Vermont 2nd State to Sound Alarm About Photo Estimates for Auto Claims

By Jim Sams | December 9, 2019

Another state insurance commissioner is warning auto insurers about the overuse of photo estimates when making settlement offers.

Vermont Insurance Commissioner Michael Pieciak issued a bulletin on Thursday to “clarify the division’s position regarding the use of visual adjusting.”

“While virtual claims adjustment systems may, in some situations, help settle claims more quickly and reduce costs for the insurer, there is compelling evidence that photographs and videos do not always reveal the true extent of the damage a vehicle has sustained,” the bulletin says.

Oregon Insurance Commissioner Andrew Stolfi issued a similar draft bulletin in October. Just as reported by Oregon, Pieciak said Vermont has seen an increase in consumer complaints alleging that virtual adjustments unreasonably delay the settlement of claims or result in inadequate settlement offers.

The Vermont bulletin reminds insurers that they are required to “conduct a reasonable investigation based upon all available evidence.”

“Insurers may not deny a claimant’s request for an in-person inspection by a licensed adjuster,” the bulletin says. “Unreasonable delays may be a violation of Section 4724(9)(F), which requires prompt settlement of claims when liability is reasonably clear.”

The bulletin provides another reason for carriers to avoid over reliance on virtual adjusting: In total loss claims, carriers may not make deductions for costs such as vehicle reconditioning and tune-up “unless those deductions are justified and detailed as a result of an actual inspection by a licensed adjuster or appraiser.”

“It’s the department’s position that the words ‘actual inspection’ require an in-person inspection by an adjuster or appraiser rather than the use of virtual evidence such as photographs or videos,” the bulletin says.

Complaints about photo estimates led the state of Rhode Island to ban their use for large claims in a bill passed earlier this year. Senate Bill 849, signed into law by Gov. Gina Raimondo on July 2, requires insurers to use licensed appraisers to physically inspect damages and prohibits estimates based on pictures for claims where losses exceed $2,500.

Photo estimates are derided by auto-body repair shop owners. A quick internet search leads to numerous blogs warning consumers not to accept any settlement offers based on photographs because photographs don’t reveal hidden damage.

Nonetheless, the use of photo estimates has grown rapidly, according to research by Mitchell International, a San Diego-based firm that provides claims administration services. Mitchell said in a September 2018 report that photo estimates were used in 14.6% of the auto claims in Mitchell’s assignment database in 2017, up from 0.2% in 2013. The share of photo inspections jumped by 10 times in 2016, Mitchell said.

Mitchell said the technology has an obvious drawback. When photo estimates are used, supplemental reports reveal much more work needs to be done, compared to estimates prepared by an in-person field inspection. From 2013 to 2017, supplemental reports from a photo estimates resulted in supplements that were 67.4% higher, on average, than the original estimate, according to Mitchell. That compares to 36.9% more than the original inspection for estimates done by field inspections.

Still, Mitchell said photo-based estimating is a cost-effective tool for carriers.

“While the supplement rate is higher than other channels, PBE does provide for a productive means of determining damages,” the report says. “Estimator productivity is typically increased substantially, from three to four field appraisals per day to more than 15 to 20, as well as reducing expenses associated with staff appraisers’ travel.”

About Jim Sams

Sams is editor of the Claims Journal. He can be reached at

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