Mortgage servicers manage the relationship between borrower and lender or investor, including processing payments, managing escrow accounts and compliance with government regulations, accounting and reporting. Processing hazard insurance claims is not a typical core area of expertise within most servicing organizations. However, executing this area of the business accurately can result in generating significant revenue for investors by recovering costs associated with properties in various stages of default or foreclosure, as well as offsetting servicer expenses.
Knowledge of hazard insurance carriers, policies and regulations is critical
If you choose to manage hazard insurance claims adjustments on your own, you should ensure your employees have the special skills and knowledge required for these tasks. In the United States, 45 states require licensed adjustors be used for processing hazard insurance claims. Licensed adjustors undergo extensive testing and certification processes in order to facilitate the complex nature of adjusting hazard insurance claims. In addition, adjusting hazard claims requires in-depth knowledge of individual carriers, their policies and practices. Adjustors also need to understand the varying state regulations and ensure they stay up-to-date with changes by participating in comprehensive training and continuous education.
Best practices accelerate payments
When it comes to filing, negotiating and recovering claims, it is also necessary to develop a system of best practices that enables you to reduce timelines for recovery. You can do this by creating a relationship with your colleagues in your property preservation, REO and other loan administration departments, and educating them on relevant hazard insurance requirements, as well as building out your internal automation system and lines of communication with the carriers.
Specialty insurance partners add value
If the idea of hiring and training internal employees to manage your hazard insurance claims seems daunting, you can choose to engage specialized hazard claims insurance service partners. General mortgage servicing staff may have insufficient knowledge of hazard claims insurance, often overlooking clauses in policies that can increase recovery proceeds from insurance claims. Instead, a specialized insurance services partner uses licensed adjustors with extensive industry knowledge to file and resolve claims quickly, as well as find claims recovery opportunities that are often overlooked.
One example of an area often overlooked by servicing organizations, and where specialty insurance adjustor partners can add great value, is in Recoverable Depreciation (RD). Policy terms and conditions vary greatly from carrier to carrier, depending on the way carriers reimburse claims using replacement cost and/or actual cash value of the property at the time of the damage. General mortgage servicing staff, who lack a detailed understanding of individual carriers and policies, often overlook opportunities for claiming recoverable depreciation which can increase the cost recovery from their insurance claims.
Insurance services partners also have the capacity and willingness to identify and file all claims, regardless of projected recovery amounts. While many in-house departments selectively file based on the highest claim returns, service partner relationships promote filing on everything and anything because doing so is the core competency of their business. They are concerned about generating the maximum overall net recovery for their servicing clients.
The hazard insurance claims business is a complicated one, so if you decide to handle the processing internally, be sure to develop a system of best practices, maintain an in-depth knowledge of regulations and keep your adjustors’ certifications up to date. Or, better yet, engage a professional insurance services partner with the knowledge and expertise to maximize and speed your claims recovery efforts.