Circling overhead

In November last year, the inhabitants of Cockermouth, Cumbria, were caught up in a scene of devastation as it was hit by the most severe flooding in the town’s history. About 200 people had to be airlifted by emergency services, while others were forced to abandon 1,000 homes and businesses as the water climbed to more than 2.5 metres. In the aftermath, many were forced to live in awful conditions, with little access to electricity or water. But according to one flood victim, the efforts of a group of men in high-visibility coats with ‘loss assessor’ in large letters across the back made a nightmarish situation even worse.

Shop owner Jonathan Chippendale was forced to abandon his business as the water rose. Later, he slipped behind the police cordon to get to his till, fearful that its contents might be damaged or stolen. But an encounter shortly afterwards left him angry and shaken.

He says: “As I left the shop holding my cash drawer, I was approached by no less than three loss assessors, all of whom told me they would save me a fortune, that the insurance company would no doubt wriggle out of paying what they should and that only with a loss assessor would I be able to maximise my claim and make the most of it.”

Chippendale believes they were taking advantage of an emotive situation. “I felt they were ambulance chasers and they had no business being inside a police cordon,” he says. “Their sales pitch was very much ‘the wicked insurance company will screw you into the ground’, which hasn’t been my experience. I think it puts more stress on people because they became even more worried about what is already a very stressful situation.”

Vulnerable to attack

The flooding in Cumbria last year has reignited the long-simmering debate on loss assessors and their place in the claims process. AXA’s customer experience director Paul Meehan says the behaviour of the loss assessors in Cockermouth has exposed major flaws in their practices. “If you have been in that position where your house has been flooded – bearing in mind that people were without electricity, without any kind of power at a time when their properties were flooded up to first floor level – that’s a terrible experience to go through. People are very vulnerable at that point and loss assessors trade on that vulnerability,” he says.

Client-side claims consultants Lorega’s chief executive, John Sims, echoes the belief that loss assessor need to clean up their act. “The problem that people have with assessors is the way they get their business really. If there is a major fire, you will get a queue of assessors. People see them as instilling the fear factor into the customers.”

AXA argues that ultimately it is the customer who loses out as they are forced to part with a percentage of their claim with little way of knowing whether the assessor was of value or not. Chippendale says that assessors in Cockermouth were charging up to 15% of the settlement. Meehan says: “Loss assessors take their fee off the top. If there is a justified claim of £10,000 and the loss assessor doesn’t get more than £10,000, the insured is going to lose that percentage of the claim.”

Meanwhile, Towergate’s head of claims, Simon Gifford, suggests that in some cases entering into a contract with a loss assessor can discourage the customer from seeking other potentially helpful advice. “They tend to say to customers ‘you are working with us, so we don’t want you to talk to anybody else and we don’t want you to listen to anybody else’. This cuts them off from any advice and dialogue from their own insurance broker, which I think is quite a negative thing.”

Furthermore, speculation has mounted about the unscrupulous practices carried out by some loss assessors. AXA’s claims director David Williams points out that after the flooding in Carlisle a couple of years ago, there were reports of some assessors suggesting that policyholders tip cars further into the water so the vehicles could be indisputably written off. Others suggested that assessors moved a new piece of furniture to and from skips in the town, photographing it for different claims to increase settlements.

Such allegations aside, one of the major gripes of insurers is that a loss assessor’s involvement is more than likely to push up the cost of the overall claim. Gifford believes this is mainly because they do not have the same discounting leverage with suppliers as an insurer-appointed loss adjuster.

“The insurer might be hiring equipment at £10 an hour, whereas a loss assessor, because it is a much smaller entity, might have a deal for £20 an hour,” Gifford says. “If the loss assessor is in control of the claim, the insurer will get a bill twice as expensive as it could have been if the insurer had got a hold of a claim and handled it.”

The Institute of Public Loss Assessors (IPLA)’s president, Henry Dony, dismisses the claims made by AXA as “outrageous and misleading”, pointing out that loss assessors carry out a vital role that can often be neglected by insurers and loss adjusters. “To give the impression that all loss assessors are ambulance chasers is skewed and it does the profession no credit at all,” he says.

