Why Loss Adjustment Expense is Rising and How RoofMarketplace Solves the Problem

Loss Adjustment Expense (LAE) is one of the fastest-growing pain points for property insurers. While growing indemnity losses capture headlines, the cost of settling and administering claims has been climbing even faster. This is especially true in property lines, where roof claims dominate both frequency and severity.

LAE is no longer a background line item. It is a significant component of expense ratios and combined ratios, and it is drawing closer attention from reinsurers, regulators, and consumers. The good news is that solutions exist. By rethinking roof claims handling with RoofMarketplace, carriers have an opportunity to rein in LAE while also improving the experience for adjusters, contractors, and policyholders.

What Is Loss Adjustment Expense and Why Does It Matter?

LAE refers to the cost insurers incur while investigating and settling claims, separate from indemnity payments. It includes both:

• Allocated LAE (ALAE): Expenses tied to specific claims, such as attorney fees, engineer reports, independent adjuster invoices, or litigation costs.
• Unallocated LAE (ULAE): Overhead and operational expenses spread across claims, such as adjuster salaries, estimate writing, reinspection time, and contractor negotiations.

LAE is eating up more of every premium dollar. In 2024, the NAIC reported that loss expenses climbed 4.3 percent to $85.4 billion, while losses themselves only grew 1.8 percent. That gap pushed the industry’s expense ratio up to 25.2 percent. Even in years when losses level off, expenses continue to grow which adds pressure to the situation. Carriers cannot rely on premium increases alone to cover the gap.

Why LAE Is Rising in Property Claims

There are several forces driving higher LAE in property claims, particularly roof claims.

1. Claim complexity. Roof claims often involve scope disputes, multiple inspections, and extended cycle times.
2. Litigation and public adjusters. When homeowners feel claims are underpaid or delayed, legal involvement follows. Each escalation adds to both ALAE and ULAE.
3. Frivolous supplements. With construction materials and labor costs rising, some below-board contractors view it as an opportunity to frequently submit unnecessary supplements. Every supplement, whether needed or not, requires adjuster review and negotiation.
4. Adjuster workload. Writing estimates, managing contractor relationships, and reinspecting roofs contributes significantly to ULAE.
5. Event frequency. Severe convective storms (SCS) — hail, wind, tornadoes — are striking more often across a wider geography, driving both claim volume and expense.

Even when indemnity losses dip, these structural drivers cause LAE to rise year after year.

Why Roof Claims Drive LAE — and How RoofMarketplace Changes the Equation

Roof claims bring together every factor that drives Loss Adjustment Expense. Adjusters often spend hours writing estimates, reviewing contractor supplements, and negotiating line items. When disputes drag on, reinspections come into play. Some claims escalate further, requiring engineers, legal support, or public adjusters. A single roof claim can quickly consume dozens of adjuster hours and thousands of dollars in expert fees. Multiply that across thousands of claims and the impact is clear.

Below is an illustration of what the traditional roof claim looks like today, compared to how the claim process goes with RoofMarketplace.

The Process: A Traditional Roof Claim

1. The homeowner files a claim as storm chasers flood their area with too-good-to-be-true offers.
2. The adjuster inspects (or enlists an independent adjuster to inspect) and writes the estimate.
3. The storm chaser disputes the scope and submits supplements to address current market prices.
4. The adjuster negotiates with the storm chaser and the homeowner.
5. The homeowner grows frustrated and involves a public adjuster or attorney to review their claim. 
6. Further negotiations lead to a settled amount, the homeowner awards the job to the storm chaser.
7. The storm chaser attempts to submit unnecessary supplements (i.e. additional dumpsters, more supervisor hours, extra portable restrooms, etc.) to squeeze more dollars.
8. The adjuster evaluates and ultimately denies the supplements.
9. The inaccurate estimate and denied supplements lead to a dispute from the homeowner and possible litigation.
10. The cycle time stretches well beyond 30 days, with rising ALAE and ULAE as every day passes.

 

The Process: A RoofMarketplace Roof Claim

1. The homeowner files a claim as storm chasers flood their area with too-good-to-be-true offers.
2. The adjuster is assigned the claim and submits a bid request with RoofMarketplace, letting the homeowner know they’ll soon receive verified bids from reputable contractors
3. Multiple vetted local contractors evaluate the property details and images and submit actionable, defensible bids at real market rates.
4. The homeowner reviews the collected bids, compares warranties and lead times, and chooses the contractor they prefer.
5. A Work Agreement is circulated and signed; work begins promptly with minimal adjuster involvement.
6. The RoofMarketplace Customer Service team ushers the project to completion, providing support to both the adjuster and the homeowner.

 

The RoofMarketplace Advantage

• Operational efficiency: Adjusters spend less time per file, freeing capacity for more claims and initiatives
• Indemnity confidence: Market-accurate pricing ensures payments align with actual costs and are defensible.
• Expense containment: Competitive bids reduce disputes, litigation, and outside expert costs.

The Bottom Line: No required estimate drafting, no frivolous supplements, shorter cycle times, completed roof projects, and significantly lower LAE.

“Eliminating the estimate step doesn’t replace the important role adjusters play—it removes a process that too often introduces disputes and delays,” said John Elder, Senior Director of Marketplace Operations at RoofMarketplace. “Carriers using RoofMarketplace are finding that this workflow leads to faster resolution and clearer outcomes for everyone involved.”

Conclusion

LAE is one of the most pressing challenges facing property insurers, and roof claims are at the center of the issue. Their frequency, cost, and tendency to escalate make them a primary driver of both ULAE and ALAE.

RoofMarketplace offers a scalable solution. By removing the need for an estimate, eliminating unnecessary supplements, and minimizing disputes, we help carriers contain expenses while giving homeowners a smoother claims experience.

Sustainable claims expense management starts with roof claims. Contact us to learn how RoofMarketplace can help your organization reduce costs and deliver better outcomes.