On his retirement, Ron Lowe shares a few thoughts with a past national president of the Australian Institute of Loss Adjusters, Norm McLean.
Contents: -
(1) The Loss Adjuster’s Life
(2) Claim Anecdotes
(3) Defining an Adjuster
(4) Insurers Attitudes
(5) Arson Claims
(6) Changes - Principles - Training
(7) Fees - Work/Life Balance
(8) The Future
(9) Farewell
(10) Leave a Comment
(1) Well Ron, 52 years in the work force including the last 38 years loss adjusting. That’s not a bad effort.
It’s had its moments Norm, but by and large, it’s been a wonderful journey, and I’ve always been aware that adjusting is a very special profession for many reasons. I can’t think of any other occupation that takes you to so many places, meeting all classes of people, including the greedy and the needy from all walks of life. My work has taken me into the homes of politicians and captains of industry, other homes with dirt floors, a wide variety of businesses making and/or selling everything from tin cans to sophisticated electronic equipment, tramped around building sites, abattoirs, mines and all manner of fire damaged buildings, interviewed motor vehicle accident victims, you name it, it’s been a lesson in life itself. In fact, it becomes a large part of your own life.
(2) Can you give me some examples of the variety of work you are talking about?
Every adjuster has hundreds of stories. I’ll mention a couple. The first occurred in the late sixties, I was in Mansfield, returning from a country trip late in the day, and rang the office to check that no more jobs had come in before heading home to Melbourne. I was told that someone had broken their leg on the snow fields and I should go there, stay the night, and conduct enquiries the next day. I was driving a VW Beetle and wearing a sports jacket and trousers, not exactly appropriate snow field attire. I set off in darkness but only got so far before the road became dangerous without chains and I had to start walking, carrying a brief case, camera and bag. I saw some chalet lights so headed by foot towards them. The snow under my feet collapsed, and I dropped to my armpits, still clutching my case etc. I gradually got myself out of the hole and staggered to the chalet, after falling through the snow several more times. I arrived looking and feeling like a drowned rat. The manager loaned me a dressing gown whilst my clothes dried in front of the fire. To add to the humiliation, and wearing crumpled sports coat, trousers and still wet shoes, I had to get onto the back of a small snow cat next morning to travel to the spot where the incident occurred. My tie dried out ok!
Another quick funny one. This claim was submitted by a well known University which had arranged for a travelling sculpture exhibition to have 22 modern sculptures displayed around the grounds of the University campus for a month. These were quite valuable large steel sculptures, made by a well known Australian sculptor. They were all titled, although I found some difficulty matching the titles with what I was looking at. After three weeks, there were only 21. One had been nicked. It was titled along the lines “Turn Right at Lonsdale St.” consisting of several rusty RSJs and other bits of scrap metal welded together, and pointing every which way. Enquiries by staff and Police had failed to reveal the culprit or locate the sculpture. I met with the University’s Insurance Manager on the 6th. Floor, and we walked to the 5th floor to collect the Admin. Mgr. They felt we should involve the head of the Arts department (4th. Floor), Security and Maintenance (both 2nd. Floor) and events co-ordinator (ground floor east wing). There were now seven of us walking single file along corridors and down staircases as we headed towards the basement workshop. It was like a scene from a Peter Sellers movie. The workshop manager answered the usual questions and confirmed neither he nor his staff had any knowledge of the matter. His body language bothered me. After various theories had been canvassed, and much shrugging of shoulders, it was felt nothing more could be done, and the single file gradually dissipated on its return run. I obtained relevant documentation, left a claim form, drove out the front gates, around the block, back in through the tradesman’s entrance, and fronted the workshop manager one on one. I told him I believed he knew more about the matter. After an initial denial he relented, and said the sculpture had been displayed on the lawn near the workshop entrance. One of his tradesmen had “mistaken” it for scrap metal and used it. “On what?” I asked. My eyes followed his nod to a large trailer parked nearby. “He built a trailer with it?” I asked. He nodded yes. “What’s his name?” I asked. “Not saying” he replied. His employees were within earshot so I said “You blokes don’t know much about art to do something like this.” And one of them piped up: “Yeah—but we build a bloody mean trailer” and another said “and it looks a lot better.” I could hear muffled laughter as I left the workshop, but it was nothing like my colleagues laughter back at the office.
