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A public adjuster is a professional claims handler claims adjuster who advocates for the policyholder in appraising and negotiating a claimant's insurance claim. Aside from attorneys and the broker of record, public adjusters licensed by state departments of insurance are the only type of claims adjuster that can legally represent the rights of an insured during an insurance claim process. A public adjuster will be most beneficial when it is clear that the insurer will pay the claim and the only issue is the proper identification and valuation of the loss. Most public adjusters charge a percentage of the settlement. Primarily they appraise the damage, prepare an estimate and other claim documentation, read the policy of insurance to determine coverages, and negotiate with the insurance company's claims handler.
A public adjuster is a representative of the policyholder who advises, manages, and submits a claim to the policyholders insurance company.
There are three classes of insurance claims adjusters: staff adjusters (employed by an insurance company or self-insured entity), independent adjusters (independent contractors hired by the insurance company) and public adjusters (employed by the policyholder). "Company" or "independent" adjusters can only legally represent the rights of an insurance company.
Outside the United States adjusters are commonly called (or translated into English as) "insurance loss assessors" (or simply "loss assessors") and staff adjusters or independent adjusters are called or translated as "insurance loss adjusters" (or simply "loss adjusters"). However, there is a clear distinction between a loss adjuster, who works on behalf of an insurance company, and a loss assessor who works on behalf of a policyholder.
Licensing and regulation
Currently, 44 states (and the District of Columbia) have in place some form of statutory and/or regulatory scheme which licenses public adjusters. The states that do not are: Alaska, South Dakota, and Wisconsin. In addition, it is important to note that on October 14, 2005, the National Association of Insurance Commissioners (NAIC) adopted the Public Adjuster Licensing Model Act (MDL-228), which governs the qualifications and procedures for the licensing of public adjusters. It defines a public adjuster as "any person who, for compensation or any other thing of value, acts on behalf of an insured", specifies the duties of and restrictions on public adjusters, including regulations for the following: examination, bond or letter of credit, continuing education, public adjuster fees, contracts, record retention, and standards of conduct. In addition, the model act states that public adjusters may only act or aid on the benefit of the insured in first-party claims.
Holding a license in one state only permits the licensed to practice in that state. Although the regulations vary from state to state, the model act states that a non-resident can obtain a license in another state if their home state allows non-residents to apply for a license on the same basis. This reciprocity agreement means that in many cases one can apply for a license in another state without having to pass that state's examination or pre-licensing education requirements. Generally, public adjusters only work with insurance claims related to property damages and the business losses that they trigger such as business income, builders' risk, mechanical and electrical breakdown, extra expense and expediting expense, and leasehold interest. Although it is uncommon for public adjusters to handle health insurance claims, in some states such as Florida they are legally authorized to handle claims in all lines of insurance except life and annuities.
The public adjuster's main responsibilities are to:
- Evaluate existing insurance policies in order to determine what coverage may be applicable to a claim
- Research, detail, and substantiate damage to buildings and contents and any additional expenses
- Evaluate business interruption losses and extra expense claims for businesses
- Determine values for settling covered damages
- Prepare, document and support the claim on behalf of the insured
- Negotiate a settlement with the insurance company on behalf of an insured
- Re-open a claim and negotiate for more money if a discrepancy is found after the claim has been settled
Typically a policyholder hires a public adjuster to document and expedite their claims, obtain a more satisfactory claim recovery, more quickly, and completely restore their residence or business operations, and insulate themselves from the stress of engaging in an adversarial role with a large corporation. However, the cost of hiring outside experts, no matter how well-earned, can be an added burden when they are borne entirely by the policyholder. The added burden can be alleviated by the work of a public adjuster. However, policy holders who are not properly indemnified by their insurance carriers may be left with little choice but to hire professional assistance to recover the claim payment to which they are entitled.
Public adjusters must be able to recognize claims that may be insubstantial and disputable and explain such problems to the client. The everyday meanings of terms like "collapse", "partial collapse" and "extent of physical damage" might be entirely different from their legal interpretations, requiring the adjuster to clarify such terms for the client. Regulations regarding the uses of these terms are constantly in a state of flux so it is important for public adjusters to have a firm grasp of the law including the division of legal responsibilities between insurance companies and policyholders.
