Loss adjusting: a sea change?

But while the spate of deals that saw VRS Vericlaims purchase Ellis May, Charles Taylor acquire Knowles Loss Adjusters and Crawford make a double swoop for Buckley Scott and GAB Robins may have bolstered revenues, some in the market have raised concerns about the impact of this consolidation on insurers and their customers.

The mega merger of Crawford and GAB Robins, revealed in December 2014, created a player that trails only Cunningham Lindsey in terms of turnover. News of the deal sparked murmurings in some parts of the market that there were now two at the top table, with the rest of the market left to fight over the scraps.

But as new Crawford UK & Ireland CEO Clive Nicholls comments, if there were concerns from a competition perspective, they were not raised by the Competition & Markets Authority, which gave the deal the green light earlier this month.

He says: "We went through a CMA process, which involves them talking to our clients, their customers and our competitors. Had there been concern that there wasn't sufficient customer choice then our clients would have been very vocal, as would our customers and the rest of the marketplace."

Discussing what prompted the firm to follow the acquisition of Buckley Scott with an even larger deal, Nicholls says it was the quest to create "a scalable, sustainable business in a highly competitive marketplace".

"Of course there are synergy savings that we're looking to achieve. But we wouldn't dream of prejudicing the service to our clients and their customers. Our clients are not obliged to use the services so we need to maintain the high standards," he adds.

Changing insurer demands
Dan Saulter, Davies CEO, says it is natural that "in sectors where there are a long list of players, you end up having some form of structured consolidation".

Changing demands from insurers is one reason smaller players may look to do deals, Saulter says: "You do hear from smaller firms that it's becoming harder to convince insurers to deal with you. In a procurement-driven world people want to deal with a firm that has scale."

However, there are other factors behind the recent wave of sales, including the fact that "a number of the smaller firms in the market are owned by people who have been doing the job for 30 or 40 years and who are looking to sell", Saulter says.

And Cunningham Lindsey CEO Phil McNeilage adds there has been "a reduction at the higher volume end of adjusting, which reflects the fact that some insurers are choosing to insource more".

But while increased insourcing has put pressure on some businesses, there are positive impacts from the fact that insurers are now deploying loss adjusters on the majority of claims rather than all claims, says Questgates managing director Chris Hall.

According to Hall in the last decade loss adjusting went through a period of ‘dumbing down' as insurers placed less value on technical skill, which meant loss adjusting was not a particularly attractive place to work.

However, as a result of insurer insourcing and in the light of the Financial Conduct Authority's thematic review on claims and its emphasis on treating customers fairly, insurers are recognising adjusters can play an important role when deployed on appropriate cases, he says.

"Adjusters are now being used on the more complex claims where they can really add value," he says. "You don't tend to go out anymore to see paint on a carpet or tiles off a roof. The upshot of this is that it is more interesting for young adjusters cutting their teeth. Adjusting is an industry in which people like to be stretched."

Quality over price
Along with this shift in mindset towards adjusters, there has been a changing approach to procurement, says Dave Watkins, UK property claims manager at Allianz. Insurers are looking more at long-term partnerships – rather than short-term dealing – which is better for the market and for the customer.

"While some are still price-driven, a number of insurers in the market are looking more at service quality," he says. "One driver for this is regulation but the other is competition. There's a growing focus on claims service at the time of acquiring business."

Rob Smale, claims director at Ageas, says that was the approach the firm took in the recent overhaul of its household panel.

"Ageas is typically selling policies through brokers and partnerships so we need something other than price to differentiate us," he says.

"We thought if we go out to the market with the same old tender as everyone else then we'll get the same back. So we started a process which asked, ‘what can you do for us that's different; how can you innovate to provide better service for our customers?' Only once we'd made the shortlist selection did we start to talk about price."

The result was a new-look panel, replacing the big guns with two medium-sized players and a new entrant. According to Smale, one of the key benefits of smaller firms is that they are "more nimble in terms of getting the message through to the guys on the front line".

"Larger players have a lot of insurers that they're serving so it can be harder to remember this is an Ageas claim and we deal with it this way. For smaller guys we can be a larger proportion of their total revenue," he explains.

Ecclesiastical Insurance claims director David Bonehill says the move away from being purely price driven is highly important if insurers want an army of skilled and qualified loss adjusters to be there in times of need.

"For many years insurers took a very short-term view by driving down adjuster fees in an effort to deliver cost savings to shareholders," he says. "But unless we are able to deploy the right level of skill – both technical and customer care – then we will see rising claims inflation and lower levels of customer satisfaction at a time when customer demands are increasing.

