When a hurricane strike appears inevitable, insurance companies activate their own internal catastrophe units and prepare call centers for the increase in claims. However, having hundreds, even thousands, on their payrolls is not a realistic, nor intelligent, business decision. “There's no way to build a response team and keep them sitting on the sidelines waiting for a storm,” said Tom Crawford, president and CEO of Crawford & Company, one of the largest independent claim management service firms.

Carriers overcome this by having adjusters who can handle a variety of claims. “Most companies have a small, permanent staff of catastrophe adjusters,” said John Eager, senior director of claims for the Property Casualty Insurance Association of America. “In down times, these people help train temporary adjusters. Many times, these adjusters also handle auto claims and work commercial claims. The key is cross-training.”

Jim Flynt, an independent adjuster who has worked property claims for 34 years, agrees. “If a storm is large enough, like Andrew, Hugo, and even Katrina, then a company like State Farm will bring in not only their property adjusters, but also their liability and auto adjusters as supervisors, managers, or support personnel,” he said.

After analyzing and comparing the predicted path of a hurricane against the projected number of policies at risk, carriers estimate the number of claims they expect to receive and in what areas they most likely will occur. If supply outstrips estimated demand, a carrier has to look elsewhere for adjusters.

Finding “Warm Bodies”

For instance, many carriers rely on third-party adjusting companies as resources to supplement existing staff when there is a surge in demand. Most major insurance carriers establish contracts with third parties prior to a catastrophe such as a hurricane, but calculating how many adjusters are needed before a disaster actually occurs presents a problem in and of itself, not to mention the limited pool of talent available immediately after an event. For third parties to connect with potential candidates, they have to get creative.

“Katrina presented a unique opportunity for us because so many people were displaced,” said Crawford. “We actually advertised in some of the centers where people were living and would offer professional training for a job in adjusting for those who chose to change their careers. Our other source was college graduates and those just getting out of school.”

How does a firm such as Crawford ensure that these potential adjusters receive the training that they need in order to handle claims in the same way as a seasoned adjuster? Recruits go through an intense training regimen that involves working 10 consecutive days to learn entry-level property adjusting. This type of focused training emphasizes the basics and alleviates the glut of simpler claims that deal with roof damage and water leakage, which allows more experienced property adjusters to focus on the complex flood and commercial claims. Although not perfect, it is one realistic way to handle the increase in the need for adjusters following a catastrophe.

“You cannot be totally prepared beforehand to address an event as large as Katrina,” said Crawford. “We made a decision to constantly train and turn out adjusters every 10 to 12 days. We just try to build up the group that is eligible to work an event like this.”

Once initial training is completed, new adjusters spend several days working in the field, trailing experienced adjusters before going off to review and adjust claims on their own. “We feel very confident that we can put solid people on the scene when dealing with less-complex claims,” said Crawford. “Our obligation is to provide quality claim service.”

In 2005's hurricane season, both the Gulf Coast and Florida were pummeled within weeks of each other. When multiple catastrophes occur, the need for an expedited training approach becomes evident. “Carriers are looking for a lot more [adjusters] than they probably can get,” said Crawford. “At a normal event, most companies are looking at 100 to 500 adjusters in a contract. Katrina was abnormal; carriers were looking for more than that.”

Kevin Hromas, an independent field adjuster who has worked as a staff and cat adjuster for nine years, said that the demand could have been even greater. “If Rita would have come in around the Galveston area as a Category 5, it would have made Katrina look like a summer squall, just in the magnitude of damages that were projected,” Hromas said. “It would have been 100 times worse than what Katrina did. In that situation, vendors really were scrambling because so many adjusters were already deployed. Warm bodies were getting hard to find.”

Experience … or Lack Thereof

A look at expected claim numbers for this year reveals even more about the need for adjusters. The Insurance Information Institute expects approximately 1.6 million claims to be made in the wake of Hurricane Katrina. ISO projects the damage from Hurricane Rita to produce 403,000 claims and, although no official estimate had been presented for Hurricane Wilma at press time, industry speculation puts the number of claims in the 600,000 range. In total, claims for this year's three major storms could top 2.6 million, a 13 percent increase over 2004.

Can the estimated 15,000 adjusters in the Gulf Coast area and Florida handle this kind of workload, given their condensed training? Some experienced catastrophe adjusters have their concerns. “Many adjusters feel like there is a lot of resentment toward new people coming into the field,” said Hromas. “The business is tremendously technical when you get into interpretations of policies; that is one area that we feel is shortchanged when new people come in.”

“It is tough to teach policy, teach estimating, even the computer estimating software, in a week,” said Flynt. “As the demand for personnel increases, there comes a point where it is difficult for vendors to find adjusters who are doing catastrophe adjusting on a full-time basis. So they bring in people like roofers or carpenters. This certainly happened during this storm season.”

An experience gap can have dramatic effects on insurance carriers, which is why third parties try to keep newer adjusters busy on entry-level claims. While an experienced adjuster will analyze a claimant's insurance policy to accurately determine the level of coverage, a new adjuster may not have the level of experience necessary to interpret it the same way. “If a [less experienced] adjuster overpays the client, that hurts the insurance company. If he underpays the claim, it hurts the insured,” said Flynt. “It increases the demand for public adjusters and plaintiff attorneys to come into play, and hurts the image of us all.”

Flynt went on to say that this could lead to an outbreak of “neighbor-itis,” a tongue-in-cheek reference to the chatter that occurs among neighbors and community residents after adjusters have made their estimates. This contagious situation is exacerbated in subdivisions with similar homes and models, where comparing losses is relatively simple, and brings an entirely different meaning to the phrase, “keeping up with the Jones.” It creates difficulties between new adjusters and veterans because while one homeowner receives a claim for the policy limit, another might only be reimbursed for a portion, depending on how the policy is written and interpreted. The result may involve reopening a claim after it has been closed, which not only slows down the settlement process and increases costs, but also can lower a claimant's satisfaction with his insurer.

Eye on the Prize

Staffing for catastrophes takes preparation and a sense of urgency, and finding several thousand well qualified adjusters on short notice is a daunting task. Although insurers may prefer to handle all claims from within their own organization, it is clear that third-party companies play a vital role in training and preparing hundreds of new adjusters in a short amount of time. They also alleviate the costs of keeping a fully staffed catastrophe team on an insurer's payroll and ensure that a carrier's customers make contact with adjusters as quickly as possible. Despite some weaknesses in the system, the dedication in getting the job done in a timely manner is apparent.