Now the opposite side of the coin. An unoccupied house (Insurers were aware it was unoccupied) burnt down in the middle of the night. Very little doubt in my mind the Insured was implicated. Background enquiries established the Insured had two previous fire claims, both in the middle of the night, neither properly investigated, and in the second one, the Insured was paid the full reinstatement value, on the basis that he told the adjuster “I intend to re-build” (which he didn’t). After that one, he obviously thought “How easy is this?” So he had another go. For whatever reason, the investigating detective just wasn’t interested, and abused me for complaining about his lack of interest. So we were on our own. When we denied the claim, things got pretty nasty. The Insured would ring my home at 3am using obscene and threatening language about me to my wife, who answered the phone, as she had elderly parents overseas. We stood our ground, and the Insured caved in at the doors of the court. As I was walking back to the office, a man from the town where the fire occurred approached me, and said he knew the Insured. He just wanted to tell me that (1) it was known in the area that the Insured had murdered someone during the course of the claim and (2) the Insured was heard boasting in a pub a few months back, that he lit the fire. By the time I got to the office, I felt like the man who saw his mother-in-law drive his car over the cliff-- I had mixed feelings. I also had a couple of strong drinks. I must add ‘though, the letters of thanks received from honest claimants, compensate for those who aren’t, and serve as a reminder of why we do this work.
I’ll make this the last one Norm. I can still feel the fear. I travelled by boat to a pipe laying barge in Bass Strait. When the boat got to the barge, there was a huge swell and large waves. I had to swing on a rope (again carrying the mandatory brief case and camera) from the boat to the barge. Not only did they not go up and down in unison, but they would scrape together one moment and provide a wide chasm of violent sea the next. The boat captain, with a grin on his face, “allayed” my fears by saying that these were the worst conditions he had ever seen! After several “almost” starts, I finally took off, and I’ll never forget looking down at the gap during mid swing, with the knowledge that to drop would be a nasty farewell. I got a standing ovation from both crews when I landed on my backside, but apart from being pleased to still be alive, all I could think of was that I would have to repeat the process going back.
(3) What are the qualities which define a good adjuster?
I think you have to begin on the premise that the people you are going to see, are not necessarily looking forward to seeing you, and they are often under stress. For example, the family home burns down in the middle of the night, and you arrive at 10am, and the Insured haven’t had any sleep, and are trying to take in the devastation the event has caused to their lives. They are still in a state of shock, looking for temporary accommodation and being “advised” by well meaning, but sometimes ill informed friends. Therefore, you exercise compassion and empathy before gently getting down to business, which includes outlining the claims process, even though you know they won’t take in what you are saying to them. I chose a domestic fire as an example, as they are the most emotive, and therefore, often the most difficult claims to settle amicably. Particularly as the Insured invariably suffer to varying degrees from post traumatic stress disorder (our formal training is lacking in this area) which can last through the entire claim process.
Communication and good listening skills are paramount, as is the ability to deal with people of all cultures, backgrounds and levels of society. Intuition, logic, an enquiring mind, good manners and the application of common sense are equally important. These are of course basic human qualities required for any successful partnership, which in its broadest sense, the claims process is.
A passion to help people, and the self discipline to obtain insurance and loss adjusting qualifications, and remain a student of insurance for as long as you are adjusting, are extremely important, if you are to have the day to day decision making skills the job demands.
(4) Do different insurers have different attitudes when addressing claims?