“There are numerous incidences where loss assessors are vital to the process. I hear so often from policyholders: ‘I can’t get hold of a loss adjuster. They are not doing anything.’ But as soon as we are on the scene, the loss adjuster sits up and takes notice because he knows that he is dealing with another professional and not just Joe Public.”

Even Williams concedes that it is partly the insurers’ fault, as they have paved the way for loss assessors to profit in disaster-struck areas by their past failings in handling claims promptly and communicating effectively with policyholders.

Know your craft

For the moment, insurers’ main ammunition against loss assessors is that, unlike loss adjusting, there is no set of standards or qualifications required for entry into the sector apart from registering with the FSA. While a growing number of qualified loss adjusters are opting to work on behalf of the policyholder, customers have little way of knowing whether the man in the yellow jacket waving a contract is one of them.

“I think the problem with loss assessors is that it is such a broad church,” Williams says. “You can have well-qualified chartered loss adjusters, who are providing meaningful value on complex commercial climes and then, at the other end, you just have people who have a bit of a gift of the gab and the eye for an opportunity.”

Many in the industry say only chartered loss adjusters have the knowledge to handle a claim. Chartered Institute of Loss Adjusters (CILA) former president Angus Tucker says: “The right person to deal with a claim is a chartered loss adjuster because the chartered loss adjuster’s training and qualifications make them a claims expert.”

Indeed Lorega, which provides claimants with a claims consultant as part of their policy, stipulates that its entire staff are qualified loss adjusters. “We have to have stronger regulation that means some Tom, Dick or Harry can’t become a loss assessor overnight. That’s fundamentally wrong,” Sims says.

Loss assessors retort that this is a spurious concern, pointing out that many people in insurance companies don’t have any recognised qualifications themselves. Moreover, loss assessors Harris Balcombe partner Nick Balcombe disputes the notion that a qualified loss adjuster is the best person to act on behalf of the policyholder. “I don’t believe a loss adjuster who can’t get any work adjusting should suddenly be able to decide they want to be an assessor. It is a different discipline.”

Dony adds that industry experience is the vital asset in loss assessing, saying most loss assessors have a background in broking or surveying. “The fact that someone has letters after their name doesn’t necessarily make them a good practitioner in their chosen field. Most of our members are very experienced; they have learnt their craft.”

Currently, the IPLA, which has 45 individuals as members, does not recommend any set standards or training. But Dony says that introducing examinations is “under discussion”.

Meanwhile, AXA is keen for the FSA to step up its supervision of the sector. Meehan says: “The FSA has been banging on for the last five years about treating customers fairly. I would be interested in knowing what type of investigations the FSA is doing about ensuring loss assessors are treating customers fairly.”

He points out that claimants can often be tied into contracts they have been persuaded to sign on the spur of the moment and should be better protected under the Unfair Contracts Act.

Indeed, Chippendale says that flood victims are at a loss when it comes to advice on loss assessors. “I think the loss assessors should be better regulated. I mean, who the hell do you phone if you feel the loss assessor is not bona fide or reliable?”

When approached by Insurance Times, an FSA spokesperson said: “Loss assessors acting on behalf of policyholders in the event of a claim are carrying out regulated activity. If there has been an incident of customer detriment, we would encourage people to contact us through our consumer helpline.”

Losing patience

Ultimately, it seems insurers, loss adjusters and loss assessors have reached a stalemate. All agree standards need to be raised but are unclear what should be done or who should do it. Insurers want the FSA to turn up the heat on the loss assessing sector, while assessors say all the sectors need to be given a good shake-up. Balcombe says: “I don’t think that only one side should be regulated. I think the whole marketplace needs to be turned upside down and made more consumer-friendly.”

Elsewhere, there are question marks over whether the FSA is even the right authority to wade in. Balcombe argues it could be time for the government to get involved directly.

One thing is clear: policyholders’ patience with the insurance industry is wearing thin. Chippendale says: “I think insurance companies don’t really help themselves by not spelling out the claims process. Also, if these loss assessors can get on the ground so quickly, why can’t the loss adjusters? Loss assessors operate in a vacuum and if the official loss adjusters were there as quickly, then that vacuum wouldn’t be there to fill.” IT