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📐 '''Claims adjustment''' is the end-to-end process of investigating an insurance [[Definition:Claim | claim]], determining the extent of the [[Definition:Insurance carrier | carrier's]] liability, and arriving at a settlement amount or denial decision. It encompasses every evaluative step between the receipt of a [[Definition:First notice of loss (FNOL) | first notice of loss]] and the final resolution of the file — including damage assessment, [[Definition:Insurance policy | policy]] interpretation, evidence gathering, and negotiation. Where "[[Definition:Claims handling | claims handling]]" describes the broader operational workflow, claims adjustment zeroes in on the substantive analytical and investigative work that produces a coverage determination.

🔧 In practice, the adjustment process unfolds differently depending on the [[Definition:Line of business | line of business]] and complexity of the loss. A minor [[Definition:Property insurance | property]] claim might involve a single site inspection, a contractor's estimate, and a straightforward coverage confirmation completed by a staff [[Definition:Claims adjuster | adjuster]] within days. A major [[Definition:Commercial insurance | commercial]] fire, by contrast, could require coordination among [[Definition:Independent adjuster | independent adjusters]], forensic accountants, structural engineers, and legal counsel over many months, with [[Definition:Claim reserve | reserves]] revised repeatedly as new information emerges. In either case, the adjuster must weigh the facts against the [[Definition:Insurance policy | policy's]] insuring agreement, [[Definition:Exclusion | exclusions]], [[Definition:Condition | conditions]], and applicable [[Definition:Deductible | deductibles]] or [[Definition:Sublimit | sublimits]] to determine the indemnifiable amount. Where multiple [[Definition:Policyholder | policyholders]] or third parties are involved, the adjustment may also address [[Definition:Subrogation | subrogation]] rights and [[Definition:Contribution | contribution]] among insurers.

💡 Precision in claims adjustment matters enormously because errors flow in two costly directions. Underpayment risks [[Definition:Bad faith | bad faith]] allegations, regulatory penalties, and the loss of customer trust, while overpayment erodes [[Definition:Underwriting profit | underwriting margins]] and contributes to [[Definition:Claims leakage | claims leakage]] — the gap between what was paid and what should have been paid. Carriers address this tension through structured adjustment protocols, peer review programs, and increasingly through [[Definition:Insurtech | insurtech]] tools that use [[Definition:Computer vision | computer vision]] and [[Definition:Machine learning (ML) | machine learning]] to deliver faster, more consistent damage estimates. Ultimately, the quality of claims adjustment reflects an organization's ability to honor its promises accurately — paying what is owed, no more and no less.

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:Claims adjuster]]
* [[Definition:Claims adjudication]]
* [[Definition:Loss adjustment expense (LAE)]]
* [[Definition:Subrogation]]
* [[Definition:Claims leakage]]
* [[Definition:Claims handling]]
{{Div col end}}

Definition:Claims adjustment - Revision history

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