It is not uncommon for several insurance adjusters and experts to be involved in a property damage claim. Insurance carriers have their own inhouse team (people referred to as a carrier or desk adjusters) and regularly use Independent Adjusters (IA) during catastrophic events like a hurricane to manage a high volume of claims. Policyholders are often unaware of which type of adjuster is responsible for their claim and there is no requirement for carriers to disclose the level of experience, training, or other certifications. 

If and when a policyholder needs outside assistance to get a property damage insurance claim fairly paid, a Public Adjuster (PA) is often their first line of defense. Public Adjusters have to meet a variety of criteria to gain a license including passing an exam, taking continuing education courses each year, and maintain a decent “creditworthiness”. Unlike Independent Adjusters, PA’s are subject to strict contractual obligations that require certain disclosures be made to the policyholder and allow the agreement to be terminated within 3 days after being signed. 

The biggest difference between an independent adjuster and a public adjuster is who the person is advocating for – the insurance company or the policyholder. Basically, each does the same job but for a different party. Despite the similarities, the licenses and regulations are very different. In fact, once a comparison is made between the two, it is easy to see how insurance carriers can leverage existing licensing laws to create an imbalanced system that ultimately hurts policyholders. 

Who Is Regulating Who?

The National Association of Insurance Commissioners is the regulatory body that sets the minimum standards for individual states to follow when it comes to the management of IA and PA licenses. There is no current standard for how carrier or desk adjusters employed by insurance carriers are regulated or trained, and they do not require a license to adjust insurance claims. 

There are two insurance licensing models, one for IA’s and one for PA’s, that the NAIC created in 2008 that set the minimum standard for licensing and conduct. States have the option to adopt the model as is or make adjustments. Currently, 16/50 states have adopted the IA model and made adjustments. When it comes to PA’s, 44/50 states have adopted the model and added additional regulations and requirements. 

Why Are Public Adjusters Singled Out?

When the two licensing models are compared, it is readily apparent that PA’s have more rules, requirements and hoops to jump through when getting a license. In total, the IA model guide is 18 pages of specifications while the PA guide is 24. How can there be an additional six pages of requirements for PA’s when the job is the same? Why is there be MORE regulation for PA’s when their job is to ensure policyholders get fairly paid? How can there not be MORE regulation to ensure insurance companies are hiring people with the proper skillset to even adjust claims to begin with?

The answer to these questions lies in how insurance companies use IA’s and other experts in the claim process and how the imbalance in power created benefits insurance carriers. 

How Insurance Carriers Use IA’s To Their Advantage

There is no denying that after a catastrophic event, help is needed to manage the influx of claims from policyholders. In most instances, there are not enough carrier or desk adjusters employed by carriers to properly investigate, adjust, and pay claims in a timely manner. To help meet high demands, IA’s and other non-licensed “experts” like building inspectors and engineers are brought in to help. 

The only problem? IA’s and these other experts have no duty to actually help the policyholders they have been contracted to work. If the IA, inspector or engineer assigned to the claim makes a mistake that reduces the claim payout or causes an inaccurate denial there is no repercussion. 

In fact, what typically happens is the insurance carrier will send a variety of inexperienced or unlicensed “inspectors” out to inspect the damage on a claim and then report that information up to the desk adjuster who ultimately makes the decision on the claim without ever physically seeing the property damage. 

This is the exact scenario that caused 100% of Hurricane Sandy insurance claims to be reopened after it was discovered that inexperienced IA’s improperly investigated claims that resulted in millions of dollars in underpaid claims. 

States like Texas even have specific provisions that reduce the responsibility IA’s have in the claims process when it comes to ensuring a claim is fairly paid. 

Who Is Protecting Policyholders?

Policyholders who have had their claim improperly denied, underpaid or who need help navigating the unfamiliar claim process have two options: hire a PA or a lawyer. Both cost additional money that the policyholder is responsible for. Some states allow for attorney fees to be reimbursed if the insurance carrier is found at fault. PA fees are not recoverable. 

Outside of hired advocates, there is little if any state or national regulation that protects policyholder interests. 

Despite the jobs of IA’s and PA’s being almost identical, PA’s have about twice as many rules and regulations to follow when working insurance claims. The biggest difference between the two is that PA’s work for the policyholder and not the insurance company.  

Key Takeaways

• Insurance carriers are not required to hire licensed “experts” like engineers to inspect the damage that determines claim payout. 
• There is no model or guide from the NAIC that requires desk adjusters to have proper training or license to adjust a claim. 
• State license regulations reduce IA’s from having any responsibility for the policyholder. 
• Any mistake that is made by an insurance carrier that reduces claim payout must be handled by hiring an outside expert – costs that the policyholder must pay out of pocket
• PA’s are a policyholders first line of defense when seeking a fair claim payment and have about twice as many requirements as an IA to get a license despite the job being the same
• The role of a Public Adjuster is justified due to the mishandling of claims and mistakes made by IA’s and desk adjusters – yet no regulations exist to prevent those mistakes to begin with 

Despite the enormity of the situation, an easy step in the right direction would be to make a universal license that required the same level of training, knowledge and dedication from all adjusters, regardless of which side of the claim was served. 

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