In 2023, the U.S. experienced 28 billion-dollar natural disasters, crushing its previous record of 20 and totaling over $92 billion in damages. The Maui, Hawaii wildfires alone were estimated to have cost over $6 billion and the scale of the disaster required the state insurance commissioner to authorize temporary assistance from non-resident independent claims adjusters (IAs) to assist with processing claims and meeting property owner’s needs.
It’s safe to say that as the frequency of extreme weather events increases, the significance of IAs to everyday Americans is only going to grow. The National Oceanic and Atmospheric Administration predicts that 2024 has a one-third chance of being even hotter than 2023, increasing the likelihood of more wildfires, hurricanes, and flooding.
As the volume of claims rises, the IA’s contractor status will be indispensable to the success of claims companies. The independent contractor model allows claims companies to embrace a variable cost model and scale their operations while saving on the overhead, benefits, tax, liability, and insurance costs associated with full-time employees.
This can amount to as much as 30% in labor cost savings, while allowing claims firms to contract as-needed and more efficiently and cost-effectively meet claims demands as they rise and fall.
For example, during CAT (catastrophe) seasons when disasters cause widespread damage and create a high volume of insurance claims within a short period, IAs can be quickly deployed to handle sudden demand surges, allowing claims companies to more quickly process claims.
The Messy Back Office of Managing Independent Claims Adjusters
Despite the operational and bottom line advantages to hiring independent adjusters, managing a large IA workforce has its challenges. The increasing volume of natural disasters and extreme weather events is creating a perfect storm of challenges for independent claims companies and their adjusters to ensure adjusters are onboarded, compliant, and ready to be dispatched.
The onboarding and management of hundreds or thousands of adjusters to keep up with the demand is creating an administrative hurricane for the operations, finance and accounting departments in their back office. Behind each adjuster is an onboarding process that includes a slew of paperwork and procedures – W-9, 1099, e-signatures, background checks – that are typically handled by a manually-intensive series of back and forth touchpoints.
Weeks can be spent on onboarding alone to ensure there are enough adjusters in the field to meet the volume of claims. And even after the work is complete, managing an adjuster requires a reconciliation process for every financial transaction, contracted agreement, documented expense, tax regulation, compliance/licensure check, and documented communication.
For many independent claims companies, these processes and documents are scattered across multiple systems and have to be manually administered through dozens of human touchpoints in HR, operations, and accounting where employees must dedicate multiple weeks out of the year to processing 1099s and consolidating contractor payment data.
For IAs, this cumbersome process can lead to frustration and churn, pressure to pursue additional service licensing, and heightened stress levels, potentially affecting the quality of their work, their interactions with customers, and overall job satisfaction. Additionally, bottlenecks in the back-office directly slow down the adjuster’s ability to enter the field and satisfy the demand that they were hired for in the first place.
And most importantly, when a days-long onboarding delay is compounded by a late payment – in many cases, being delivered via a check in the mail – there’s a high risk claims companies negatively impact the adjuster’s job satisfaction, quality of work, and their likelihood of returning to do more work for the company. With IAs having the flexibility to choose which companies to work for, delivering fast, intuitive and easy experiences become a critical competitive advantage to retaining and growing an IA workforce.
Improving the adjuster experience enables growth
For many claims companies, job dissatisfaction and turnover pose an existential threat to the business. Without a satisfied workforce they can deploy in the field to service their clients, independent claims companies cannot deliver revenue generating services
And given the nature of their independent status, the risks of worker dissatisfaction and churn to business operations are exacerbated. IAs choose the claims company that best meets their needs, potentially leaving claims companies who don't deliver an exceptional experience without an adequate workforce to service their clients.
For adjusters, there are three critical "moments of truth" that largely determine their satisfaction working in independent claims companies and comprise the most important parts of their independent work experience:
- Adjuster Onboarding
- Adjuster Payments
- 1099 Creation and Filing
Adjuster Onboarding
Onboarding delays are typically caused by over-reliance on manual, spreadsheet-driven inputs and workflows that are prone to error and don’t automatically comply with client policies and government regulations.
Administering onboarding processes, and correcting the inevitable errors that arise from a slew of manual and human-led touchpoints, often requires tedious back and forth over phone and email with the adjuster themself. Firms must streamline and control onboarding with simplified, centralized processes that will eliminate over-reliance on spreadsheets, enable contractor self-servicing, prevent errors on the front-end and give full visibility into an adjuster’s contract data and lifecycle.
Adjuster Payments
IA payment processes require an even more urgent overhaul. For an adjuster to receive payment:
- W-9 forms must be collected and verified
- Banking details must be collected and verified
- Invoices must be processed
- Payments and reimbursements must be triggered
Even large claims companies, staffing thousands of adjusters, still manually execute each one of these steps. Unsurprisingly, it is not uncommon for them to then mistakenly pay wrong bank accounts, over pay, send checks to incorrect addresses, or simply delay otherwise correct payments by several days.
