The role of adjusters in the claim adjustment process

By Tom Lichtenberger, MBA, CPCU, AIC, AIM

Dealing with the aftermath of significant storm or fire damage to your ministry’s property can be stressful and unsettling. Naturally, you’ll want to resume ministry activity as quickly as possible. One of your first calls should be to your insurance agent or insurance company. They can help get the claim process started.

An important step in the claim process is getting an estimate for the amount of loss. Once you get an estimate, you’ll need to work with your insurance adjuster. The adjuster is responsible for investigating, documenting, and evaluating the loss. The adjuster will also work with the insurance company to determine whether the loss is covered by your policy, and if so, the appropriate insurance payment.

This article will help you understand the role of the adjuster during an insurance claim, the types of adjusters, and some important considerations when working with an adjuster.

What is an insurance adjuster?

According to the National Association of Insurance Commissioners (NAIC) State Licensing Handbook, an adjuster is “a person who investigates claims, determines coverage, examines relevant documents, and inspects property damage. An adjuster might also determine the amount of a claim, loss or damage payable under an insurance contract or plan. An adjuster often settles or negotiates settlement of the claim.”

There are three types of insurance adjusters:

  1. A company adjuster
  2. An independent adjuster
  3. A public adjuster

A company adjuster is an employee of your insurance company. They should help walk you through your claim and keep you apprised of the process. A company adjuster will investigate your insurance claim to determine the extent of the insurance company’s liability according to your insurance policy.

Within the boundaries of your insurance policy, which is a legal contract, the company adjuster will verify insurance coverage and determine a fair amount for settlement. Company adjusters are required to be licensed and obtain continuing education credits to maintain their licenses. There is no fee to the policyholder for the services provided by a company adjuster.

An independent adjuster is an independent contractor that your insurance company pays to assist in the investigation of your claim. When insurance companies need someone on site to inspect a policyholder’s property, they contact independent adjusters in the area where the claim occurred.

The independent adjuster inspects the damage and provides a report to the insurance company of any damage found, along with information and documentation to assist the insurance company in determining whether there is coverage under your policy, and, if so, the amount of payment to be made. There is no fee to the policyholder for these services as they are part of the claims adjusting costs to the insurance company. Independent adjusters are required to be licensed in most states, and like company adjusters, are required to obtain continuing education credits throughout the year.

A public adjuster is hired by the policyholder to assist in quantifying and resolving the claim on the policyholder’s behalf. The public adjuster works for the policyholder and the policyholder is charged a fee for their services. Although some states require hourly fees, a public adjuster typically charges a commission based on a percentage of the final settlement amount. In many states, a public adjuster may charge 10% of the final settlement amount, but that rate can be higher or lower. This commission is not covered by your insurance policy. If you plan to repair or replace all your damaged property, your insurance proceeds would go toward repairing or replacing your damaged property, requiring you to pay the public adjuster out of pocket. Public adjusters are required to be licensed in most states and require continuing education credits throughout the year.

When a claim occurs

When you make an insurance claim to your insurance company, it is assigned to a company adjuster or an independent adjuster. The adjuster employed by the insurance company will contact you to begin the claims process. Many claims can be processed by the adjuster with documentation you provide for your claim. Examples are theft losses, lightning damage to contents, glass breakage, and other similar damage. You might be asked to provide photos of the damage and other documentation such as estimates or invoices for repairs or replacement of the property.

The independent adjuster will inspect the damage and submit a report to the insurance company so they can determine what is covered by your policy and how much can be paid, based on the policy coverage and limits you purchased.

Resolving a claim

Most policyholders can resolve their property claims by dealing with their insurance company and the assigned adjuster. However, you have the right to hire a public adjuster to help present your claim.

State insurance departments suggest that the policyholder try to settle their claim with the insurance company before hiring a public adjuster. In most states, it is illegal for a contractor or other vendor to act as a public adjuster in representing the policyholder.

If a policyholder chooses to hire a public adjuster to handle the claim on their behalf, there are some things to consider:

  • Confirm that the public adjuster is licensed in your state.
  • Understand the public adjuster’s commission, which is usually a percentage of the claim settlement as noted above. If you plan to replace all your damaged property, you will need to pay the public adjuster commission separate from the insurance proceeds.
  • Don’t sign a contract unless you’ve read and understand the terms, including the cancellation terms and the amount of the adjuster’s commission. The contract terms will usually also indicate how claim checks are to be made payable and where the check is to be sent.
  • While having a public adjuster adds another level of communication, it is important that you remain engaged in the claims process, so you are aware of coverage decisions, determining costs of repair, and when payments are made.
  • Although a public adjuster can assist in the reconciliation of the claim, in most states they are not allowed to provide legal advice or provide any repair or replacement services for the policyholder.

Questions to ask before hiring a public adjuster

  1. Are you licensed to practice public adjusting in my state? (Ask to see their license.)
  2. Will you be handling my claim personally? This makes sure you are speaking with the individual that will handle your claim and not a sales representative.
  1. How many other claims have you signed up in this area? This can help determine if they are equipped to handle all the claims they take on in a disaster area.
  1. Can you tell me about your claim adjusting and construction estimating skills, credentials, and experience? This helps you determine how long they’ve been licensed as a public adjuster and how long they’ve been practicing in your state.
  1. Can you provide at least three references of local clients who were satisfied with your work? Ask for references for claims they have personally handled in the past 3 years.
  1. What is your fee contract? Most public adjusters work on contingency fees. Make sure you agree up front on whether the public adjuster will get a percentage of monies the insurance carrier has already agreed to in writing to pay. You might need to negotiate something up front.
  1. If I hire you, can I still communicate with the insurance company and assigned adjuster? Hiring a public adjuster does not prohibit you from communicating with your assigned adjuster or the insurance company.
  1. How do I pay you? Make sure you reach an understanding on this before you enter into a contract. Many public adjuster contracts request that the public adjuster be included and named on all insurance proceeds claim checks. It is also advantageous to request that the insurance company send you all payments, so you are aware of each payment made, and to also avoid the opportunity of a fraudulent endorsement.
  1. If for some reason I want to terminate the contract before a settlement has been finalized, can I, and how much will I owe you?
  2. Have you had any insurance department complaints against you or your company?

Remember, if you hire a public adjuster, generally you agree to pay them a percentage of the insurance benefits they recover on your behalf. Many insurance departments provide guidelines on using public adjusters. Policyholders should review these guidelines online at the department website or contact the department before entering into a contract or formal agreement with a public adjuster if they have any questions. The NAIC has links on its website linking to all the state offices.

The information provided in this article is intended to be helpful, but it does not constitute legal advice and is not a substitute for the advice from a licensed attorney in your area. We strongly encourage you to regularly consult with a local attorney as part of your risk management program. Your organization is responsible for compliance with all applicable laws.

Tom Lichtenberger, MBA, CPCU, AIC, AIM is Assistant Vice President, Property Claims for Brotherhood Mutual Insurance Company.


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