The ethics of loss adjusting firms – why so much secrecy?

  • 25 September 2019

Are loss adjusters shooting themselves in the foot when it comes to ethics? A recent survey of how they use codes of ethics indicates that they are. And this is all the more surprising when you think of the vital role they play in the delivery of many claims settlements. So why have adjusting firms missed the point when it comes to codes of ethics? And why so many of them too?

During the summer, I contacted six large loss adjusting firms with sizeable operations in the UK. While small in number, these six represents a large chunk of the adjusting market here. And I presented myself as a member of the public, not as an ethics consultant. The contact was initially by phone and often then by email.

I asked if I could be sent a copy of their firm’s code of ethics. Some firms asked why I was asking for it, and I said that I was doing some research into the type of things that firms working in the insurance sector put into their codes of ethics. None of the six firms asked for any more detail about that.

The results were revealing…

  • One firm showed me where on their website their code of ethics could be found (it was a bit hidden away)
  • One firm told me that their code of ethics was confidential and could not be released to the public
  • Four firms gave me either an HR or compliance email address to contact, all of which never replied, despite a number of diplomatic reminders.
Too Long to Read? 

Let’s look at the one adjuster who did have a code of ethics in the public domain. At 76 pages long, it was by far the biggest code of ethics I’ve ever across. None of the ten insurer codes of ethics I reviewed last summer came anywhere near the size of this one. There were of course a lot of pictures in it, but its sheer size was distinctly off putting for me. And given I’ve read a lot of codes of ethics, imagine how it would feel to an everyday employee.

Given that the other five adjusters firms are so secretive about their codes of ethics, I have nothing against which I can compare the code of this more open adjusting firm. Their code was wide ranging and full of supporting case studies. This is fine, but I would question whether so much of this material needs to be wrapped up together in the one document.

Let’s turn now to the five adjusting firms who were determined to keep their codes of ethics hidden away. The upshot of this is of course that we don’t know anything about the commitments these firms are extolling their employees to uphold. The insurance buying public just have to trust them on trust. And that is the sort of double bind that ethics should never really get into.

The Wider Audience 

Now some people argue that codes of ethics are for employees. And there’s some mileage in that, but not enough. Codes should provide employees with guidance on values, conduct and decisions, but their purpose is much wider than that. For the outcomes generated by how employees follow that guidance are largely experienced by the insurance buying public. That’s why there is a justifiable reason for seeing what sort of ethical guidance is being given to these adjusting people.

One factor is of course the position of adjusting firms within the structure of insurance markets. Insurers appoint and pay them for the supply of claims services. At the same time, an adjusting firm is required by the regulatory obligations under which the insurer operates to act in the best interests of each claimant they have contact with. And it is just that tension between revenue streams and claimant interests that makes it even more important that how they go about handling that tension should not be treated as a secret.

Many adjusting firms do of course employ a lot of people who are members of a professional body like the Chartered Institute of Loss Adjusters. And that’s fine, but it is not a substitute for the adjusting firm itself being open about its ethical commitments and how it discharges them. After all, there are people in such firms who are not loss adjusting professionals, and the insurance buying public will struggle to differentiate between them.

The 'Tell Me' World is Gone

On the face of it, adjusting firms seem to be stuck in what is called the ‘tell me’ world. Hence the response of most of them being simply along the lines of ‘we have a code so be satisfied with that’. The ‘tell me’ world is long gone. In its place for a while came the ‘show me’ world, in which disclosure became the norm. Now however, we are firmly in the ‘prove to me’ world, in which firms not only have to show you what they’re doing on ethics, but back that up with some evidence that it’s having the expected outcomes.

The ‘prove to me’ world is pretty much where most insurers work now, in large part because the regulator has been nudging them towards evidencing their conduct outcomes. Yet adjusting firms are also regulated in the UK, but seem to have responded differently, at least when it comes to codes of ethics, to that regulatory nudging.

Should we then just trust in regulatory oversight and insurer accountability chains, and leave adjusting firms to go on keeping their ethical priorities under wraps? I think not. Their role is too influential, their interests so in tension, their services too intertwined, to let them linger in that ‘tell me’ world. They need to engage more with the public, demonstrating to them the type of ethical culture they have.

Let’s end on a more positive note. It’s great that one adjusting firm puts its code of ethics in the public domain. If only they could shorten it! Aim for eight pages max, design and all. In this way, it will invite people to read it, and on reading it, they’re a step closer to using it.