Instead of glossing over this oxymoronic “spike in reduction,” let's draw some of our own conclusions as to what might be driving the losses, as gleaned from responses to a similar question I posted in several claim-related groups in LinkedIn, as well as comments made by several industry sources.

It's the Economy, Stupid. People are driving less. Small businesses are dropping coverage, reducing staff, or closing their doors entirely. All of this has the effect of reducing claim-generating activity, such as the number of auto, workers' comp, and liability claims that carriers are reporting. This, in turn, affects the number of claim assignments. Fewer claims equal fewer adjusters.

Rise of the Desk Adjuster. Economics and improved automation/technology have led many carriers to rethink whether claim handling business intelligence could be built-in to applications and make handling claims via call center a viable option. These desk adjusters can handle more claims while also reducing ALAE and UALAE. Claims are settled more quickly, although the “nothing more, nothing less” aspect of the policy is likely to suffer, resulting in higher payouts. Insurers can make up for the higher claim payouts by increasing premiums. This isn't the case with allocated loss adjusting expenses.

Lack of Major Catastrophes. A storm surge isn't the only thing that rises during a busy hurricane season. A similar phenomenon occurs in the claim community, as the need for adjusters rises exponentially. When multiple storm seasons fail to materialize, as they have the last several years, once gainfully employed adjusters are forced to move on to greener pastures. It's a temporary flight and, like the swallows of Capistrano, they'll eventually return.

It's All a Mirage. The numbers only recognize formal adjusters, and therefore fail to reflect changing employment status of some professionals. Companies are hiring adjusters on a contract basis, who are essentially performing the work on the side. Therefore, they may or may not be counted among the adjuster ranks. This could affect the overall reporting of the figures. The claims are still occurring, and they're being handled by adjusters. They're just not being classified that way.

What do you think the reasons are behind the drop? Go to the article here to add your own thoughts and comments, and let the speculation begin.