Industrial risk claims: fees for representing the insured

The scope of a large-loss mandate

Representing an insured after a plant fire or explosion involves programme analysis across layers and sections, management of the claims protocol, coordination of the insured's engineers and accountants, quantification of buildings, plant, stock and business interruption, and negotiation with a lead adjuster reporting to multiple markets.

The work also includes evidence management, interim payment strategy, debris and decontamination issues, salvage, and the interplay with regulatory investigations. On the largest losses, the mandate can last several years and require a dedicated team.

Multi-insurer programmes add their own cost. Information requests arrive from the lead adjuster on behalf of several markets, following insurers may ask for separate briefings, and decisions sometimes need sign-off from each participant. The insured's expert spends time keeping that process orderly, which is valuable but must be reflected realistically in the fee proposal.

• Programme mapping, layers, deductibles and sub-limits
• Claims protocol and document management
• Coordination of engineering and accounting specialists
• Quantification of PD and BI elements
• Interim payments and final settlement

Indicative sliding scale for industrial losses

There is no official tariff for policyholder experts in the UK, US, Canada, Australia or Ireland. The table on this page presents an indicative order of magnitude observed on the market, not an official or legal scale. Because industrial claims are large, percentages fall quickly and most mandates above a certain size are negotiated individually.

Where a US public adjuster is involved, state licensing and any statutory caps apply. In other markets, fees are contractual and subject to conduct rules for firms handling claims on behalf of customers.

Indicative amounts, to be checked with each expert.

How the percentage is applied

Options include a percentage on the total recovery, on recoveries after appointment, or on the uplift over a defined baseline, such as the insurers' first reserve-based offer. Blended scales are common: one rate up to a threshold and lower rates on each subsequent band. Some contracts exclude amounts paid directly to contractors under agreed scopes, or apply a lower rate to them.

Caps are standard on major losses. They may be absolute amounts or linked to time spent, ensuring the fee remains proportionate if the claim settles quickly.

Retainers, time charges and specialist costs

Large mandates may combine a monthly retainer with a reduced success fee, or be charged on time with an outcome bonus. Engineering, quantity surveying, forensic accounting and valuation specialists can be within the fee or charged separately; on industrial losses their costs can be substantial. Taxes such as VAT or GST apply in most of these markets, and travel for remote sites is usually billed at cost.

Policy extensions that may contribute

Industrial programmes often include professional fees for reinstatement and, in some cases, claims preparation costs with a defined limit, which may be negotiated higher on large programmes. These rarely cover advocacy, but they can offset accountants' and engineers' costs incurred to produce information required by the insurers.

Because limits and conditions vary, the broker should be asked to confirm, before appointment, which costs are recoverable and under which section. Some large insureds negotiate an enhanced claims preparation clause at renewal precisely because of the expense of past losses.

How costs scale from moderate to catastrophic losses

For a moderate industrial loss of around £300,000, such as a localised fire in a production hall, a percentage of 8% to 10% puts the fee at roughly £24,000 to £30,000. For a £5 million loss involving plant replacement and several months of interruption, a blended scale might produce an effective rate of 3% to 4%, or £150,000 to £200,000, depending on complexity.

For catastrophic losses above £25 million, effective percentages may fall to 1% or less, often with an overall cap and detailed budgets for specialists. These are indicative illustrations, not quotes.

Deductibles also matter when judging cost. Industrial programmes often carry high deductibles on property damage and time excesses on business interruption, sometimes combined with a captive layer. The expert's fee should be assessed against the amount recoverable from the commercial market, after those retentions, rather than the gross value of the loss, since the insured bears the retained portion in any case.

Example of a blended scale

Consider a contract charging 7% on the first £1 million, 4% on the next £4 million and 2% above £5 million. On a £12 million settlement, the fee would be £70,000 plus £160,000 plus £140,000, totalling £370,000, an effective rate of about 3.1%. A cap of £300,000, if negotiated, would reduce that. This calculation is illustrative only.

Selecting a firm for an industrial claim

Experience in the same sector and at a similar scale is essential, as is access to engineers and accountants who understand process plant. Ask for a proposed team, a project plan and examples of similar losses handled. Compare proposals on the same scenario, using a blended scale calculation for each.

Treat promises of a guaranteed result with scepticism. Insist on a written engagement that sets out fee bands, caps, specialist costs, exit terms and the treatment of amounts already agreed before appointment.

Governance deserves attention too. On a mandate that may last years, agree who within the company instructs the expert, how often written progress reports are delivered and how the budget for specialists is approved. Clear governance prevents scope creep, which is the most common reason advisory costs on large losses exceed expectations.

• Proposed team and sector experience
• Fee bands, cap and effective rate on scenarios
• Specialist costs included or excluded
• Reporting frequency and governance
• Termination and fees on early exit

Large industrial claims justify careful fee engineering: blended scales, caps and clear specialist budgets. More guidance on large-loss adjusting is available on expertdassure.com.