Yes, company attitudes vary. There are three ways to approach a claim (1) Look for a way to pay it (2) play it down the middle or (3) look for a way to deny it. For example, I think that if someone is schooled in handling third party motor claims, where they look for ways to minimise the payment, they tend to take that mindset with them if they are transferred to material damage claims. Some adjusters adopt the same approach simply because of lack of proper training, and/or an expectation that to settle for less will bring more work. Some solicitors also adopt the same approach. Indeed, I have seen a disturbing trend over recent times for some Insurers to use what I would call “crash and bash” solicitors (lower fees) to handle complex insurance matters, instead of solicitors well versed in insurance law, and having a solid knowledge of the reason behind certain clauses appearing in policies.
The adjuster works at the coalface of insurance, and for this reason, it has always intrigued me that many Insurers rarely, if ever, get to meet those people who represent them when a claim occurs. After all, it is only then, that an Insurers performance can be measured. The mission statements mean nothing if there is no professional follow up. And if I may add, I’ve never understood those Insurers who have turned to University graduates or lawyers to rewrite their policies, instead of conferring with adjusters or claims personnel, who work with their contracts on a day to day basis.
(5) You are a long standing member of the International Association of Arson Investigators. Do we properly investigate arson claims?
In the State of Victoria, it is the duty of the fire brigade to investigate the cause of a fire, and hand over that investigation to the police, if arson is suspected. Insurers also have a vested interest in such enquiries, and generally conduct their own. When I first started loss adjusting, these three parties didn’t confer with each other, and arson wasn’t high on the list of Police priorities. Here in Victoria, we had a three man “Arson and Livestock Squad”, and they sometimes jokingly answered the ‘phone “Heat and Meat”. Things have changed for the better. The Arson Squad is effective, and there is now co-operation between these parties, although privacy laws tend to be an impediment to full co-operation. I have also found that Government agencies in particular, will not revisit their findings even when irrefutable evidence to the contrary is put before them. This can present a real problem in an arson investigation. I would rather see one independent authority adopt the overall investigation. It could even be partially funded by Insurers. I do have the highest regard for some of our fire scene investigators. Much better than thirty years ago. But the courts don’t help. Only 31% of convicted arson offenders are jailed in Victoria, for a median sentence of two years.
(6) What are the major changes you have seen?
Well, although our society has seen many dramatic changes in the work force, particularly over the past 10 years, I’ll just talk about two, which I believe are important. Firstly, the basic principles of adjusting still apply. Sure, we can now report electronically to Insurers (although we seem to create more paper than before) however, when, for example, a material damage loss occurs, someone needs to establish (1) the cause of loss – how, when, where and why (2) whether the loss is covered by the contract (policy) between the parties, and if so (3) how much should be paid, (4) whether any other policies should contribute towards the payment (5) whether there is the basis for any action in subrogation to recover from a third party and (6) deal with any salvage. There is a lot more to it, and some claims can be extremely complicated, but these are the basics. The appointment of an adjuster is not only to do these things, but also to provide a service to the Insured, a point not only missed by some Insurers, but also some adjusters.
The Insured deserve to have a skilled professional handle their claim, to not only provide advice as required, but to use his/her experience to guide the Insured through what is quite often a very difficult process. Therefore, it will be seen in this light, that the adjuster should have a solid grounding in (appropriate) insurance law, contract law, Statute law and the law of tort. Only then, will he/she know what they are supposed to be doing. This knowledge can be obtained from study, and the passing of examinations. But that’s only part of it. You can learn to dance, but you’ll only be able to dance if you dance. You have to get out into the field and hone your investigative and communication skills, learn how to take a written statement, and write a logical and concise report. A basic grounding in liability work is ideal preparation for moving on to material damage claims, provided the right attitude prevails. As I said before, become and remain a passionate student of insurance.
