Loss reserves and how setting them correctly can expedite the claim process and give a more accurate claim settlement.
There is a common myth that Public Adjusters delay the claims process. In certain circumstances this may unfortunately be true. However, if the right PA is employed at the right time in the process, a property claim can actually be expedited. How this is achieved begins with correctly setting a claim reserve.
What are Reserves Anyway?
Reserves, or more specifically a loss reserve, is an estimate of the amount for which a claim will ultimately be settled. Additional money not set aside for claims is used for the insurance company’s investment portfolio on Wall Street. Setting aside too much money causes the insurance company to potentially risk losing out on investment opportunities. Comparatively, setting aside too little causes an adjuster to have to make a “capital call” to claw back investment money. Insurance companies want a reserve amount to be as accurate as possible, and so should you and your client!
The Typical Claims Process
Owners, managers and even sometimes contractors typically make their first call to the insurance broker advising them of a claim when a loss or damage occurs to a property. You know the questions the insurance company asks you when you file a claim? Those answers give the insurance company aid in setting an initial, or soft reserve based on peril, size of property, and other various parameters. Typically this is when an insurance adjuster is assigned to inspect the loss. The inspection is when a more accurate, or hard reserve is set.
If reserves are inaccurate for any reason, you face the task of convincing the adjuster to make the “capital call” described above. Consider how difficult it is for anyone to go and request more money when their “allowance” has already been given? This is where the misconception about Public Adjusters delaying the claim process often comes from. As the claim progresses, it is increasingly more difficult and time consuming to change reserves. This also means a more difficult task to receive an accurate claim settlement. So how can these obstacles be overcome?
An Expedited Claim Process
A complete claims package prepared prior to filing a claim and supplied with the first notice of loss allows for a more accurate reserve setting from the beginning. Consequently, the insurance adjuster assigned has all the facts presented, and a more accurate hard reserve can be set accordingly. A claims package may vary for each claim. However, a claims package generally should include: an Xactimate estimate, a contractor’s estimate/bid, documentation to support the estimate(s), a Proof of Loss, and/or affidavits from owner/manager of the property stating any facts necessary to further support the claim. This proactive approach, if done properly, will expedite the claims process and result in a more accurate claim settlement. In fact, on average when we are involved in a claim from the beginning we see 38% faster claims resolution.
Want to Learn More?
C3 Group is always here to help! Interested in learning more about how to prepare a claims package or have questions on a specific claim? Speak with one of our team members by calling (833) 232-5246 or contact us by email below.