The art of loss adjusting

August 7, 2023

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Loss adjusting is not just a science; it is an art.

There is no doubt that loss adjusting requires technical know-how – or access to systems that provide such knowledge. The requisite proficiency spans a number of disciplines depending on the area in which the loss adjuster operates, and it will include an understanding of insurance principles and practices. However, it is the way this knowledge is applied which determines the skill and success of a loss adjuster.

Advancements

Over recent years, there have been many developments that have impacted and enhanced the work of loss adjusters. Some of these have resulted from innovative technologies that create new ways of carrying out inspections, accessing information and communicating. The depth and breadth of accessible information has expanded exponentially, and techniques such as data analytics have added to the tools available to a loss adjuster.

Preservation

At the same time, while the science of loss adjusting has increased significantly, it has become more important than ever to preserve the underlying skills that constitute the art of loss adjusting. While technological developments including advances in artificial intelligence (AI) have led to significant efficiencies, they have not yet (and may never) reach the point where they can adequately replace the human component. Empathy and intuition are needed to create the best outcome for larger or more complex insurance claims.

Sedgwick is adopting new technologies to enhance loss adjusting processes. At the same time, we recognise that these tools will not replace the timeless principles that take loss adjusting beyond a mechanical process into the realm of art. For some, the art of loss adjusting is intuitive. For most, it is learnt through practical experience, training and by working with qualified mentors. A loss adjuster will know they have the art if they possess the ability to:

  • Identify problems and find creative solutions that can benefit both insurers and insureds.
  • Manage expectations so that appropriate outcomes can be achieved without unnecessary conflict.
  • Show genuine empathy which creates the trust needed to work well with multiple parties.
  • Show humility and facilitate powerful teamwork — enabling people with unique expertise and experiences to focus collaboratively on different aspects of a claim.

Art at work

One claim involved a large crane at a container port in Sydney that was struck by a ship. The stevedore had an insurance policy which covered the cost of replacing the crane as well as the business interruption which flowed from the disruption. Costings showed that a new crane to the same specification would cost about AU$12 million and would involve a lead time of about eighteen months.

Option one would have been to allow the insured to order a new crane and look at ways of mitigating the business interruption as much as possible while the business was disrupted for about eighteen months. However, a review of the available options triggered an analysis of the stevedores’ operations at various ports around the country — which introduced option two. Creative thinking led to moving a number of pieces on the “chessboard”. Rather than ordering a new crane, an older one from a port in Melbourne was brought to Sydney and upgraded. A new crane which was in the final stages of manufacture was then diverted from its original destination at another port in Sydney and taken to Melbourne. This move more than compensated for the capacity which was taken from Melbourne (circumstances had changed since this new crane had been ordered and this meant it could be employed more effectively away from the port for which it was originally destined). The total cost of the plan was around AU$7.5 million and the downtime was greatly reduced.

The stevedoring company ended up with one less crane but a more efficient operation and greater productivity. The insurers ended up paying much less than they would have paid if tunnel vision had prevailed – if the claim had been allowed to run along the narrow lines of the policy prescription. Lateral thinking created a positive outcome for both the insurers and the insured.

Harnessing the power of teamwork

A large and complex claim resulting from a fire in an abattoir led to numerous issues that had to be resolved quickly to minimise the loss. This is one way that working with a team experienced in losses of this nature can be beneficial. Sedgwick was able to assemble a large team of more than 20 loss adjusters and forensic accountants, as well as some external experts, with individual team members focusing on areas that played to their strengths. Our team worked efficiently and effectively, achieving an outcome that delighted all stakeholders and one that the lead adjuster could not have achieved as professionally and as confidently on their own. The art of loss adjusting often requires the art of teamwork.

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