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Newt
USA
657 Posts |
 Posted - 12/13/2002 : 09:56:14
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I am reviewing this topic, it is complicated to say the least. I can see a real bag of worms if this is not explained to the insured before any of the claim is discussed.
At the time the policy is sold to the insured would be the best time for the explaination, but the Agent most times can't get it across. The insured is not interested in the details, and nods his head in agreement to every thing thats said.
The adjuster is the fall guy, if they feel you are just making a judgement call off the top of your head. As far as they are concerned you are the insurance company, they don't look past you.
The penalty and deductable does reduce the settlement by a considerable amount and if the consumer is not on the same page with you, he is not getting what he anticipated.
I think this would be a real challange for those of you doing commercial claims, and I don't envy your job.
I may need some tips and help in this area, because I'm sure there are many hazards and pit falls I don't know about. Working with the insured is not the time to stumble across them.
Got about two or three days left on these forms
then I will know more about what to ask.
This may be a problem I am making in my head, but these things pop up and all I can think about is "what if". |
Edited by - Newt on 12/13/2002 10:01:31 |
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CCarr
Canada
1200 Posts |
Posted - 12/13/2002 : 16:29:40
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Newt, you have raised a property policy wording issue that must be dealt with on each claim where the insured building is affected.
First, my general thoughts on the many parts of your post.
Good - the topic should be reviewed and understood, and applied in each claim; too few adjusters do this
No - it is not really complicated. The homeowners version of the principal is a bit more complex in its wording of the issue, than is the commercial wording of its counterpart
No - there is no need for a bucket of worms to be held by the adjuster relative to this issue, nor are you at the kitchen table to educate the insured on their policy wording. You do not have the time for these lengthy explanations every stop of your day.
Yes - it is the obligation of the agent to explain what they are selling. This area of the "loss settlement" regarding insurance to value on the dwelling should be used to the agent's advantage to convince the homeowner to insure to replacement cost. You may find if you start "explaining" this part of the wording to an insured, you will put yourself at odds to what an agent said before you. If in fact the insured was 'not interested' in these details when they were purchasing protection for their home, they will find no comfort if you have to explain it as you apply the negative result of their failure to adequately insure.
No - the adjuster is not the 'fall guy'. The adjuster simply applies the contract wording to the loss conditions and situation confronted with; no different than a policeman applying and enforcing the laws legislated by others. An adjuster has to avoid the 'fall guy' attitude, or regardless of the breadth of your shoulders or leather like exterior; it will quickly become a burdensome weight.
No - the application of this area of the 'loss settlement' is not a 'judgemental call', and if applied correctly it is a technical determination based on technical data.
Yes - you the adjuster, are the image of the insurance company. However, in that role your function is to interpret the contract and apply its provisions based on the existing loss, policy limit and wording. You did not sell that policy to the homeowner, and again are not accountable for its' affect to the presented loss.
No - the deductible should not enter into your concern or be tied to the issue you raise concerning insured to value. The rate and premium for the policy you are working with was predicated on the insured having whatever deductible is noted, to serve as a self insured retention.
No - I do not believe this issue is a real challenge in commercial claims. In fact, I suggest it is less of an issue. The co-insurance clause in commercial is much clearer, and you are dealing with an insured who is a business person and should understand that issue.
Yes - tips and explanation of the issue for adjusters to understand this matter will go a long ways towards their understanding and address of the issue, which is too often ignored in both residential and commercial claims becuase they don't want to 'stumble with the insured' dealing with the matter.
The concept of what I refer to as 'insurance to value' is pretty straightforward in its application to a dwelling. For my reference, I am using an HO 00 03 04 91 wording.
Under the loss settlement clause, the building loss will be settled at replacement cost, if at the time of loss, the amount of insurance on the dwelling is at least 80% of the full replacement cost of the dwelling. That is for example, if you determine the RC of the dwelling to be $100K, and the policy limit is $80K or more; you proceed with an RC adjustment.
We will get to the 'determination' of the dwelling RC later. This is where I suggest it is not a 'judgemental call', but that it is a technical determination based on technical data.
