Motoring claim appraisal (Part one)

© Shuets Udono, CC BY-SA 2.0

The second part, due in June, will focus on the status of adjuster and the profession’s evolution.

The risk approach is essential for an insurance company whose ultimate goal is to create a homogeneous portfolio. And to do so, the insurer works with specialists who enable him to manage risk not only during underwriting but also upon the occurrence of a claim.

In the non life insurance, insurers delegate part of their supervisory powers to experts most often entrusted with the task of appraising damages after a loss. In fact, the mission of a motor loss adjuster is much broader than this simple adjustment.

Nowadays, motor adjuster discharge duties of assessing damages following a claim and of public safety. A third role is added to the previous two, namely that of risk assessment prior to its acceptance by the insurer.

Introducing motoring claim assessment

Motoring claim appraisal is a relatively recent technical discipline, with beginnings dating back to the 1930s. Its development has been closely linked to that of the automobile in the industrialized countries. Over the years, the business has become more professional, especially after third party liability has been made compulsory for owners of land motor vehicles. It is a regulated business carried out by independent natural persons or legal entities, subject to obligations.

Definition

There is no single accurate definition for motoring claim appraisal. Its outlines are based on the needs expressed by insurers and on the assignments entrusted to it: pre-claim appraisal, post-claim appraisal, classic and vintage car appraisal, legal expertise, expertise and road safety, etc.

Expertise before loss © Wheelhouse1, CC BY-SA 3.0

For the most requested tasks, that is to say, those after the occurrence of a loss, the role of the assessor is to determine the causes of the loss and to evaluate the repair costs of damages.

Finally, in many countries, the motor assessors sometimes operate outside the insurance sector. Indeed, the legislator has entrusted them with a road safety duty, which means they are more actively engaged in the public service of justice.

Motoring claim appraisal within the framework of motor insurance

In their traditional role, motor assessors are always needed upon the occurrence of a motor claim. However, they may sometimes come into play during the process of underwriting an insurance contract.

During the underwriting of an insurance contract

Adjusters play a key role in the management of certain motor risks covered by the insurer who shall determine the premium amount according to the details provided by the assessor as follows:

• classic vehicles,
• specific vehicles,
• on-road heavy-duty vehicles,
• site and specialized work gear needed on public roads.

At the request of the insurer or of an individual, recourse is made to adjusters in order to search for hidden vehicle defects. They may also act as technical assistants when it comes to buying a used vehicle.

The tasks of adjusters after the occurrence of a claim

According to insurance law, recourse to appraisal does not stand as a requirement imposed on the insurer. In non life insurance, the same law provides for the principle of OTC (over the counter) payment.

However, in complex cases or when damage valuation requires special technical knowledge or to avoid any disputes, insurers tend to use the appraisal. In practice, simple cases can be adjusted according to the OTC principle while complex cases on the basis of appraisal.

Traditional missions of the adjuster

Following the occurrence of an event, the assessor’s first task is to appraise the damage and to quantify the cost of repair of the damaged vehicle.

In practical terms, adjusters are appointed by the insurance company to carry out an assignment which includes a series of acts that result in a survey report:

• Identification of the vehicle,
• Identification of responsibilities,
• Selecting repair methodology,
• Determining the value of the vehicle,
• Figuring restoration costs,
• Monitoring damage repair,
• Cost and bills analysis.

Identification of the vehicle

After receiving the mission order from the insurer, justice or administration, the assessor is required to identify all or part of the damaged vehicle. This process requires the use of administrative documents such as registration card or certificate, notice of withdrawal, certificate of sale, etc. The assessor may, if necessary, have recourse to technical descriptions, to vehicle registration file or other databases.

He is then required to record the vehicle’s registration number, serial number and the number of the manufacturer’s plate, certifying to the identification of the vehicle by matching the recorded numbers with the references provided by the administrative documents as mentioned in the mission order. This task is conducted in association with the insurer, the policyholder, administration and sometimes the vehicle manufacturer.

Identification of responsibilities

When a vehicle is damaged or crashed, the assessor observes and analyzes the damage. Understanding the causes of the accident is essential. To do so, the claim form and/or the accident report, the manufacturer's documentation or vehicle history are essential components. In association with the vehicle’s custodian, the insurer, the serviceman, the owner and public authorities, the adjuster is required to conduct a matching exercise between the actual damage observed and the damage reported.

Selection of repair methodology

According to the principle of indemnity governing property damage insurance, the crashed vehicle shall be returned in the condition in which it was at the time of the loss. The assessor shall, therefore, determine the most appropriate method to achieve restoration. This implies taking into account the recommendations of manufacturers and spare part suppliers, safety standards and the technical means available to the mechanic performing repairs.

Determining the value of the vehicle

The assessor may be required to determine the replacement value of the damaged vehicle. This value takes into account the depreciation rate of both the vehicle and the second-hand market. For complex cases, adjusters may rely on specialized magazines and sites to make their evaluation.

Stolen vehicle

When the vehicle examination is impossible (stolen or completely burned), the assessor determines the value of the insured property from a set of parameters: the vehicle’s score in specialized magazines, the value of an identical vehicle in second-hand markets, findings of the latest technical report, previously performed repairs on the vehicle, etc.