Most public adjusters are paid based on a percentage of the total settlement. For example, one Georgia company states their fee is between 5% and 10% based on the type and amount of the insurance claim. However, lower percentages are used for larger losses being claimed under a policy of insurance. Higher percentages are needed for smaller claimed losses. Smaller insurance claims can have similar costs as larger claims, but because the recovery is less on smaller claims the fee range must be adjusted to compensate for the operating costs. All public adjusters are not equal in their abilities to secure policy benefits. Skills of performance can vary significantly between public adjusters ranging from basic to elite expert. Fees of 10% to 12% are ordinary and typical for claimed losses of $100,000 or greater when handled by standard-rated public adjusters. Expert-rated public adjusters get a higher fee than standard-rated adjusters. For example, an expert public adjuster can charge 12% to 15% on a loss that exceeds $100,000. However, superior experts possess capabilities to obtain the most effective results. Therefore, highly qualified adjusters can be expected to be better skilled at achieving a greater increased benefits settlement amount than an adjuster who is not an actual expert. Adjusters who are experts must be classified and registered as an expert by the judicial system. Public adjusters declaring themselves to be experts should be verified, because such notice is not always factual. For those public adjusters who proclaim to be actual experts, it's highly recommended that their credentials be validated to prove such qualifications. Most public adjusters are not court-registered experts, but instead just have claims experience. Experience is often not expertise. Some public adjusters charge a flat percentage or a flat fee set price, while others use a regressive scale. It depends, in part, on the State Law where the loss occurred. For example, a regressive scale can be 25% of the first $100,000, 15% between $100,001 and $200,000, and 10% of any amount beyond that. Claims that are less than $50,000 are considered small claim losses. There are Public Adjusters who will not service smaller claims at all, while other public adjusters charge a normal range of a 30% to 35% fee rate for insurance claims with a settlement value that is less than $50,000. Public adjusters can charge a lower fee on the total settlement value of the claim, or they can charge a higher fee on an improved settlement amount that is beyond the initial settlement originally offered by the insuring organization. For example, for a $100,000 loss, a fee can be 12% on the whole claim value, where the cost risk can be a shared expense with the client, but for a lower fee which is a benefit for the client; or alternatively, if the initial settlement was $50,000, then a public adjuster might accept a 25% fee —not on the initial $50,000― but on any additional recovery settlement referred to as "new money", being a partial claim value of an amount which exceeds the initial $50,000 settlement, where fees apply exclusively to only the additional amount recovered. However, this additional recovery method of "new money only" means that the public adjuster assumes all of the cost risk and expense, with no cost risk shared by the client, hence the higher fee. (For a claim not covered by the Policy, the public adjuster could experience a business loss from operating expenses spent on "new money only" claims that are limited to only improved settlement recovery services). There are public adjusters who contract for "new money only" services but charge fees of 40% and 50% to accept that high risk, where any improved settlement benefit, or the new money recovered, is essentially split about evenly between the public adjuster and the client. It's important to note that some states cap public adjuster fees at levels such as 10% or 20%, and some consumers opine that normal public adjuster fees are standardized, citing 10% on any claim regardless of its value. This is not accurate and cannot work. Such limitations can cause public adjusters to avoid helping consumers with smaller claims altogether when the services' costs can actually become a financial loss if not providing a fair, reasonable and necessary business earnings' margin needed by public adjuster firms in order to operate, just as with any business. Most states do not cap fees for this reason, while nearly all states welcome public adjuster services for their insuring public. Professional fees must be adequate for public adjusters to cover operating and business costs while still providing sufficient business income returns on those costs. Higher fees on smaller claims having low recovery values are necessary to provide the adequate compensation that a public adjuster needs to accept the costs of providing full services. Regardless of the fee structure, the public adjuster professional fee may, and will likely, be offset by an increase in the settlement amount on a covered claim. In many jurisdictions, the fee structure must be disclosed up front. It is important to note that a public adjuster cannot obtain more than the policyholder is legitimately entitled to, but public adjusters ―especially experts― generally recover a better financial settlement benefit than the fees charged to their clients, thereby leaving their clients with a net financial improvement of benefits recovery after fees are paid. The indemnity promised and provided for by an insurance policy, or the full potential financial recovery value of an insurance claim, is often not obtainable without professional assistance like that which comes from a very capable public adjuster.
Loss recovery insurance
Loss Recovery Insurance is an insurance policy devised by Lorega Ltd - which covers the cost of an independent Chartered Loss Adjuster, who acts solely on behalf of the behalf of the policyholder, in preparing, negotiating and settling an insurance claim. Insurers always have the benefit of staff or independent adjusters to act on their behalf, reducing the claim wherever possible. Loss recovery insurance helps level the playing field by providing the policyholder with independent expert advice. Lorega Limited is a Lloyd's Managing General Agent, based in London, and distributes a number of assistance insurance products which provide expert help, when it is needed, to policyholders in the UK.
When to contact
While it is not always clear when a policyholder may benefit from hiring a public adjuster, the most benefit is likely to be realized if they are engaged immediately in case of a loss. Shortly after the insurance company receives notice of a loss, an adjuster representing the insurance company will visit the policyholder to gather facts about how the loss occurred, the magnitude of the loss, and the possibility of subrogation. Incorrect, incomplete or inadequately expressed answers to the adjuster's questions may reduce the amount that can be claimed. A public adjuster engaged early in the process, before the fact-finding stage, will have more opportunity to help the policyholder receive a fair settlement for all losses legitimately covered under the insurance policy. However, any time during negotiations with the insurance company and even after a settlement has been received by an insured, a public adjuster may be able to negotiate for a higher amount.
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