By Ronald J. Zaremba, CPCU,AIC,ARM

The phrase, "raining cats and dogs" is truly a nonsensical metaphor. I am not sure of its origin; however, one could easily believe that it is an Anglicized corruption of a French or German word or phrase.

In the claims sense, cats and dogs are not pets or even furry critters. "Dogs" denotes certain claims in a way that is probably slanderous to the canine world. However, the baying and barking of the old claims in the bottom drawer of the file cabinet of open claims will intimidate even the most seasoned adjuster. These files should be rare. The experienced independent adjuster can assist in dispatching these claims. Nevertheless, if your claims office seems more like a kennel than a professional office, it is more likely a management problem, not a natural occurrence.

"CATS" on the other hand, nearly always arise from natural occurrences. "CATS" is a short name for catastrophe claims. When "CATS" occur, the frequency of claims is high and often overwhelming. Independent Adjusters are the natural answer to the question, "Who is going to handle all these 'CAT' claims?". The local independent adjusters possess the knowledge of local contractors, costs, conditions, agents, people and attitudes. They also have staff on hand who are usually more than willing and able to do the necessary work.

Here are two things you should consider when using the local independent adjusters to handle your "CAT" claims, the local independent adjuster's capacity and costs. The local independent adjuster should be at or near his capacity for claims volume during normal times. When the "CAT" occurs, except for the desire of his staff, his ability to increase his capacity may not be any greater than yours. He has his regular clients who give him assignments on a regular basis, occasional clients who give him work occasionally, his annual clients who will give a claim to work every year or so and the rest are potential clients. The local independent adjuster's priority will be to keep and serve his regular clients first and foremost, followed by the occasional clients and the rest. To do otherwise is economically suicidal. Thus if you do not have a regular or at least an occasional relationship with the local independent adjuster, it is prudent to check with them first before giving them your "CAT" claims.

The local independent adjuster's ability to increase his capacity will depend on the interest of his staff to expand their working hours and the availability of temporary help. Temporary office space and equipment needs are not usually the limiting factors. His staff will generally be motivated to work long hours if they believe they will rewarded for their efforts. Even the most dedicated staff member's interest will start to flag, though, after eight eighty hour weeks. If an adjuster is working eighty hour weeks instead of forty hour weeks, it is a realistic expectation (at least to him) that his weekly gross income should increase at least two or three fold. After all, the effort, stress and strain of eighty hour weeks is more than twice that of a normal week of work. However, as the work week load increases, the marginal productivity increases at a decreasing rate to and beyond the point where increased working hours actually decrease productivity. Regardless, costs rise.

The other alternative for the local independent adjuster is to hire temporary staff. To do so requires that qualified and willing adjusters are available to work on short notice for long hours. I have heard a number of adjusters say that when they retire they are going to do "CAT" work. One can not help but wonder if they have ever done "CAT" work before to say such a thing. True, there are a few "retired" adjusters doing "CAT" work, but "CAT" work is more work than most of the regular staff wants to do, and much more work than most adjusters would consider in retirement. "CAT" work requires good health and stamina. Most retirees do not want and can not handle the stress and strain of "cat" work. You may get a retired adjuster out to help on one "CAT", but the second time around it will be difficult to get him to even come to the phone and talk about it.

The other alternative usually boils down to getting qualified "CAT" adjusters to come and help you out. To do so requires increased costs. The "CAT" adjuster's pay will nearly always be higher than regular staff and so will his costs. To bring in additional qualified help requires increased costs to instruct and supervise.

To the extent that the "CAT" work exceeds the normal capacity of the local independent adjuster, the local independent adjuster will see his costs rise at an increasing rate. Thus for the local independent adjuster to handle any appreciable temporary increase in volume, he will have to increase his prices to cover his increased costs. Exhaustion is a poor motivator. If the local independent adjuster does not increase his prices to cover his increasing costs, exhaustion is all he will get for his increased efforts. For these reasons, local independent adjusting firms should be careful about taking on "CAT" work. If they do so, they often find that their regular clients do not expect to pay increased prices. The regular clients may be able to get regular prices for "CAT" claims, but they should realize that there is no free lunch here either.

If your volume of "CAT" claims is too large for your local independent adjuster or if you do not have a regular relationship with the local independent adjusters, then your best alternative may be to use independent adjusting firms that specialize in "CAT" work. The specialized "CAT" adjusting firms have the resources to move into an area quickly with qualified staff and supervision to meet the needs of the policyholders. The market place is competitive, but these firms will usually be more expensive than the local adjusting firms simply because their costs are higher. Whether you use the local independent adjuster or the independent adjuster that special in "CAT" claims, the independent adjuster is your umbrella when it is raining CATS and DOGS.