Inflation creates ‘perfect storm’ for loss adjusters in Argentina

Loss adjusters in Argentina are faced with an inflation-driven perfect storm, said global law firm Kennedys.


Argentina’s inflation will be one of the issues discussed at the 2016 Latin American Claims (re) Insurance Forum in Miami, which is hosted by Kennedys and accounting firm QLDG.

What are the main problems that high inflation is causing loss adjusters in Argentina and what are these professionals doing to deal with this issue?

 Inflation affects claims adjustments profoundly from various angles. Firstly, as time passes because of inflation sums insured are quite frequently not enough to pay damages in full. In the case of first loss insurance if the insured is lucky enough to have had a minor loss the sum insured might very well suffice, but if average is applied in a context where values at risk have risen due to inflation it is very likely that the insured will receive an incomplete payment no matter how small the loss. Inflation will also seriously affect the adjuster’s capacity to estimate losses, as the prices of goods in general are not well established but will constantly shift. Some retailers will use inflation to hide unjustified profits, with which price ranges tend to widen (and insureds, who tend to associate higher prices with better quality, will demand payment at the highest price). After an adjustment is performed, while the insured is waiting to receive the indemnity payment inflation will continue to distort the agreed indemnity amounts so the adjuster will be under pressure to finalize his work and get insurers to issue payment.


In this scenario, successful adjusters tend to rely on their personal skills and negotiating ability. Borrowing an expression from another industry, the key to an adjuster’s success in this context is “communication, communication, communication”. The adjuster has to be conscious of the value of time in an inflationary environment, and perhaps will have to shy away from precious discussions with the insured over minor differences. Successful adjusters will have trusted providers of goods and services factored into the basis for the adjustment for a reasonable repair/replacement alternative. Last but not least, the adjuster will be alert to the specific policy conditions applicable, as there are a range of insurance products which deal with inflation in different ways. As time is of the essence, delivering the closing report urgently will always be a plus.

These problems are the elements for a perfect storm, and we at Kennedys have been involved in assisting adjusters with complex cases of this nature, usually including an intricate mix of underinsurance, inflation, and currency exchange rate issues.


Does the fact that inflation figures published by the government and private sector experts still differ significantly, pose an additional problem for the loss adjusting industry in Argentina?

Yes, but the effect is limited. Normally losses are adjusted on a “market value” basis –what goods sell for in retail stores. So typically both the insured and the adjuster will obtain repair or replacement quotes on that basis. Yearly inflation rate percentages do not affect that very essential side of the adjustment. The problem that does arise has more to do with underwriting, as sums insured are calculated using yearly inflation rates. If the rates aren’t accurate, the new sums insured won’t be either -and the adjuster is left to cope with the situation.

2016 Miami Latin American Claims Reinsurance Forum

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