What is the Purpose of Claims Adjustment?

Claims adjustment is the process of investigating, evaluating, and settling insurance claims. The purpose is to determine if the insurance company is liable for a loss under the terms of its policy and if so, what amount should be paid to the policyholder. Claims adjusters play a vital role in this process.

Who Are Claims Adjusters?

Claims adjusters are professionals who represent insurance companies. They are responsible for investigating claims, assessing damages/injuries, calculating claim amounts, negotiating settlements, and authorizing payments. The key purposes of claims adjustment include:

• Determining liability – Evaluating if the insurance company is responsible for a claim based on the policy coverage and circumstances.

• Investigating the loss – Inspecting property damage, interviewing claimants and witnesses, reviewing police reports and medical records. Gathering all pertinent facts about what happened.

• Calculating claim amounts – Estimating repair/replacement costs, medical expenses, lost income and other monetary losses tied to the claim.

• Dispute resolution – Negotiating settlements between the insurer and policyholder. Settling any disputes over the value of a claim.

• Detecting fraud – Identifying potentially fraudulent claims through investigation and collaboration with special investigative units.

• Managing expenses – Controlling the costs paid out on claims while following insurance regulations and company guidelines.

Adjusters serve as the primary point of contact for policyholders who suffer a loss and file a claim. They manage the claim from start to finish, interacting with all involved parties. The adjuster acts in the insurance company’s interests, but strives for a fair settlement.

Key Duties of Claims Adjusters

Some of the most common duties performed by claims adjusters include:

• Interview claimants about what happened to cause damages or injuries.

• Inspect damaged property, such as homes, vehicles and commercial buildings. Document the extent of damage through notes, photos/videos.

• Consult police reports, medical records, invoices, valuation reports and other documents related to the loss event and resulting expenses.

• Determine the appropriate property repairs or medical treatments for valid claims based on necessity and costs.

• Request additional information from first responders, witnesses, contractors, doctors or other experts.

• Calculate claims payouts based on assessment of damages/injuries, deductibles, policy limits and other factors.

• Negotiate claim settlements with policyholders.

• Recommend a fair and accurate payment amount to their supervisor.

• Communicate decisions clearly to claimants and explain the claims process.

• Manage paperwork and documentation, maintaining detailed claim files.

• Detect potential fraud indicators through investigation and report suspicions to the special investigations unit (SIU).

• Comply with regulations and the insurer’s policies for claims handling.

Property vs. Casualty Claims Adjustment

There are two main types of insurance claims that adjusters handle:

Property claims – These relate to damage or loss of property, such as damage to a home due to fire or natural disaster. Property adjusters inspect damages and calculate repair costs.

Casualty claims – These relate to liability from damage/injury caused to a third party, such as a slip-and-fall accident on someone else’s property. Casualty adjusters verify details of the incident and estimate claim payouts.

While some adjusters specialize in one area, many handle both property and casualty claims. The general process is the same: investigation, assessment, calculation and resolution. But casualty claims tend to require more interaction with medical providers, attorneys and witnesses.

Inside the Claims Adjustment Process

The claims adjustment process typically follows these key steps:

1. First notice of loss (FNOL) – The policyholder reports the claim and provides preliminary details. This can occur by phone, online, email or mobile app.

2. Assignment – The claim is assigned to an adjuster based on claim type, location and workload.

3. Investigation – The adjuster reaches out to the claimant and investigates the loss through inspection, interviews and documentation review.

4. Coverage analysis – The adjuster verifies policy coverage for the claim and what exclusions may apply. This determines liability.

5. Damage/injury assessment – All damages, injuries and expenses tied to the loss are evaluated and quantified by the adjuster.

6. Resolution – The adjuster negotiates a settlement with the claimant and resolves any disputes.

7. Payment – The appropriate amount is issued to the policyholder based on the agreed upon claim settlement.

8. Closing – The adjuster formally closes the claim in the insurer’s system once payment is issued and releases reserves.

This is the general workflow, but claims can vary greatly in complexity. Property claims are relatively straightforward while major liability claims involve extensive medical assessment and negotiation.

Why Effective Claims Management Matters

Claims adjustment supports several important goals for insurance companies:

• Mitigates losses – Through investigation, accurate claim valuation and fraud prevention.

• Improves customer service – By resolving claims quickly and keeping policyholders informed.

• Manages expenses – Setting appropriate reserves and controlling claims payouts.

• Adheres to regulations – Following all legal and compliance rules in claims handling.

• Provides valuable data/analytics – Adjusters’ work produces data that informs actuaries, underwriters and pricing models.

In addition, fair claims handling promotes customer retention and trust. Policyholders who feel mistreated during the claims process are less likely to renew their policies.

Key Skills for Claims Adjusters

Claims adjusters require an interesting mix of soft skills and technical skills to succeed:

• Communication skills – For questioning claimants, explaining claim decisions, negotiating settlements, and corresponding with various parties.

• Analytical skills – To gather facts, weigh evidence, detect inconsistencies, spot potential fraud, and calculate claim values.

• Critical thinking – To make sound judgments on liability and evaluate appropriate claim resolutions.

• Customer service skills – To interact with clients diplomatically, manage frustrated policyholders, and resolve disputes.

• Time management and organization – To juggle numerous claims while maintaining detailed files.

• Technical knowledge – Of insurance policies, regulations, damages, injuries, costs and industry software.

Adjusters play an integral role in the insurance system by valuing and resolving claims. They apply investigative skills and industry knowledge to protect insurers against fraud while also providing fair treatment for policyholders. Proper claims adjustment allows insurance companies to deliver on their promises and retain customer trust.