Commercial claims: FNOL to settlement

Interviewer: So I want to understand what actually happens to a commercial claim, start to finish. Pretend I just rear-ended your whole process and I have no idea how it works. Where does a claim even begin for you?

Adjuster: [laughs] Fair. So it starts with what we call FNOL — First Notice of Loss. Somebody tells us something bad happened. That can come in a few ways — the broker calls or emails it in, the policyholder reports it directly, or it comes through the online portal, which honestly is more and more of it these days. However it lands, that's the trigger. The clock starts then.

Interviewer: And the first thing you do with it?

Adjuster: It gets set up in the claims system. We create the claim record, and the system spits out a claim number. That number is everything — it's how the whole file is tracked from here to close. No claim number, the claim basically doesn't exist as far as our systems are concerned.

Interviewer: Then it comes straight to you?

Adjuster: Not straight to me, no. It goes through triage first. Somebody — or these days, partly the routing rules in the system — looks at the line of business, the complexity, the severity, and assigns it to the right adjuster. A little fender-bender on an auto policy and a warehouse fire are not going to the same person. The big, hairy, high-severity stuff routes to a senior adjuster or a specialist. The routine stuff comes to someone like me on a normal day.

Interviewer: Okay, it's assigned. First move?

Adjuster: Acknowledge it. We have an SLA on initial contact — depending on the carrier it's like 24 or 48 hours — and I've got to reach out to the insured or the broker inside that window. Sounds like a formality but it really isn't. Early contact sets the whole tone, and missing the SLA gets flagged and it follows you around. So, acknowledge, introduce myself, let them know I've got it.

Interviewer: And once you've made contact, you start figuring out what you owe?

Adjuster: Right, but before any of that — coverage. This is the step people outside the business never appreciate. Before I spend a dollar, I have to confirm we actually owe anything. I pull the policy. Was it in force on the date of loss? Then I'm into the weeds — exclusions, endorsements, the limits, the deductible. The policy is a contract and the answer to "do we pay" lives in that contract, not in how sympathetic the loss is.

Interviewer: What if the coverage isn't clear-cut?

Adjuster: Then we branch. If there's a real coverage question — maybe the loss might fall under an exclusion, maybe an endorsement changes things — I'll issue a Reservation of Rights letter. An ROR. It basically says, "we're going to keep investigating and helping you, but we are not waiving our right to deny coverage if it turns out this isn't covered." It protects the carrier's position while we dig. Sometimes that thread resolves fine and we pay. Sometimes it ends in a coverage denial and the claim closes right there without an indemnity payment.

Interviewer: Assuming coverage is good — then what?

Adjuster: Then I set reserves. This is huge, and it's probably the thing I lose the most sleep over. A reserve is my estimate of the ultimate cost of this claim — what it's going to cost us in total, indemnity plus expense, when all is said and done. And I'm setting it early, when I know the least. The whole company plans around these numbers — it's money set aside on the books. Set it too low and you've got a nasty surprise later; set it too high and you're tying up capital that didn't need to be tied up. So it's this educated estimate that I'm going to keep revising.

Interviewer: Then the actual investigating.

Adjuster: Then the fun part, yeah. I investigate. Depending on the loss that's a site visit or inspection, recorded statements from the insured and any witnesses, photos, police or incident reports, pulling documents. On a commercial property loss I might be standing in a flooded building. On a liability claim it's more paper and statements. The point is to build the actual factual picture of what happened and what it did.

Interviewer: Do you do all that yourself?

Adjuster: On the bigger or more technical losses, no. I bring in experts. An independent adjuster if I need boots on the ground somewhere I can't be. An engineer for a structural question — did the roof fail because of the storm or because it was already shot? A forensic accountant for a business-interruption claim, to figure out what the company actually lost in income. Their reports feed right back into my file and, usually, back into my reserves.

Interviewer: You mentioned fraud earlier-ish. Where does that come in?