Now to answer your question! I’m a great believer in the master/apprentice system, not just because it has worked effectively since the beginning of time, but it is a very good way to learn. The UK Chartered Institute of Loss Adjusters still operates under this system. You work under the tutelage of an experienced adjuster on a one to one basis, beginning with smaller claims and working your way up to the larger ones—same principles, just bigger numbers. Unfortunately, for the most part, this has gone by the wayside here, which can only be detrimental to the long term future of professional claims handling. Time after time, when insurance company CEOs (and our present Insurance Institute CEO) are interviewed, they point out the importance of the proper education and training of employees. But as far as I can see, this doesn’t happen in claims. The importance of providing fully trained adjusters has been diminished. It’s a bit like closing down trade schools, then a few years later, wondering why you can’t find a plumber, carpenter or welder.
Just briefly, the second major change has occurred in the relationship between the adjuster and the Insurer. In essence, the adjuster is an extension of the claims department, i.e., one of the team. Over recent years, this relationship has changed dramatically. In the past, adjusters would periodically sit down with claims staff and claims managers to discuss the proposed course for large and difficult current claims. An exchange of ideas if you like. Adjusters would also freely provide their time for in-house Insurance company training sessions. This has, for the most part gone by the board, and I see in some areas a complete lack of respect by some Insurers (not all) towards adjusters, reflected not only in day to day attitude, but also with regard to contract negotiations.
(7) What’s the essence of the problem?
Someone said recently that we no longer live in a society, we now live in an economy. It’s all to do with short term bottom line expectation, driven by free market fundamentalism. As in most other areas of commerce, the small adjusting firm is almost non existent, and the large firms dominate the market. This country was built on a healthy mix of small and large companies. In the service sector, whether it be solicitors, accountants or loss adjusters, I have seen no evidence to convince me that a large company can provide a cheaper and better quality service than a small one. The large company might have more offices spread over a wider area, but it also has higher costs. To ensure survival, it needs to appoint additional people in the areas of marketing, personnel, financial management, internal management including quality control, computer consultants and so on. Even when offering interactive computer systems to Insurers, some Insurers insist that their own system and report formats be used. Thus in the past, when secretarial staff were required, this took a quick call to an employment agency. Now, a two to three month training course is needed. Moreover, large scale consolidation of Insurers, and lack of cohesion by adjusters, has allowed Insurers to dictate terms of engagement, without any proper understanding of the complexity of what we do. Healthy competition has reverted to a one way street.
Fifteen years ago, an employee (adjuster) in a loss adjusting office, or any other service industry with similar overheads, was required to turn over around 2.5 times his/her salary, to cover costs and a reasonable return on that turnover. Now, it’s more like 3.5 to 4 times his/her salary, when all present day on-costs are taken into account. Let’s take an overview of that. Firstly, we have to make a number of educated assumptions, starting with what we think a loss adjuster should be paid, and I’m not talking here of tick sheet “in house” claims. It differs of course with qualifications, experience, type of work handled, size of claim etc. Let’s just hit the middle of the road and say $80,000 per annum to coincide with an average claims manager’s salary. Therefore, to support a salary of $80k, multiply it by 3.5 which brings a required turnover figure of $280k. Under present Australian Workplace Agreements for insurance personnel, standard working hours (not lunch time etc) are 37.5 per week, multiplied by 52 brings 1950 hours per annum. Deduct annual leave, public holidays and the odd sick day, and you’re down to somewhere around 1700 hours. Now another assumption. We’re not machines, and if we can charge out say 60% of our working time (the rest is lost time, study/research, computer training/breakdowns, seminars, meetings, discussions, milestones, kpi’s, difficult Insureds and Insurers etc.), we’re down to around 1000 hours to bring in $280k. That is, the charge out rate needs to be $280 per hour. This is what claims preparers charge, and are paid. Yet, Insurers expect to attract quality people to represent them by paying about one third of this.