Figuring restoration costs

Once the appropriate repair method has been selected, the assessor may conduct additional inspections or tests on parts of the vehicle to be repaired or replaced.
Determining the cost of repairs is based on prices of spare parts, the cost of labor, the tests that might be needed, the costs of painting, etc.
Economic and technical aspects in connection with safety may impact the decision of the assessor who may decide either the repair of the vehicle or its disposal.

Monitoring damage repairs

Once damage is assessed and the value of the vehicle established, the assessor is entrusted with a monitoring task, ensuring that the procedures applied meet the predefined specifications.

Cost analysis and bills

Based on their training, adjusters are able to understand and verify vehicle repair bills, ensuring that the prices applied meet their own estimates. Any gaps reported shall be justified.

Insurance companies routinely use expertise for most complicated cases. It is therefore up to the assessor to quantify the damage and the time required for the vehicle restoration.

The various kinds of appraisals

In many countries, recourse to motoring claim appraisal is governed by inter-company agreements. Those conventions signed between insurers of the same market may apply to specific guarantees. They may also be distinguished according to the amount of damage. There are appraisal conventions that apply only to compulsory third party liability while others relate to car damage insurance. Finally an appraisal convention may be limited to claims that do not exceed a certain amount.

Motoring claim appraisal conducted by the insurer

In common law, the assessor is notified by the insurer after an initial examination of the notification of claim received from the insured. The adjuster approved by the business and/or by court is selected on a national list.
When available, conventions set the terms for the appointment of the assessor.

The assessor designated by the insured: joint amicable assessment

Where no OTC agreement is reached between the insurer and the insured or when the latter challenges or rejects the findings of the assessor appointed by the insurer, he is then free to request a second expert’s opinion. This counter-expertise is at the insured’s own cost.
The second expert should meet with the one mandated by the insurer to cross-check their ideas, and eventually come to an agreement to draft a joint report, a procedure referred to as a joint amicable assessment. When both adjusters reach an agreement, the procedure stops.

Third party appraisal

When both adjusters fail to agree, they may designate a third adjuster to conduct a third-party assessment.

© Sonia Sevilla, CC0 1.0

Recourse to a third-party assessor must be mentioned in the insurance contract. This contractual clause is often criticized by judges who consider it unreasonable as the insurer may be tempted to extend unnecessarily the procedure.
The third assessor may be appointed by agreement or otherwise designated by the court. Each party pays its own arbitrator, with expenses of the third arbitrator being equally shared between the insurer and the insured.

Legal appraisal

In case the joint amicable assessment and third-party appraisal fails, either party may ask the court for a legal appraisal. The president of the court then appoints a legal expert whose findings will be used to settle the dispute. Legal appraisal is a long and expensive procedure.

Motoring claim appraisal within the framework of public safety

The authorities are increasingly relying on the knowledge of motor insurance adjusters to reduce the number of road crashes.
The data collected by adjusters are centralized in databases. Accidents caused by badly-maintained roads or damaged vehicles have prompted some countries to introduce compulsory technical inspection of vehicles. Some laws have supplemented this measure by specific procedures for severely damaged vehicles.

Severely crashed vehicles

© Oregon Department of Transportation, CC BY 2.0

The motor insurance adjuster is responsible for preventing a vehicle, having sustained significant damage to use public roads without prior inspection. The return of such a vehicle to traffic is only possible after the delivery of a compliance report testifying that the vehicle meets the safety standards required.

Under French law, the qualified experts for this mission are theoretically designated by the insured from a specific list. In fact, they are appointed by the insurer after consulting his client. This is a unique assessor in charge of submitting a report strictly based on the safety dimension. The assessor is required to decide only on the possibility of fully repairing the vehicle and on the vehicle’s road worthiness.

Vehicles economically beyond repair

A vehicle is considered economically beyond repair when the assessor appointed by the insurer finds that the cost of repairs is above the vehicle value. Faced with such a situation, the insurer may make a proposal for compensation to the insured that may also retain his property. In this case, objection is made for the transfer of registration certificate. To overcome this objection, the insured must provide an assessment report certifying that the vehicle has been repaired in accordance with the safety regulations and that it can be back on public roads.

The expert report

The expert appointed by the insurer must submit his report within the required time.

The expert report must provide information that will help the insurer. The report comprises:

• the name of the expert,
• the name and the quality of people present during the inspection of the vehicle,
• the place of expertise,
• the date of valuation,
• the identification elements of the claim,
• characteristics of the vehicle appraised,
• the condition of the vehicle,
• tire wear percentage,
• when the vehicle has been appraised before, during or after repairs,
• the value of the vehicle: value as new (for vehicles insured under property insurance), market value, replacement value by an expert, when the amount of work is equivalent to the price of the vehicle,
• restoration appraisal,
• expertise operations: impact points, details and costs of supplies, cost of labor, wear and tear rate, repair duration, photographs showing the impact points,
• the conclusions of the expert.

A copy of the expert report is sent to the client, usually the insurance company. According to the legislation, a copy is also sent to the insured.

Within the conventions of motoring appraisal, insurers endeavor not to contest the assessment of damages determined by the unique assessor when the amount of works does not exceed a certain sum.