Crisis in U.S. Claims Workforce: Insights and Recommendations

A looming crisis in the U.S. claims workforce could render up to 40% of catastrophe claims resources unavailable by 2027, warns Andrew McCallum, Vice President of Specialty Operations at Sedgwick.

This warning comes at a time when insurers are required to adapt their resources across an increasing variety of disasters and geographical areas. The potential loss of both personnel and essential expertise is raising concerns among industry insiders. McCallum emphasized the criticality of retaining seasoned adjusters, who have experienced handling substantial losses from major events like Hurricanes Harvey, Katrina, Sandy, and Hugo.

Current Trends and Projections

According to recent labor statistics by the Jacobson Group, sourced from the Bureau of Labor Statistics (BLS), claims employment witnessed a notable decline of 20.9% year-over-year as of July. In contrast, the broader property and casualty sectors saw a marginal drop of 1.7%. BLS forecasts a further reduction in the claims workforce, expecting numbers to dwindle by approximately 5%, from 376,100 in 2025 to roughly 355,500 by 2035. This shift is attributed mainly to workforce exits and career changes, with around 21,600 job openings annually anticipated in this domain.

Strategic Resource Allocation

The industry is experiencing a shift towards a more diversified array of catastrophic events. Consequently, insurers must strategically allocate claims resources to manage simultaneous catastrophes, such as concurrent wildfires and hurricanes. This requires advance planning and realistic commitments of personnel and resources to effectively handle multiple events occurring at the same time.

For brokers and risk managers, this evolving scenario underscores the imperative to scrutinize a carrier's claims capacity thoroughly. A vital question to consider is whether insurers have access to an adequate pool of experienced adjusters to manage multiple large-scale events, beyond merely having an established response plan.

The Role of Technology in Claims Management

Technological advancements are revolutionizing claims management amid a shrinking workforce. BLS anticipates that automation, enhanced data processing, and artificial intelligence will increasingly perform tasks once handled by claims staff, such as evaluating property damage images and calculating claims. At Sedgwick, technology is instrumental in making resource deployment decisions following disasters, employing modeling and AI to assess damage and guide personnel allocation.

Training and understanding how technology complements human roles are essential to improving outcomes in disaster response.

Andrew McCallum, Vice President of Specialty Operations, Sedgwick

Balancing Technology with Human Expertise

While digital tools offer significant potential, McCallum cautions against an over-reliance on technology as a substitute for human expertise. The challenges of implementing these tools at scale are non-trivial, necessitating comprehensive training and understanding of how technology can complement human roles. To this end, Sedgwick is employing sandbox environments to help personnel familiarize themselves with new tools, optimizing their effectiveness in the field and ensuring improved outcomes in disaster response.

The insurance industry stands at a critical juncture, necessitating a balanced approach that integrates technological advancements with seasoned human expertise. As insurers navigate these challenges, the focus on strategic resource allocation and technological integration will be crucial in weathering the evolving landscape of disaster management.