On some current ad valorem contracts, adjusting firms are faced with taking short cuts, or receiving a final figure of around $30 per hour. Pay low rates and you’ll end up with low skill levels. And bear in mind, the example of $80k is nowhere near what a fully trained and qualified adjuster handling complex claims (liability, business interruption, contract works, ISRs, fire etc.) should receive. The average wage in Australia today is $56k per annum. A school principal of a small country school with half a dozen students gets $82K. You have to pay $120 per hour for a clown to attend your kids’ birthday party. And as far as I know, none of these people are required to regularly work in adversarial and often dangerous, filthy and carcinogenic environments, or receive death threats, or for that matter, swing on a rope over Bass Strait carrying a briefcase and camera.
The ICA General Insurance Code of Practice requires Insurers and other signatories to put in place training programs for claims employees. How can an adjusting firm find the money and time do so under the current system? There are already signs in the market that there is a shortage of skilled adjusters, with some, not surprisingly, now moving into the claims preparation area. Anecdotal evidence strongly suggests that morale in adjusting firms is poor, as their incomes diminish, work loads increase, and the client base places a greater emphasis on system compliance than on quality of work. Adjusters attempt to counter this by working longer hours and carrying larger work loads, in some instances between 100 and 300 files at any one time, in the hope that all those Insured don’t ring them more than once a month ! Even if there were only 3 to 4 problems per file (wouldn’t that be nice) it’s still an overload situation. Trying to cope with such work loads in an unsupportive environment for extended periods, inevitably leads to anxiety, excessive stress levels and feelings of meaninglessness. This ultimately manifests itself in low production levels, burn out, failed marriages, depression and the taking of addictive substances. I personally know of several instances where this has already occurred. Without wishing to labour the point, this goes to the very heart of our sense of self. What kind of life we lead, time available for relationships, leisure, personal interests, reflection, caring for each other and our communities? What example are we setting our children if they inherit a culture without soul?
Loss adjusting is a unique profession, unlike most others. It is a people business. People dealing with, and attempting to resolve, other people’s problems, some of which are quite complex and/or emotional. And yet, it is being driven by number crunchers, who treat adjusting as though we are contracting to make a production line item for a retailer. If the opportunity arose during claim discussions with top level company executives, I would often ask the question “if you had your time over again, would you make any changes?” They all gave me basically the same answer “Yes—I’d spend more time with my kids--they grow up so quickly.” At the end of his life, George Bernard Shaw was asked, what was his greatest achievement, to which he replied “I still have children who talk to me”. To lead a balanced life, work should only be a part of it. This is a wealthy country, so we can afford to do it right. But we need to re-think just how we do it. The “big is better” concept isn’t working for adjusters, and ultimately, won’t work for Insurers if the present rates are not improved.
Sorry for such a long winded answer, but as I see it, if we don’t address this problem, the long and proud profession of loss adjusting will be brought to its’ knees, and frankly (and of this I have no doubt) that will only have a deleterious effect on the medium to long term overall performance of our industry. And it matters not, if it all goes in-house. The same principles prevail.
(8) Do you think in the long run, all adjusting will go “in house”?
I think so-yes. With the increase in size of Insurers, and even with today’s technology, we could be looking at the end of large service organisations. There’s no reason why adjusters could not work from home as direct employees of Insurers after serving a proper apprenticeship, and obtaining the required qualifications.
(9) I’ve enjoyed our chat Ron. I think you have echoed the thoughts of many of your colleagues in the industry who are concerned about its’ current direction. Good luck for the future.
Thanks Norm. I’m looking forward to shedding the corporate cloak, and strengthening the connection with my real self.
Author
Until his recent retirement, Ron Lowe was a long standing Fellow of The Australian Institute Of Chartered Loss Adjusters, a Senior Associate of the Australian and New Zealand Institute of Insurance and Finance, a member of the International Association Of Arson Investigators, and a past member of the Australian Insurance Law Association. Ron served on various claims committees and discussion groups, and delivered published papers to various Institutes and the Victoria Police Academy. He is also known in loss adjusting circles for after dinner performances by his alter ego Reg. Jones, who holds a service award presented by the Australian Institute of Loss Adjusters.
E-mail address for Ron Lowe: magiclantern@netspace.net.au
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