Are Public Adjuster Fee Caps Helping or Hurting Policyholders?

In the past six months, lawmakers across several states have proposed new limits on how public adjusters are compensated. Known as “fee caps,” these rules set a maximum percentage that an adjuster may charge on an insurance settlement.

Supporters say caps protect consumers from excessive charges. But critics warn that these restrictions could backfire, making it harder for homeowners, especially disaster victims, to find the professional help they need.

At the American Adjuster Association (AAA), we believe this is one of the most important debates happening right now in the property insurance space.

What Are Fee Caps?

Public adjusters are typically paid a percentage of the settlement they help a homeowner secure. This contingency-based model allows families to get professional assistance without paying upfront.

A fee cap sets a ceiling on that percentage. For example:

• In some states, adjusters cannot charge more than 10% of a claim’s settlement.

• In others, caps are applied only in disaster situations, such as wildfires or hurricanes, with limits around 15%.

On paper, this may sound like consumer protection. But the reality is more complicated.

Recent Examples of Fee Cap Proposals

Several states have introduced new fee cap legislation in 2025:

• California AB 597: Imposes a 15% fee cap on claims resulting from a declared disaster or state of emergency. It also bars adjusters from charging fees on payments issued before the contract is signed. Read the bill analysis.

• South Carolina Bill 196: Proposes a 10% fee cap on all settlements, regardless of circumstances, and prohibits any payment or compensation before settlement. View the bill text.

• Florida HB 1047: While not a strict cap, the bill introduces restrictions on how public adjusters can conduct themselves and may set the stage for future compensation reforms.

• NAIC Model Act Revisions: The National Association of Insurance Commissioners (NAIC) has also proposed changes to its Public Adjuster Licensing Model Act, which include tighter rules on compensation and prohibiting fees on payments made before a contract is signed.

Why Fee Caps Matter for Consumers

The central question is simple: do fee caps help or harm homeowners?

• Potential Benefit: Caps can prevent bad actors from charging unreasonably high percentages, particularly when policyholders are vulnerable after a disaster. This is the consumer protection argument most often cited by lawmakers.

• Real-World Risk: In practice, caps may discourage qualified adjusters from working in certain areas—especially in disaster zones where claims are complex, costly, and time-consuming. If the maximum compensation is too low, adjusters may not take cases at all, leaving homeowners to negotiate directly with their insurers.

• Uneven Playing Field: Insurers employ adjusters whose job is to minimize payouts. If consumers are unable to find representation because of fee caps, the scales tip further toward the insurance companies.

The Disaster Zone Dilemma

Fee caps become particularly problematic during declared disasters. For example, after California wildfires or Florida hurricanes, thousands of claims may be filed at once. Insurers are overwhelmed, timelines are long, and settlements can take months—or even years—to resolve.

If adjusters face a strict cap of 10–15%, they may not be able to justify the travel, lodging, and extensive work these cases require. This creates a shortage of available advocates just when policyholders need them the most.

Industry and Consumer Response

Public adjuster associations nationwide have spoken out strongly against blanket fee caps:

• In California, consumer advocates warned that AB 597 could make it harder for wildfire victims to secure fair settlements.

• In South Carolina, adjusters argue that a 10% cap is unworkable for many claims and would effectively shut out smaller firms.

• Nationally, groups are urging lawmakers to focus on enforcing ethical standards and transparency rather than imposing across-the-board limits on compensation.

What the American Adjuster Association is Watching

At AAA, we support efforts to protect consumers from predatory practices. But we believe fee caps are a blunt instrument that may do more harm than good. A one-size-fits-all approach does not reflect the complexity of real-world claims, especially after catastrophic disasters.

Instead, AAA advocates for:

• Clear disclosures so policyholders know exactly what percentage they will pay.

• Strong licensing and oversight to weed out bad actors.

• Flexibility in compensation that allows adjusters to take on complex cases without being financially penalized.

We are monitoring legislation in California, South Carolina, Florida, and other states to ensure that consumer protection is balanced with access to fair representation.

Conclusion

Fee caps may seem like a quick fix, but they risk leaving homeowners without the help they need to navigate the claims process. The real solution lies in smarter regulation—rules that promote transparency, accountability, and ethical conduct without cutting off access to skilled public adjusters.

AAA will continue to advocate for legislation that protects consumers while ensuring they have the right to professional support when disaster strikes.