“We are creating an industry which is creating jobs that are less and less appealing to the potential employees in the job market.” ~Thomas Underbrink


Last month I had the pleasure of attending the Oregon Casualty Adjusters Association annual symposium.  It had been a while since I had attended this event.  I’ve been on the consulting side of claims for some time now, and it was great to connect with folks who I hadn’t seen since my time as a Restoration contractor.

It was also very interesting to see and hear how the claims industry has continued to change since my departure.  Restoration project managers and front-line claims adjusters operate in a much different environment than the one that existed only ten years ago.  “Programs”, TPAs and continued specialization and consolidation have created a far less personal (and appealing) working environment all involved.

The Symposium keynote was given by Thomas Underbrink, the Director of Litigation at Mutual of Enumclaw.  I was fascinated to hear things from his point of view, and very much felt like a fly on the wall as former contractor-turned-adjuster.  As the contractors and other vendors chatted it up in the exhibit hall, Thomas treated me to an inside view of the claims world that I was unaware of till that point.

“You’ve got to serve somebody.” ~Bob Dylan

The keynote began with this quote.  What Bob was telling us is that no matter who you are, you’ve got somebody to answer to.  In each of our own lives, we have to recognize who we’re serving, and learn their rules of engagement, in order to succeed.

In my experience on the contracting side of claims, there were always three masters: the insured (Clients), the adjuster (Carriers) and my boss (the Company).  This tri-chotomy (yes, I just made up a word) led to a great deal of cognitive dissonance in my own life (as I’ve mentioned in a previous video/rant).

What I was surprised to hear is that contractors aren’t the only ones who struggle with the often unfair rules and systems that they’re forced to work in every day.  Adjusters and attorneys, as it turns out, are feeling the same frustrations at how our industry is changing as contractors.

The rise of the “-ations”

Thomas spoke about the increasing use of financial metrics to manage the various litigation and adjusting services.  It’s only natural.  Big business and management have always looked to measurement metrics and financials to help boost bottom line profits and shave costs.

The problem, as I heard it, was that when you ONLY make decisions according to the “score board”, you miss some of the important things that make great adjusters and attorneys – the human factors.  An example he used was the increasing use of IAs to handle claims.

In and of itself, hiring outside adjusters isn’t a bad thing.  There are many qualified and experienced adjusters out there.  The problems arise when the IA and the hiring carrier have different intentions.  Things used to be more straight forward.  An independent adjuster was a partner in the claims process.

They were the eyes and ears.  They were the trusted party to help the carrier bring the claim to a successful settlement.  This isn’t the case any longer.

Increasingly carriers are turning to outside help for one singular reason: reduce claims severity.  That’s another word for pay less on claims.  For those who “grew up” in this industry, this runs contrary to the old way.  This becomes a problem and leads to a clash of cultures.  And when cultures clash, the carrier wins.

Thomas talked about the rise of the “-ations.”  By these he meant Segmentation, Specialization and Centralization.  These are another way to reduce claims expense and increase claims efficiencies.

Segmentation means the splitting of claims to certain groups or departments dependent on the level of complexity of a claim.  The thought is that if people can keep doing one kind of claim, every day, they can maintain a higher level of output.

Specialization is similar to segmentation except that claims are assigned according to claim type.  Glass only, BI, theft, liability; all these have been sent to special departments or vendors dedicated to each type of claim.  Some carriers have even begun to split parts of the same claim between two or more adjusters or departments: the water mitigation portion of homeowners claims are adjusted by a separate adjuster from the structure adjuster.

Centralization refers to the increasing popular strategy of physically moving claims centers to one geographic location.  This also coincides with the move to rely more heavily on outside adjusters and “vendor partners” (contractors) to handle the heavy lifting of claims documentation.

All of these things are riding on a culture of reducing costs in order to boost corporate profits.

If you don’t understand this culture, you lose. 

IA firms lose contracts, law firms lose clients.  The ones who succeed learn how to work the system.  The key is to learn what the rules of engagement are, decide that you can accept them, and then play the game.

If the rules are not ones that you can succeed at, it’s time to find a new client/employer.

Someone asked the question, “How can someone [like an inside adjuster] change the current culture?”

