One Concerning Trend For Independent Adjusters

Canadian P&C carriers appear to be taking claims adjusting expenses in-house more often than several years ago, a trend of concern to the independent adjusting community.

The good news is that net loss ratios since 2006 and the proportion of these ratios attributable to adjustment expenses hover between 8 and 11 points on the loss ratio (and, as a consequence, on the combined ratio), MSA Research president and CEO Joel Baker wrote in a recent report.

‘So far so good,’ he commented in Let’s Take it Inside, an article in the MSA Quarterly Outlook Report for 2022 Q4.

For independent adjusters (IA), the bad news comes when examining the divide between unallocated loss adjustment expenses (ULAE), or carriers’ internal expenses, and allocated loss adjustment expenses (ALAE), or insurers’ external expenses. In essence, ULAE are not attributable to a specific claim, while ALAE are attributed to the processing of a specific claim.

‘When examining the bifurcation between internal unallocated (ULAE) and external allocated (ALAE) net loss adjustment expenses incurred, one can see that the equilibrium that prevailed until 2015 was broken in 2016 and diverged most profoundly in 2021,’ Baker wrote. ‘The trend is not the IA’s friend.’