For new insurance agents and brokers, understanding the intricacies of property and casualty claims handling process is crucial to managing expectations and facilitating smooth interactions between policyholders, third-party claimants, and the insurance company. At the heart of this process is the insurance adjuster, whose job is not just to assess coverage, but to ensure that each claim is thoroughly investigated, evaluated, and resolved in a fair and timely manner.  

The book I use as an adjunct professor of risk management and insurance at the Borough of Manhattan Community College states there are four steps to the claims process. The fourth step is “settlement.” Recently an article in an insurance journal stated that consumers expect claims to be settled within five days and that paper checks are outdated. If there are only four steps in the claims process, and one of them is to “settle the claim,” then producers might well wonder why the adjuster cannot quickly initiate the wire transfer in order to close the claim.  

First Notice of Loss and Coverage Review 

The claims process begins the moment a policyholder or third-party claimant reports a loss. Adjusters must promptly acknowledge the claim, which sets the stage for all subsequent actions. The adjuster must make first contact, review initial information, and explain coverages to the policyholder. This step is more than ticking a box for key performance indicators. The Unfair Trade Practices Act and the Unfair Claims Settlement Act require it. In almost all cases, it’s codified into state or federal law.  

Because the insurance policy contract only pays for fortuitous (unexpected) losses, the adjuster verifies policy details and confirms that the claim falls within the coverage period. This preliminary review is critical, as it helps identify potential coverage issues that could affect the claim’s validity as well as ensures that the insurer pays only covered losses. 

Investigation and Gathering Documentation 

Following the initial setup, adjusters embark on a comprehensive investigation. This step is fundamental and time-consuming, as it involves gathering all relevant facts about the claim. Adjusters must inspect the damage (for property insurance), review medical records (for health or bodily injury claims), or assess any other relevant documentation such as scene photographs, police or fire reports, and expert reports. This phase also involves interviewing witnesses, consulting with experts such as engineers, doctors, or forensic analysts. The goal is to establish a clear, factual basis for the claim, which requires meticulous attention to detail. The adjuster cannot expedite the process without compromising the quality of the assessment. 

This step is the one that takes the longest because adjusters often face challenges that can delay resolution. These may include difficulties in obtaining necessary documentation, disputes over coverage or the extent of damages, and coordination with third parties such as repair shops or medical providers, and frequently, a lack of cooperation from the insured or claimant. Even in the best of circumstances where the policyholder takes their vehicle to the preferred repair facility, delays can occur. The pandemic taught us that our supply chain is vulnerable to shortages, which we are just now overcoming.  

It may seem like a platitude to say each claim is unique, requiring a tailored approach that precludes a one-size-fits-all timeline, but these examples above are just a few of the reasons claims do not resolve quickly or in five days. 

Evaluation of the Documentation 

With all the information in hand, adjusters then evaluate the claim against the policy’s coverage. This involves interpreting policy language, determining coverage of the loss, and if so, to what extent. This evaluation must be both thorough and fair, balancing the insurer’s obligations under the policy with the need to protect against fraudulent or inflated claims.  

Should the adjuster discover there may not be coverage, the adjuster must issue a reservation of rights (ROR) letter. A ROR allows the insurer to warn the insured that coverage for the claim may not apply yet preserves the insurer’s right to investigate. This harkens back to the mandate that the carrier must inform the policyholder of the coverages and rights they have under the policy. Often the receipt of a reservation of rights letter frightens the policyholder, who may then obtain the services of a public adjuster (if legal in the state) or attorney. This will, invariably, revert the claim to the investigation and documentation stage as the policyholder’s representative will supply additional information for consideration.  

The above simply considers first-party claims; in the event where the insured may be responsible for the loss, negligence also must be decided. Again, this cannot occur until all the documents and information is in hand. Most consumers do not understand that a policyholder may be responsible (liable/negligent) for an accident, but there is no coverage to settle the claim. Likewise, it is possible the policyholder is not responsible (liable/negligent) for the accident, but there is coverage. In the event of a casualty accident, determining if the adjuster will pay a claim is a two-step process involving both coverage and negligence. Having enough information to make these decisions will also take longer than five days.  