You can’t.  Tom’s answer fell with a thud.  I think some folks thought he’d come with some magical answer, but there isn’t one.  The fact is that the only thing that we can affect change on is ourselves.  If we can’t succeed in the environment we’re in, the answer isn’t to change the environment.

The answer is to change ENVIRONMENTS.  You have to choose who you’re going to serve.  “It’s up to you to change your existence in this industry,” Tom said.  And he’s right.

We can’t hope to change the company culture to fit our needs. 

It works the other way.

We see this happening every day in other areas of the insurance juggernaut.  Take health care for example.  There are doctors who refuse to “accept” certain insurance programs.  There are even doctors who don’t accept any insurance at all.

Why would they do that?  Because they don’t have to.  They don’t agree with the rules of the game, so they take their ball and go home.  And I say “Good for them.”  The health insurance world is even more dehumanizing than the property damage world.  And the property carriers are trying harder every day to be more like the big “health” companies.

Profit over people.

I see contractors doing the same thing.  Making the conscious decision to choose clients over carriers.  The biggest “restoration” contractor in Bend, OR where I live is NOT a Servpro or ServiceMaster.  Even the Belfor outpost here is tiny.

CODR succeeds where these other “program vendors” don’t because they put their clients, the local people in Central Oregon front and center in their business plans.  They understand that programs exist to put carrier profit before contractor profit, and that translates to lower quality work for CODR’s clients – home and business owners.

Remember the “trichodomy” I mentioned?  It doesn’t really exist because in that situation someone always loses in order for someone to win.  And the contractor is just the lacky delivering the bad news and substandard work product.

Before you get all mad, let’s look at the numbers.  If you are part of the Code Blue “network”, what do you give on every single water loss?  30%? 40%?  Do you even have a chance to make that up by boosting your invoices? Nope.  They write YOUR sheet don’t they?

Let me get this straight: you go out in the middle of the night and perform services for a “client.”  Then you report to Code Blue and THEY tell YOU how much your invoice is going to be.  Oh yeah, and then they take 40% off and write you a check.  And then they pass a PORTION of that savings to their client, the insurance carrier.

Now you’ve got to compete with a business across town who does their own marketing, has established their own name and referral base in the local market, writes their own invoice and gets to keep ALL OF IT?  How do you survive Mr. Program Vendor? By handling more volume?

I’m sorry if you’re hearing this for the first time right now, but the only thing you’re doing is losing money on more claims than your competitor.

I know there are many out there, friends of mine included, who believe deeply in the programs.  They are viewed as a revenue foundation for growth.  And they may be – for now.

If there is any sure thing in this day and age it is this: things are changing faster than any of us can possibly comprehend.  The rate of change is only increasing.

The other sure thing? The insurance industry is due for a reckoning. With half a trillion dollars in claims every year, and ZERO true innovation in the last twenty years, the industry is just begging for disruption.

Do you think the taxi companies of the world saw Uber coming? No one saw Uber coming.

Did the founders of AirBnB ask Hilton permission to create their company?  The founders didn’t even come from the hospitality industry.  They just saw a big problem and solved it.

The main reason the insurance world hasn’t been rocked by a startup tech company is because it is an amazingly complicated machine.  Lots of moving parts and lots of invested players – players who are more concerned about the status quo than where the industry is going.

My take away from Thomas’ talk was this: adjusters and attorneys are finally feeling the squeeze that contractors have been feeling for the last ten years.  Profits before people.

The days of the 20-year adjuster are over.

Am I the only one noticing this trend?  The “old timer” insurance adjusters are now mostly folks who started in this game AFTER I did.

Yes, I realize that I’ve been at this a while. And yes, I am getting older.  But what happened to the adjusters who were here before I started?  They’re all gone.

Carriers have shown an incredible distaste for adjusters with years of claims experience (and expensive pensions).  The focus is now on reducing overall claims expense. That means it’s more important that a claim is settled quickly, than it is to thoroughly examine the loss, coverage and policy for the benefit of the insured.

Remember those days?  When the insured was treated like a client?

Now we’ve got a crop of college graduates who are taught one thing – the claims system.  The application of policy language and proper loss analysis is all but dead.  It doesn’t fit the new metrics.  So those who are accustomed to the old metrics and slowly weeded out to early retirement – or worse.