The negative impact that these delays have on the adjuster workforce should not be underestimated - 73% of adjusters reported that they would switch companies for an improved payment experience. Additionally, widespread mishandling of contractor wages can result in serious penalties from government labor regulators.
To mitigate any retention issues and ensure that a firm’s valuable adjusters are being paid in a timely, error-free manner; invoicing and payment must be automated to allow for faster, more accurate and scalable processes. By automating the payment process, companies can save dozens of hours each month, ensure reliable and accurate payments, decrease pay disputes, and allow adjusters to self-service and choose their preferred payment methods.
1099 Creation and Filing
Process consolidation and automation also presents the opportunity to offload the entire 1099 filing process for back-offices and adjusters alike. By handing off reconciliations and 1099 creation, filing and delivery, claims companies and their IAs can eliminate the risks of non-compliance or late-processing, provide a more convenient experience to their adjusters, and relieve themselves of one of the most stressful periods of the year.
Investing in your adjusters can pay dividends
Industry’s leading claims companies are taking additional steps to provide their adjusters with quality job experiences, encouraging the retention and growth of their adjuster workforces. Pacesetter Claims Services, CRU Adjusters, and CIS Group, who each collectively work with thousands of adjusters, have launched initiatives that offer their adjusters access to healthcare benefits, easy access to trusted experts in legal/tax/accounting/benefits administration, and assistance with managing finances.
These benefits provide adjusters with group-based access to licensed brokers to help purchase cost-effective health, vision, dental, and life insurance benefits that they wouldn’t have access to as individuals. And assistance with managing finances and legal and tax compliance helps adjusters reduce the burden of calculating tax withholding, estimating payments, filing business expenses, and maintaining bookkeeping.
"Access to healthcare is crucial for our adjusters on the road. It’s life-changing to provide them with access to these services." - CRU President David Repinski
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Another area that presents claims companies with a great opportunity to invest in the long-term retention and growth of their independent adjusters is continuing education and skills development. A recent survey of the global independent labor market revealed that when a contractor is deciding whether or not to take a job, their number two consideration, after remote work flexibility, is if the assignment presents unique project opportunities or a chance to develop skills.
While learning and skill development is inherent to being deployed and assessing claims, there is a lot that claims companies can do to create a supportive and engaging work environment by offering training, mentorship programs, and professional development. And they can do so by partnering with adjuster training programs and industry associations such as AdjusterPro and the National Association of Independent Insurance Adjusters.
Firm-associated or firm-sponsored skill development and continuing education for independent adjusters can help relieve them of the stress, and potentially the costs, of staying up-to-date on their credentials and skills development. And it will help third-party adjusters (TPA) ensure that their adjusters are always current on licensure, industry standards, and new skills that make them better equipped at serving policyholders.
Readily available access to training and skill development can also provide adjusters with an easy path to diversifying their licensure, which could provide the firm with a workforce that can address a wide range of claims services. This can help firms offset the need to contract with large pools of adjusters with a single service specialty and more easily meet specialized demand surges with the adjusters they already have staffed or have contracted with before.
Turning Adjuster Experience Into Competitive Advantage
Whether it’s through process optimization, providing health and financial benefits, or continuing education and professional development, investing in process optimization and adjusters themselves will be critical to the growth of claims companies and their ability to retain their adjuster workforce, especially as workloads increase.
For Bill Brassfield, CEO of Pacesetter Claims, the impact couldn’t be more obvious. Since implementing Wingspan, his company has saved $45k in software and labor costs, eliminated 25 hrs/week in administrative work, reduced payment errors by 40%, and has seen 95% of their adjusters get onboarded without any assistance.
Claims companies can begin the journey of transforming and future-proofing their adjuster management processes by identifying and performing a cost-of-inaction analysis of the bottlenecks and challenges that exist for their adjusters and back-offices, particularly within areas that impact workforce retention and business growth.
This analysis will help leadership build a realistic roadmap for the optimization and investment initiatives that they need to prioritize, and help identify technology solutions that align with those initiatives. Identifying the right technology solutions that align with leadership initiatives and contribute to the growth of the business will be mission-critical to claims companies’ ability to handle the high volume of claims on the horizon for 2024 and beyond.
Wingspan helps claims companies that depend on independent adjusters grow without limits by automating the full contractor lifecycle. Onboard adjusters, process payments, offer access to benefits, and stay compliant. If you're interested in getting a free savings assessment of your claims operation -- how much inefficient 1099 workflows are costing your business -- drop us a line here.
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