Conversely, if at the time of loss, the dwelling is not insured to at least 80% of its RC, the insurer will pay the greater of (but no more than the limit)
(a) the ACV of damage
(b) that "proportion" of the damage on an RC basis, that the policy limit "bears to" 80% of the RC. This in essence is the residential wording of the co-insurance principal.
Three factors must be known to apply the above and deal with the two keys - "proportion" and "bears to".
(1) amount of damage on an RC basis (eg $10K)
(2) the policy limit (eg $60K)
(3) the RC of the dwelling at the time of loss (eg $100K)
Now apply "proportion" and "bears to", it is simple math.
Remember the following for the rest of your life - "the amount of insurance, over the amount required, times the loss".
Or applying the example,
60,000 / 80,000 x 10,000 = 7,500
When adjusters consider and apply the provision at all, often an error is made in the "amount required", the penalty is consistent with the wording. The requirement is to insure to at least 80% of the RC, therefore the "amount required" in computing the "penalty" is 80% of the RC, not 100% of RC.
If agents kept it to this simple concept when selling a policy and dealing with the policy limit required, there would be little exposure to this potential 'penalty'.
Therefore, for the adjuster to consider this part of the 'loss settlement', they must determine the RC of the dwelling; and the policy stipulates what not to consider in that determination.
Most estimating software programs I have encountered have a section for building evaluation to determine RC. Personally I have a hard copy of the Boeckh guide that I use.
Pretty well every property claim adjustment requires a diagram, which requires perimeter measurements. That, plus a determination of the type of structure (i.e. 1 storey, 2 storey, tri-level, etc), plus a determination of the construction type (i.e. frame, brick veneer, stone, etc); will give you sufficient data to compute a reasonable RC. Sometimes you may need more detail of the structure, but seldom.
Again, this is not a judgemental process, but it is a technical exercise.
I hope this makes this important part of the loss adjustment process clearer to you.
This concept is important to carriers from both sides of the fence. From an underwriting / premium perspective, carriers need their book of business to be insured to value, to balance their contract exposures to the policy limits at risk. From a claims point, it is all part of indemnifying for what they owe in accordance with the policy, and no more or less. Too much money is "left on the table" by adjusters not applying this important step of the 'loss settlement' provisions. |
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Newt
USA
657 Posts |
Posted - 12/13/2002 : 21:45:06
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Thats good info and I will read it over a few times to make sure I got every thing you mentioned.
I was into the commercial property form CP 00 10 04 02 which i think is the latest commercial form titled,"BUILDING AND PERSONAL PROPERTY COVERAGE FORM". With your take on this I think I can work out my doubts about the handling of the situation with out undue apprehension.
My view of some hazards along the way are the very thing that will keep me out of trouble. When others more experienced explain why those doubts are no concern or how action can be taken to insure those matters don't become a problem then I can procceed. I only know of one way to become proficient, by thinking problems. The subject is never as tough as the varibles which comes from experience.
The thing that set off the alarm for me was the penalty statement, I was thinking people are always concerned with the word "penalty". Sounds too much like punishment.
I will try to keep all this info stored in my memory , I understand what you are saying about the loss settlement not being a judgement call, rcv, acv, and replacement cost are fixed unlike depreciation which seems to be a gray area and sometimes requires a judgement call or so I have been told by the claims personnel at some carriers.
I am still trying to work at least two or three fictional claims a day, now I need to start working co-insurance /underinsurance/ penaltys into my claims. Adding another demension slows me down for a while. |
Edited by - Newt on 12/14/2002 07:17:12 |
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Newt
USA
657 Posts |
Posted - 12/14/2002 : 08:03:35
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After reviewing our posts on this most important subject, I found your response cleared some muddy water for me.
The statement about the judgement call was not meant in the literal sense, and what I meat to convey is that we as adjusters should never give the appearance of a judgement call.
Another point I would like to clarify is, many states require the policy be explained at the time of the investigation. This is a burden on the adjuster to a point. An no ammount of policy education will insure the customer will understand it. IMHO we explain the policy according to law and answer questions. We would have no assurance they would understand it or may even deny it if it came up in litigation.
So we give a simple explaination of policy contents, answer questions and figure the claim, acv,rcv or whatever, using the other schedules as required in the policy. Thats simple enough.
Unless told otherwise, figure depreciation by the book and leave it to the carrier to make any adjustments, no more no less. |
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