Adjusters must navigate complex policy documents and legal precedents, a task that demands both time and expertise. 

Resolution of the Claim 

Only after a thorough investigation and evaluation can adjusters resolve the claim. This resolution might involve approving the claim and determining the payout amount, denying the claim (with a detailed explanation and applicable policy language in order to fairly inform the policyholder of the reason for the denial), or negotiating a settlement with the policyholder, third-party claimant, or their representatives. Each outcome requires careful communication and documentation to ensure that all parties understand the decision and the rationale behind it. 

Consumers are used to paying their premiums online and wonder why they cannot receive payment for their damages similarly. It is true that, in some instances, the carrier can issue a spending card to the claimant for the purchase of certain goods. Unfortunately, in most instances, insurers cannot accommodate the electronic payment wanted by the consumer. The reason is that the policy requires all persons who have an interest in the property to be on the settlement check.  

For example, if the policyholder suffers a fire, the check will have the policyholder’s name as well as their mortgage holder. Two-party checks cannot be wire transferred or made into a spending card. Similarly, if the policyholder has an attorney or a public adjuster, that person’s name must also be on the check.  

The Producer’s Role in the Claims Process 

It is no secret that with today’s staffing challenges, adjusters have too many claims to handle. Being an adjuster is a challenging career at the best of times. First- and third-party claimants meet us only after a loss has occurred. While we see these types of claims daily, often this is the claimant’s first experience with their policy or filing a claim on someone else’s policy. Their guard is immediately up from the horror stories of how the insurance company did not cover this, did not pay full value for that, not to mention the ubiquitous plaintiff attorney advertisements justifying the claimant's feelings. 

Because, if there is coverage (and liability in the case of a third-party claim), the adjuster can only pay what the policy states. Therefore, if the insured, trying to save some money on premium, is underinsured, then the insured will pay their pro-rata portion of the loss in addition to the premium. If the insured purchases an actual cash value (ACV) policy, then the insurer pays the ACV amount of the loss with no chance of recoverable depreciation. And although the adjuster should have explained this to the insured at the beginning of the loss, the consumer does not generally understand the full implications until it comes time for payment. 

It would be nice if the adjusters working these claims would notify you of this impending issue, since the next person the insured will call is you, their agent, to understand what their premiums actually pay. In my experience, the claims department is continually under-staffed and adjuster continuing education is no longer supported by the vast majority of carriers, even if their states requires it. In the day-to-day working of claims, the adjuster no sooner hangs up the phone than the phone rings again and a slew of emails, each more impassioned than the last, arrive.  

This is to say, bluntly, that many adjusters do not take the time, unfortunately, to walk the claimants through the claims process as they once did. Perhaps it is also true to say that they don’t realize that walking a claimant through the process at the initial phone call could save them time, energy, and effort.  

In this hard market, where you are looking for an advantage over your competition, explain the step-by-step claim process to the insured is as an added value for their premium dollar.  

A word of warning, though – refrain from stating if a claim is covered or if the damage is payable under an insurance policy. According to the National Association of Insurance Commissioners and many state regulations, the only persons who can do this are adjusters and attorneys. If you have authorization from the carrier to adjust small claims, ensure the person handling those losses has an adjuster license if required by the correct state’s department of insurance.  

Conclusion 

Understanding the claims handling process from an adjuster’s perspective helps new insurance agents and brokers appreciate the complexity and diligence required to resolve claims fairly and accurately. It’s a process that, by its nature, demands patience and thoroughness. Rushing this process can lead to oversights, errors, and dissatisfaction for all involved.  

By setting realistic expectations and communicating the steps and challenges inherent in claims adjusting, agents and brokers can better support their clients through what is often a difficult time, ensuring a smoother, more transparent path to resolution.