Magazine article Risk Management

A Risk Manager's Guide to Managing Adjusting Fees

Magazine article Risk Management

A Risk Manager's Guide to Managing Adjusting Fees

Article excerpt

Kevin M. Quinley, CPCU, is vice president of risk services for Hamilton Resources Corp. in Fairfax, VA.

Most risk managers buy adjusting services. Consequently, they are constantly seeking ways to manage and, wherever possible, cut these costs. However, cutting adjusting expenses to the bone makes no sense if money must be spent elsewhere due to inept or delayed investigations. Still, there are ways to lower costs without compromising the quality of service. Here are several ways to accomplish this.

Negotiate a flat fee per claim. Most adjusting firms will typically quote a flat rate for cases involving routine claims that can be turned over quickly. These include medical-only workers' compensation and collision damage to company cars. However, while these firms will also quote flat rates on many third-party losses, they rarely do on products and professional liability claims.

Perform certain tasks in-house. Why pay an adjuster $40 an hour to gather police reports or medical records when these tasks require no special training? Photocopying is another example; some adjusting offices charge 25 cents per sheet to photocopy. Collating documents and gathering and photocopying records in-house can be done by a clerical staffer in the risk management department.

Be prompt with the adjuster's requests, Do not waste the adjuster's time by having him or her repeat requests for much-needed information, such as important documents or an interview with an employee for a statement or authorization to settle a claim. Time wasted will ultimately cost money. Risk managers should evaluate their own departments, procedures and work schedules to make sure they do not hinder adjuster efficiency Surely the adjuster serves to please the client, but behaving as if a claims investigation is a low priority will incur unnecessary expenses.

Periodically audit adjusting bills. Do not just process bills; challenge charges that seem excessive or do not make sense. Questioning a bill every so often demonstrates to the adjusting firm that the risk manager is vigilant about watching adjusting costs. Invoices should list exactly what work was performed, when and by whom, as well as related expenses. They should also be clear, legible and itemized by time, broken down into tenths-of-an-hour increments. Certainly, the risk manager should not raise issues for the sake of raising issues. If the bills seem fair and accurate, there is little need to follow up.

Establish billing guidelines. Establish and enforce billing guidelines to avoid misunderstandings down the road and help manage adjusting costs. Simply having written guidelines sends a strong message that the risk manager is cost-conscious. If given to the adjusting company at the outset, guidelines need not be lengthy or detailed. They may include such items as the travel-expense policy, permissible expenses and those requiring pre-authorization, billing frequency and notice requirements on hourly rate changes. Guidelines should also specify those adjusting tasks not billed to the risk manager, such as reviewing correspondence and setting up files.

Exchange fee concessions for volume commitments. If one adjusting firm is used exclusively for case assignments, the firm should offer a discount on its hourly fee. …

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