What is going to happen when Google’s AI machine figures out that it is better at applying your “program rules” to Xactimate estimates than you are?  Guess what slick, you’re gone too.

Just like Amazon will kill the Postal Service and UPS with their autonomous delivery initiatives, the button pushing you do as a “desk adjuster” will be deemed better suited to a machine sooner than anyone expects.  Just ask any taxi driver in San Franscisco, they’ll say the same thing, “Man, that happened quicker than I thought.”

The Times, They Are a Changing

I took a stroll around the exhibit hall after Thomas’ opening statements.  The changes were incredible.

“Back in the day” there would be all manner general and restoration contractors in at the booths.  I used to jokingly call the Symposium a contractor’s love fest.  It used to be wall to wall.

Now guess who’s exhibiting: lawyers.  Attorneys, benefits companies and forensic/analytics providers.  That and a couple IA’s thrown in for spice.  Is that any indication as to the direction the industry is headed?  Yes, there were some contractors represented, but their position as drivers of the industry has now shifted.

And the funny part is, the attorneys and IA’s were complaining about the EXACT same things us contractors used to complain about. Program rules, cut rates and layers of bureaucracy.  That’s just another day in Restoration to us, but to them, this is all new.  Forgive me if I happen to be all out of tears to shed.

We Should Have Seen it Coming

None of us should be caught off guard by these changes.  We’ve had an exact mirror image of our future right in front of us for years; the health care industry.  What is happening in the P&C space is nothing more than “managed care” for property.

What makes us all the more stupid is that we’ve all be part of HMO’s and PPO’s for years.  These companies were not created to enhance “patient care.”  They were created for profit.  I just got done paying off an ultrasound that my wife had THREE YEARS AGO, because our “provider” at the time deemed the procedure “unneccisary” – despite the fact that our doctor had ordered it.

If this had been a property claim, I would have known what to do – and how to fight.  But I had no idea what to do, so I paid $3,000 out of pocket for a procedure that should have been “covered” by my insurance.  And now they’re coming for property claims.

I’ve said for the past couple years that Xactimate is nothing more than medical coding for construction.  I’ve run my “construction coding” company for nearly four years now.  And there are many companies in my space now.

So What’s Next?

I’m no fortune teller, but I don’t have to be.  The future is more “managed care” for the property restoration industry.  Programs will become less and less profitable, and more restrictive.  Carriers will soon literally own their own stable of contractors, and the independent firms (both contracting and adjusting) will have to become creative in order to survive.

Just look at the Sedgwick – Vericlaim – First Choice conglomerate.  When has there ever been a completely vertically integrated risk management, claims management and vendor management company? Ever?  Please someone correct me if I’m wrong.

Sedgwick isn’t the last.  I fully expect someone like Home Depot or State Farm to put together their own property monstrousity.  Ever heard of Code Red?  How hard would that be to integrate into State Farm’s “Premier Service Program”?

These are all things out of our control as contractors and vendors.  Big companies will do what they want.  So what do I recommend?

I say double down on your local market.  Concentrate on doing the best work you possibly can and choose your clients carefully.

And if you don’t enjoy your work, stop it.  Find something better to do with the rest of your life.  Life is too short to be frustrated all the time.

Sometimes the Grass IS Greener

I saw an old friend at the Symposium.  She was talking with her former claims manager.  Both of them had recently left their employer – her to pursue a different business, him to work for a different carrier.  Both of them were happier than I’d seen them in over twenty years. Literally.

We all make choices in life about where we work.  Some of us compromise more than others.  I don’t believe anyone should compromise happiness in exchange for perceived stability and “benefits.”  Are you happy in your work?  If not, why?

You don’t get bonus points for staying in a crappy situation longer than anyone else.  You just get more crap.

Take a look at my resume and you’ll see that I’m living proof of the saying, “If you’re not living a life of your own choosing, you’re living someone else’s.”  I’ve been fired, layed off, cut back, overworked and underpaid by more businesses than I like to say.  But ever since I made the decision that I was going to be in charge, I’ve been happier.

There are thousands of ways to “make a living”.  We get to choose it.

Do you work in a company culture that you can’t succeed at?  Time to change companies, because you can’t change the culture.





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