Is Adjusting Back in Business?

Until the early 1980s, this publication was known as Insurance Adjuster magazine. Even those of us who were independent adjusters at the time worked primarily for insurance companies and were comfortable with that title.

In the late 1970s and early 1980s, however, perhaps due in large part to inflation of insurance premiums and legal costs, many businesses began to use various forms of self funding. They sought the services of firms that could handle their claims directly as they, the insured or self-insured entity, desired. They could purchase such services from insurance companies directly in what was termed unbundled services (loss control, actuarial services, risk management information systems, and claim adjusting without the benefit of a first dollar insurance coverage), from one of a large number of brokerage firms, or from independent adjusting companies who began calling themselves by the health coverage industry term third party administrators.

As a result, the old multi-line adjuster became a claim representative, an account executive, a claim administrator, a loss and claim technician, or a loss service specialist, fancy names for what had been known for a century or more as an adjuster. Hence, Insurance Adjuster became Claims.

Someone asked me at the October SCLA/ACE Conference and Exhibition in Chicago where the term adjuster originated. I said at the time that I thought it originally had come from the marine insurance field, where average adjusters were employed to handle the multitude of cargo claims in the ocean marine arena. According to Webster's, the root of the word is French, from the word ajoster, to join, which was converted to Middle English as ajusten, which took on the definition, “to change so as to fit or conform, to make accurate by regulating, to settle or arrange rightly, to resolve or bring into accord, to correct (as in a gun sight),” or “to decide how much to pay in settling (an insurance claim).” Either adjuster or adjustor is acceptable, with the “er” being preferable. Webster's does not separately list average adjuster, but does cite “average” with reference to marine law, noting again the French word avarie, “damage to [a] ship or goods, mooring charges.”

In Marine Insurance Claims (1963), author Leslie J. Buglass states that the Association of Average Adjusters of the United States “was established in 1879 to 'maintain the honor and dignity of the profession of average adjusting.'” Adjusting claims is, or ought to be, a profession. That is a primary objective of the Society of Claim Law Associates and the American Educational Institute, co-sponsors of the conference.

The Deed of Settlement of the Philadelphia Contributionship, which was established in Philadelphia in 1752 by Ben Franklin and other local citizens as a mutual-like fire insurance mechanism, does not mention the words adjustment and adjuster, but the terms and conditions of the coverages they provided were similar to those of marine insurance, and we might assume that such adjusters handled any partial losses that might have occurred. Any losses paid by the Contributionship were averaged among the contributing insured members. (The Contributionship still survives; the first claim this writer ever settled was a dog bite loss under a Contributionship homeowner policy back in 1967. Ben no longer was one of the firm's director, however.)

None of the other claim texts that I have available, including a 1955 first edition of Claims' first regular columnist, the late Patrick Magarick's, Successful Handling of Casualty Claims (now published by West Group as Casualty Insurance Claims, 4th), discusses the origin of the term. If any of you, my readers, have other information on the word, please let me know.

Terms and Words

At the 2004 SCLA/ACE, I was delighted to hear many speakers and exhibitors use the term adjuster for those of us who handle claims. Even the titles of some of the education sessions suggested that those of us who earn our livings investigating, evaluating, and negotiating coverage, liability, and damages are not just a bunch of dumb clucks in a cubical answering phones, but actually have a role in making the world work better. Seminar titles avoided the ubiquitous “claims representative” terminology with names such as “The Eight Characteristics of the Awesome Adjuster,” and “Adjusters Are From Mars — Attorneys Are From Venus.” Even that worn-out term “training” has been replaced by the much better term, “education.” Seminars and general sessions were divided among management, legal issues (with a heavy focus on litigation management), technology, and special issues, mostly claim-oriented to include coverage interpretation, fraud, evidence preservation, and remediation.

For this old image-breaker's personal taste, however, there was a tad too much tech talk, although I was grateful for the conference help provided by our sister-publication, Tech Decisions. (Their October issue featured an article entitled, “BPM — A Better Mousetrap?” It turns out that means “business process management,” but even the author asks, “Can BPM live up to its hype, or will it become just another three-letter acronym?”) Many of the speakers were either tech vendors or chief information officers of large insurance companies. When asked for a show of hands of those employed on the tech side, only a few indicated that particular vocation.

Many of the non-techies looked as bewildered by the presentations as I was. I'm still not sure what “governance” and “architecture” imply in information technology language, despite the definition given by one speaker that “IT governance” means, “framework for decision rights and accountability to encourage desirable behavior in the use of IT.” Say what? We were told that eBusiness had to be integrated using project portfolio management diligence and that we should “highly leverage standards and target architectures for quick integration.” We learned that “business-based, service-based architectures can enable new claim operating models and levels of service,” but I'm not quite sure what all that means. Perhaps, I was not listening closely enough. We also heard about “IT footprints,” things that could “pass the architectural smell test.” I guess I've been unaware that computers had feet and an odor.

The Scalpel Performed the Surgery

None of the vendors, speakers, or exhibitors present was so bold as to suggest that technology can handle your claim for you, but some came close. That is a bit like saying, “The scalpel did the surgery.” The scalpel is just a tool; the surgeon cannot perform the surgery without a scalpel, but the scalpel cannot do the job all by itself. Not yet, anyway. Soon, however, there may well be some computerized laser scalpel, pre-programmed to slice us open, repair our gizzards, and sew us back together again. Some day, perhaps, the surgeon may be obsolete!

And some day, I suppose, we actually will have a computer system that will handle claims in the fashion I wrote about in a 1981 column, “The 21st Century Adjuster.” That adjuster, whom I named “I. M. Fair, CPU,” was nothing but a high tech computer system that automatically answered the phone, took the details, organized the information, and either spat out a money transfer to the claimant's or insured's bank, or sent a dispute to another computer at the courthouse that searched its database for the proper adjudication of the claim. There would be, I had prognosticated, no need for human adjusters or appraisers, not even a need for lawyers. “Pain and suffering,” I anticipated, “would no longer be a factor by the year 2001 because medical science would have eliminated pain.” I sure missed on that one!

Nevertheless, unless we adjusters truly believe ourselves to be professionals, the world of I.M. Fair — some IT invention that will do it all — will be nipping at our heels. Furthermore, some of those vendors and sponsors at the Chicago SCLAoACE were in the outsourcing business. Why pay Americans, who demand high wages and benefits, when the Irish or the Chinese or the Indians can do it cheaper? Combine IT and outsourcing, and a few local investigative or damage evaluation services, and there will be no need for adjusters. One outsourcer says it is a global provider of professional services to include customer contact centers. I guess that will be the new name for adjusters in a few year. “Hello, this is Joe, your customer contact representative.” So, is “adjusting” back in business, or are we just treading water until the final claim is outsourced to a computer?

Ken Brownlee, CPCU, is a former adjuster and risk manager, based in Atlanta. He now authors and edits claim adjusting textbooks.

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