Why Are Unlicensed “Professionals” Adjusting Claims?

A growing trend among insurance carriers to use unlicensed, untrained “professionals” to assess damage and work insurance claims could get a whole lot worse. A recent report put out by McKinsey and Company notes how carriers can increase profit by moving as much as “30% of their workforce to outside vendors”. 

What do they mean by outside “vendors”? Roof inspection team or “ladder assists”, independent adjusters, engineers, and claim filing administrators just to name a few. Despite not being able to make claim coverage decisions, all of these vendors have a direct role in a claim’s outcome including the overall payment. 

Several catastrophic storms have highlighted the problems with this type of business model. Inexperience or “green” adjusters and outside vendors have no responsibility to serve the policyholder properly. Items get missed, estimates are not accurate, errors cause longer timelines and more. Most of these unlicensed and untrained workers don’t even have the skills needed to understand and review an insurance policy. While it is unfortunate for the policyholder, others involved in the repair process, like roofing contractors, also suffer. 

With UPPA laws in place to remove the contractor from the equation, many question how these same laws don’t apply to insurance carriers who use third party “experts”. If the person is unlicensed, untrained and does not have the credentials to perform the job, how can these ladder assist, appraisal and engineer “experts” be allowed to make decisions that impact the claim outcome? 

Also keep in mind that most policyholders lack the knowledge to adjust their own claims. When contractors are not involved in the process and these hired third party experts make decisions that negatively impact a claim’s outcome, there are limited resources available to policyholders that helps to hold carriers accountable. 

How Outsourcing Increases Profits 

Outsourcing saves insurance carriers from the added costs of having full-time employees, paying health insurance and other benefits, payroll taxes, training, HR costs, etc. Since these jobs are handled by a third party, insurance carriers are not required to properly train or license the Independent Adjusters or experts they assign to claims. Interestingly enough, these third party vendors have no obligation to the policyholder to ensure a fair claim outcome. This means if they lack the training needed to properly assess the damage or write an estimate, the insurance company also benefits from those seemingly insignificant mistakes. 

Holding Carriers Accountable Comes At A Cost

One of the biggest ironies of the insurance claim process is that policyholders have to foot the bill and hire their own experts to undo the mistakes made by those hired by the insurance company. Put another way, policyholders who have to pay above and beyond their annual premiums to ensure they are fairly paid are never made whole after a claim is made, despite that being the very purpose of having insurance to begin with. 

Using a Public Adjuster is one route policyholders can take. PA’s are state regulated and must hold a license to act in the policyholders best interest by taking on the claim process. Often this means ensuring carriers meet contractual obligations and a fair payment is made. The cost to use a Public Adjuster varies but it is not recoverable if an insurance company is found to have acted in bad faith and wrongfully denied or underapid a claim. 

Policyholders can also seek legal assistance for insurance claims but going to trial can mean years of legal proceedings before a judgement is rendered. In some states, court fees including attorney’s costs are recoverable if the ruling is in favor of the policyholder. Most states do not impose additional penalties or payments if the carrier acted in bad faith. 

Outsourcing Brings More Challenges To Policyholders 

If more insurance carriers utilize the McKinsey and Company recommendations to increase profits by outsourcing aspects of a claim to third party companies, policyholders should at least get notice should they have to file a claim in the future. This would help educate them on what warning signs to look out for, what questions to ask and know when to get expert help early. Unfortunately, carriers are not required to provide this information upfront thus increasing the likelihood that problems with the bad faith claim loophole will continue. 

Our goal at the American Adjuster Association is to make insured’s whole again. We will move lawmakers to adopt the principles of indemnity and consequential damages into state law. Show your support by becoming a member or follow us on Facebook and join the conversation.