Loss Adjustment Expense
A loss adjustment expense is defined as the amount of specific cost related to the investigation, administration and payment of an insurance claim. This includes legal fees, investigation cost, salary of the adjusters, court costs as well as the expert witnesses. This expense also depends on how complex the claim is. It also varies on the capability of the insurance company on how its staff performs on the significant tasks associated to the claim.
In most cases, the insurance companies should hire and pay variables of the outside for help. Even if the company is fully staffed, a set aside loss adjustment expense is unavoidable. For instance, in the expense of police report, the department will charge those beings who are either directly or indirectly involved in the incident event to pay the copy of the theft, accident or injury report.
Claims are involved of either an allocated loss adjustment expenses or an unallocated loss adjustment expenses. A allocated loss adjustment expense is described as any expense that is specified in an individual claim that includes cost that are recoverable based on the party at fault where the accident happened. On the other hand, the unallocated loss adjustment expense is described as the payment for the claim operations of the company that includes the supplies, rent, salaries and the utilities of the claims department.
Insurance companies most of the times do not pay for the claims that are verified and proven. They always opt to pay for the loss adjustment expense on the services rendered upon the confirmation of the claim that is valid other than paying a claim that is not verified. Depending in your locality law, this investigation may be one form of a legal requirement. It’s up to the insurance company on what service to request depending largely on the claim.
In terms of claims in auto insurance, the loss adjustment expense is usually incurred in the police report. The only exception is when there is no investigation of the accident by the police department. If in case the staff of the insurance company has numerous cases to handle or has no damage evaluator, the company might need to hire an appraiser to handle estimation of the amount of both parties involved.
If in the event that the stories told are not the same about the accident, the company might need to pay again for an adjuster or another service to acquire an interview of the involved parties. This might also requires locus investigation in which the adjuster will make diagrams as well as take photos of where the accident happened.
If ever certain claims might not be settled behind the court, additional fee is incurred. Strategies of settlement such as court, mediation and arbitration are money involved. At times, the insurance company might need to hire a witness, an expert witness that will help in defending a claim. These kinds of allocated adjustment expense are believed to be the largest.