"Loss adjusters fall under the regulatory responsibility of the insurer. They are not directly regulated by the FCA and, therefore, insurers have an absolute responsibility to ensure the customer is getting the correct outcomes. This won't happen unless we are paying the ‘right rate for the job' – allowing adjusters to invest in a robust talent pool that will serve the insurance profession well into the future," he adds.

Recruiting new talent
The depth of this talent pool is something that is continually debated, with loss adjusters facing the same struggles as many sectors in luring the best and the brightest in an increasingly globalised jobs market. There is also the so-called ‘demographic timebomb' as old, wise heads look to exit the market without enough qualified members coming through the ranks to fill the gap.

The age demographic of the profession is a subject which crops up again and again in conversations, to the point that, as McNeilage says: "You would think loss adjusters were the only ones that ever aged."

Graham Smart, European managing director at McLarens, says while concerns about brain drain are valid, they are not a new threat and may have been overegged.

"The loss of seemingly indispensable wisdom was an industry concern 40 years ago – and probably far longer back than that," he says. "Great work is being done in the loss adjusting profession to ensure robust succession plans are in place and, while we shouldn't be complacent, the time bomb is not quite the threat that many would have you believe".

"For the arena within which we operate – commercial, complex and high-value claims – the correlation between experience, expertise and age means that there can be a perception that older means better. But what's important is not forgetting to provide future generations with careful training to ensure that the skillset is passed down."

McNeilage echoes this: "All professions and the industry as a whole have a responsibility to plan for succession. Cunningham Lindsey has a raft of initiatives to ensure succession – graduate fast-track training, apprenticeships and a great learning and development programme.

"Anybody can get bodies in. The trick is to give people cause to stay. And people stay if they know they're going to be looked after and developed. We've concentrated on broadening the range of professional services we offer. People can join us and become a chartered surveyor or a chartered engineer."

While the focus on training and retaining staff once they are already in the profession is key, there is still more work to be done in terms of raising awareness of the profession as a whole, according to Arthur Clark, CEO at Charles Taylor.

"It is still an issue and one that everyone needs to take seriously and work to actively attract high-quality staff," he says. "Loss adjusting is relatively unknown outside insurance circles, and what little is known by graduates is in respect of household and motor. We have been visiting universities in order to make them aware of our profession."

FCA focus
This cause has also been taken up with gusto by the Chartered Institute of Loss Adjusters in recent years, with greater focus on offering entry-level qualifications along with more advanced professional courses.

Malcolm Hyde, executive director at the CILA, says there has been a push for more competencies and qualifications in recent years, partly driven by insurers, but also by "consumers and the consumer protectors".

"There's an increasing focus from the FCA on insurance. It has done its thematic review of claims and is also looking at the SME space," he says.

But while the FCA has seen a massive increase in people achieving charted status – its most technical-focused qualification – it has also seen a significant increase in uptake of the certificate, its entry-level qualification, and of the diploma, its customer service-focused accreditation.

"In the last year we had 330 members achieving a qualification within the institute. When I came five years ago it was maybe in the tens. It's a complete sea change," Hyde says. "It's important we attract the right people. Three years ago we brought in our certificate-level qualification to bring young blood into the industry. We've also taken part in the government's trailblazers apprenticeship scheme."

Lack of consumer knowledge
Once people know about the nature of the job, it is seen as "quite an exciting part of insurance", but there is still a lack of awareness around what adjusters actually do, Hyde says.

Key to successful recruiting is getting the messaging right – something the industry as a whole is still getting to grips with, he adds.

"If you talk about insurance, people think, ‘that doesn't sound terribly exciting', but when you talk about risks, claims, disasters and solving problems then people do get interested," he says. "It's all about using the right hook."

While there is a lot of focus on industry staff becoming older and more grey-haired, when it comes to the companies themselves, fresh faces are also hard to find.

Ahead of the arrival of new entrant Stream in 2014, the last new entrant was Questgates, some 10 years prior. According to Hall, this can partly be blamed on the high barriers to entry – regulation and the requirement to have filed several years of accounts – but there is also a lack of innovation in what is a fairly traditional sector.

Role of new technology
One area which is ripe for innovation is around the deployment of new technology, which has the potential to make the adjusting process quicker and more efficient, but no one has quite worked out the best way to do this, says Hall.

"Insurers are all looking at what can be done with technology but without losing the personal touch. It's challenging but whoever cracks it first will see significant benefits," he explains.

While the ways in which companies work may be changing, the need for the complex blend of technical skill, emotional intelligence and empathy that good loss adjusters bring is as great now as it has been at any time in the profession's history, says McNeilage.

He says: "We show up on people's doorsteps after the fire brigade has left, or on the factory floor after the building has burned down, and see how we can work with them to rebuild their lives."