as a result, unavailable for inspection.
For over 30 years, I have adjusted contents losses of all sizes for the insurance industry and have seen many changes. My first experience with a specialized contents adjustment was as an independent adjuster working in Michigan in the mid-90s. My customer’s instructions were to go to the insured’s home and capture an inventory of total loss items. I was asked to hand write the inventory on their company forms and send to the insured for pricing, which seemed like a foreign idea at the time. Shortly thereafter, I was contacted by another customer who requested I assist them in a case involving an insured with a second fire loss in two years. The insured had not filed any replacement cost claims from the previous loss. The claims manager was concerned that a similar inventory would be presented and would include items not present at the time of the loss. I suggested a physical inventory of the total loss items and we identified every damaged item. As suspected, the scope of the inventory was minimal and, as a result, the claim was settled in a fair and accurate manner. Because of these first two experiences, our contents solutions program was born.
Contents inventory looks much different than it did back then. Even 20 years ago, it was unlikely to find contents limits for a three-bedroom home exceeding $150,000. Today, it’s common to find contents limits of more than $300,000 — due in part to an increase in expendable items including electronics, clothing, furniture, sporting goods and appliances. Increased standards of living, busy lifestyles and higher demands on time have also impacted the reporting timeframe for contents inventories and prompted a shift in assignments. And technology, as in other parts of life, has changed the landscape. These changes have inevitably brought new challenges to the industry — requiring adjusters, insurers and those insured to adapt.
Time and accuracy
A contents claim should receive the same amount of attention to detail as a building claim, but there is potential for delays that may get in the way. For instance, delays may occur in settling the claim and closing the file if the insured does not have the capacity to compile their inventory in a timely manner due to increased demands. When the insured does not have the time, they often look to a public adjuster or contractor to complete their inventory. The challenge this poses is that if one’s compensation is based on the amount paid on a claim, the inventory may be inaccurately defined.
In addition, when a contents inventory is compiled by the insured, it allows for "soft fraud" when an insured may create a “wish list” of items that goes beyond the contents limit. Further, the accuracy is not known as often the items are no longer available for inspection. Neither the scope of the loss nor the accuracy of the inventory can be verified.
Using a highly experienced contents adjustment firm will ensure a professionally managed contents solution. By using an adjuster to prepare an accurate scope, replacement and salvage services may be more easily utilized — ensuring more items can be replaced. The professional contents adjuster also understands the importance of customer retention and the goodwill earned with customer service. The insured appreciates the integration of contents services, as it alleviates the daunting task of presenting their personal property claim.
Scope and cost
The type and quality of a property, as well as its contents, has changed — higher contents limits and the increase in quantity and value of expendable items support the need for an accurate scope. A properly scoped inventory not only provides the quantity and description of items, but also provides information regarding their value, quality and use. Without a detailed scope, inaccurate payments are inevitable. Even with the advent of contents evaluation software and web-based contents programs, it’s important to consider specifics rather than simply matching inventories to programmed lines of information.
The scope is not of value unless it is placed in the right hands. No matter the size or complexity of the claim, professional adjusters have a clear understanding of the policy provisions including exclusions, limitations, and how value is affected by age, wear and tear from use, physical deterioration, all forms of obsolescence, brand, quality and market conditions. Proper scope promotes higher salvage values as the scope has the detail required to maximize returns.
Pack-out costs present another challenge. While use of today’s estimating programs controls the cost of a building claim and the scope is well managed through detailed sketching and comprehensive scopes, we have not achieved the same detailed approach to the adjustment of personal property claims. Pack-out decisions on what to remove and clean are still left to the vendors. The formula is simple: more boxes and bags equal higher pack-out costs. A poorly managed pack-out frequently results in inaccurate payments. That’s why it’s so important to have a process that not only controls the cost, but ensures fair and accurate payment to all parties involved.
In times like these or other circumstances when a professional adjuster may be unable to visit on site to control the scope of a pack-out, the use of remote adjusting tools can be just as effective. A contents adjuster armed with the knowledge of pack-out techniques and the right technology can manage the inspection virtually. The same knowledge and tools can be used to audit a pack-out when it is presented.
With commercial claims, typically more complex and requiring additional attention to coverage, integrating the expertise of forensic advisory services with contents solutions can determine the best approach. This brings a depth of understanding of co-insurance, agreed values, scheduled property and inland marine coverages and how they apply. A contents adjuster who understands the application of these coverages will be more efficient, and will also ensure that the insured is getting the full financial benefit from the coverage available.
The need for speed, accuracy, efficiency and fair settlements has never been more important. The costs of acquiring an accurate scope, performing pack-out management, using replacement services, and most importantly a skilled adjuster, all result in a return on investment. Contents services alleviate the daunting task of presenting a personal claim and help overcome some of the challenges after a commercial or residential property loss, while also supporting high customer service delivery. Sedgwick’s contents solutions division provides comprehensive and accurate contents assessment, adjusting, scope and valuation services to bring you peace of mind. For more information, please contact 989.928.2528 or Charles.McMartin@sedgwick.com.