A Review of Key Auditing Practices
In the auto claims industry, auditing appraisals is a common procedure done mainly by insurance carriers and to a lesser extent the average independent appraisal firm. Depending on who is reviewing the files, the viewer is likely to focus on different things. Auditors for most insurance carriers are usually required to meet certain guidelines handed down from upper management. Most tend to scrutinize items such as; color sand and buff, hazardous waste allowance, and masking for overspray, to name a few. These key focus items are where many auditors catch easy savings. Independent appraisal companies, on the other hand, are not generally known for quality appraisal audits. You’ve all dealt with the ones who have been around forever. An appraisal audit to them is merely making sure the photos, estimate and invoice are attached before they submit to the insurance client. A quality audit should be a standardized process, completed with efficiency and accountability. The process can be broken down into one that is much more simple and effective, that ensures much more consistent results.
An auditor cannot always catch every mistake. However, by following these six steps any auditor can achieve the most out of every review.
1. Basic Administrative Data- When first looking at a completed file it is best to quickly scan all basic administrative data. Are the names correct? Is the deductible listed? Is this the claimant or insured? Is this the correct vehicle? The number of errors that can be found at this point can often be surprising.
2. Review Photos- Before fully reviewing each estimate line item, it is much better to take a good look at the photos and make sure the vehicle matches the one listed in the administrative data. All too often, appraisers may accidentally upload incorrect photos into the wrong claim. Additionally, review of the photos is important because it gives the auditor a mental picture of the extent of all damages before they attempt to start matching up each line item. The pictures should tell most of the story. If they don’t, it’s a sign there is a problem.
3. Reference Client Guidelines- Before diving into the specifics of the estimate, make sure you do a quick review of client guidelines is done. A copy should always be on hand for reference. This will ensure any special nuances the client may have regarding various procedures are followed through on.
4. Scrutinize the Estimate- When first scanning the lines, look to see if the damage in the photos match the damage on the appraisal. Look for detail errors, such as incorrect repair times. Make sure labor time allowances look reasonable and there is no overlap included. Search to see if betterment is utilized on wearable items and there are no manual line entries that seem out of place. This is the step in the auditing process in which to verify that all miscellaneous items match client guideline allowances.
5. Review Parts- Once you have reviewed the estimate for appraisal specifics then take a good look at the parts usage. Are used, aftermarket or reconditioned parts utilized where acceptable and cost effective? Are the sources documented on the estimate? Quite often failure to optimize used or alternative parts result in lost savings on an appraisal. Reviewing client guideline procedures while reviewing costs is key, since many carriers will at least allow use of recycled or reconditioned parts on vehicles. These parts can provide a significant savings.
6. Summary Report- Unfortunately, summary reports are a lost art in independent appraising. Very few appraisers write a summary toughly detailed enough to provide any value to the adjuster or auditor. No estimate is complete without a full description of the damages, narrative of possible hidden damages, efforts to secure part quotes, etc. The appraiser should completely explain the inspection and what to expect once the vehicle is in for repairs. Auditors or adjusters should not have to guess.
These are just six simple keys to providing an accurate appraisal audit. While much of this may seem basic, if each step is practiced every time on every file the savings to the client will be enormous. Little mistakes can add up to hundreds of thousands of dollars. Don’t be afraid to demand the best from the auto damage appraiser. Their duty is to provide a top quality product. Staying consistent in your auditing practices will deliver results!
