A vicious circle of poor service and poor results is dogging loss adjusters. We need a solution fast, says Andy Cook

What does the future of loss adjusting hold?

A few weeks ago Capita Insurance Services managing director Bill Dye outlined his thoughts on the future of claims management in Insurance Times. The future of high volume, low fee loss adjusting, which predominates the personal lines market, is not promising in its current format, argued Dye. And he is not alone.

While the market for loss adjusting is still oversupplied, insurers will continue to drive prices down, resulting in poorer service for customers and poor results for loss adjusters. This is a vicious circle. Because insurance companies will get panned in the press and make greater demands of their loss adjusters and loss adjusters who are making poor returns on the business will find it hard to invest in the systems that can solve the low fee, high service level conundrum.

GAB's new chief executive recognises the problem (see interview page 10). In the short term, this kind of personal lines business can only really be useful as a revenue driver helping to pay for central costs that underpin the high margin complex work. But in the long term, something has to happen to make the business work better.

The current market, which for GAB means net profit margins of less than 10%, is bleak. There are many better places for investors to put their money. Surely the answer is more consolidation. There continues to be too much capacity in the market and further consolidation is needed.

One solution could be the development of a pool of skilled, freelance loss adjusters. Loss adjusting companies would keep on a core team to look after key clients and expand this as and when required through the use of the freelance pool.

We have had a pretty good summer so far and so weather claims have been very low, leaving many loss adjusters with overcapacity.

Can this really be justified in an era when Britain's flexible labour force is the envy of the Western world?