Adjuster: Threaded all the way through, honestly, but there's a real decision point. I'm always watching for fraud indicators — the story that keeps changing, the loss that conveniently happens right after coverage is bumped up, documentation that doesn't add up. If something trips, I refer it to SIU — our Special Investigations Unit. And then it's somewhat out of my hands; they run their own investigation, the claim might pause, and depending on what they find we either pick back up or we're heading toward a denial.

Interviewer: Okay, say no fraud, you've investigated. Now you put a number on it?

Adjuster: Now I assess. Liability — are we actually on the hook, and how much — and the damage quantum, which is just the dollar value of the loss. On a third-party claim that's "who was at fault and for how much." On a first-party property claim it's "what's it cost to make them whole." That assessment is where all the investigation work cashes out.

Interviewer: And the reserves you set early — do you touch those again?

Adjuster: Constantly. That's the loop that never really stops. Every time a new fact comes in — the engineer's report, a bigger repair estimate, a lawyer shows up — I re-evaluate the reserve. Up, down, whatever the facts say. A big reserve change usually pings my manager too. Honestly, reserve accuracy over the life of a claim is one of the things we get measured on hardest, because it's how the whole company knows what it owes.

Interviewer: Is there anything you're thinking about for later, even mid-claim?

Adjuster: Subrogation. As I'm investigating I'm always asking — is there somebody else at fault here we can recover from? If a contractor's faulty work caused the fire, we might pay our insured now and then go chase that contractor — or their insurer — to get our money back later. I flag the subro potential early even though the actual recovery happens way down the line, sometimes after the file's closed. Salvage too — if there's a damaged asset with leftover value, we account for that.

Interviewer: Then you settle. How does that part go?

Adjuster: I negotiate. With the insured, the claimant, or more and more, their attorney. There's a demand, there's back-and-forth, and as that goes I might bounce back to re-assess or re-reserve because their demand reframes things. The goal is to land on a number both sides can live with.

Interviewer: And can you just agree to a number?

Adjuster: Only up to a point — and this is a real gate. I have a settlement authority limit. Within my authority, I approve it myself and we move. Above it, I have to escalate — to my manager, or for the really big ones, a settlement committee. They can sign off, or they kick it back and tell me to renegotiate. Nobody's settling a seven-figure claim on their own say-so.

Interviewer: What if it just won't settle?

Adjuster: Then it goes into litigation. We assign defense counsel and manage the file through suit. That's a whole branch of its own — discovery, depositions, sometimes years. Most of those still end up settling on the courthouse steps, but some go to a verdict. Either way it eventually comes back around to a payment.

Interviewer: And once it's resolved?

Adjuster: I issue payment — the agreed indemnity, net of the deductible, within the policy limits. Then I chase any recovery I flagged: pursue the subrogation, dispose of the salvage. And then I close the file — final numbers in, reserves down to what was actually paid, closed.

Interviewer: Closed-closed? Or does it come back?

Adjuster: It can absolutely come back. New information, a supplemental damage that shows up, a late subro recovery comes in — any of that can re-open a closed claim and pull me right back into investigation and assessment. A "closed" claim isn't always a dead one.

Interviewer: If you had to name the one thing people get wrong about all this — what is it?

Adjuster: Reserves. Everybody on the outside thinks claims is about the settlement — the negotiation, the big number at the end. And new adjusters think the same; they treat the reserve as paperwork, this estimate you slap on early and forget. But the reserve is the discipline of the whole job. It's you, on day three with barely any facts, forced to honestly say what this is going to cost — and then having the rigor to keep moving it as the truth comes in, instead of anchoring to your first guess because admitting you were off is uncomfortable. Where that breaks down, you get leakage — money quietly leaking out of claims that should've cost less — and surprise reserve jumps that blow up the numbers. The settlement is the visible part. The reserve is where the claim is actually won or lost, and almost nobody outside the business sees it.

Interviewer: That's a great place to stop. Thank you.

Adjuster: Anytime. Beats standing in a flooded warehouse. [laughs]