Insurance Adjuster - Understanding the Process and Types of Adjusters

1. Section A 2B

2. Adjusting The process of comparing a claimant’s losses to the promises made in an insurance policy Insurance Adjuster An agent who process insurance claims for a salary, a fee, or commission What is an Insurance Adjuster? In the insurance business, adjusting refers to the process of comparing the losses of a claimant to the promises made by an insurer in an insurance policy. As we just saw, insurers want to handle claims quickly and efficiently, while remaining faithful to the terms of the policy. Most often, this job is assigned to an adjuster. An insurance adjuster is an agent who, for compensation, processes insurance claims. Adjusters can be salaried employees of an insurer, or they can work on a fee-for-services basis. Sometimes they are paid by commission. It depends on what type of adjusters they are.

3. Who The Adjuster Works For The Insurance Adjuster works on behalf of: • an insurer • a private company • An adjuster company (an adjusting bureau) • The claimant Adjusters can work for the insured or the insurer

4. Types of Adjusters The Staff Adjuster (Company Adjuster) • Employed by only one insurer • They are salaried employees • Can work either locally, regionally, or nationally • Also called “company” adjusters • Work for insurer such as State Farm, Nationwide, Humana, and Safe Auto Staff Adjuster Independent Adjuster Public Adjuster Emergency Adjuster

5. Types of Adjusters The Independent Adjuster • Also called “fee adjuster” or “bureau adjuster” • Not contracted to any particular insurer • Self-employed • Processes claims, sometimes for multiple insurers at the same time • Paid by fee schedule, daily rate, or time & expenses • Sometimes paid on a commission basis (percentage of the final settlement amount) Unlike Staff Adjusters, Independent Adjusters are self-employed. They work as contractors for insurers and claims-handling companies (which are sometimes called bureaus or Third Party Administrators - TPA's) Staff Adjuster Independent Adjuster Public Adjuster Emergency Adjuster

6. Types of Adjusters The Public Adjuster • Hired by policyholder (the claimant) • Represents the policyholder in the claim • Charges a commission, between 10-30% of settlement • Hired when the insured knows the insurer will be making a payment for the claim • Helps determine the proper identification and valuation of a loss • Specializes in appraising and negotiating claims Staff Adjuster Independent Adjuster Public Adjuster Emergency Adjuster

7. Emergency Adjusters • Temporarily licensed by insurance commissioner when there is a catastrophe • May be adjusters from other states • May be an individual who is temporarily certified by an insurer to adjust claims • Only allowed to work on claims related to the disaster Types of Adjusters Emergency Adjusters are individuals who are temporarily licensed to handle claims after natural disasters or other catastrophes. State laws require that these claims be processed as quickly as possible. But the pool of available licensed adjusters may not be large enough to manage all of the claims. To respond to this type of emergency, the Insurance Commissioner allows emergency adjusters to be licensed quickly. These adjusters may hold licenses in other states, or they may be certified to work by an insurer. Emergency adjusters can only work on the disaster for which they are licensed, and the license is temporary, usually lasting for a few months. Staff Adjuster Independent Adjuster Public Adjuster Emergency Adjuster

8. What is the title of the insurance professional who processes claims for compensation? • Insurance broker • Insurance salesman • Insurance adjuster • Insurance agent

9. What is the title of the insurance professional who processes claims for compensation? • Insurance broker • Insurance salesman • Insurance adjuster • Insurance agent

10. What do you call a self-employed adjuster who works as a contractor for insurers or claims-handling companies ? • Public adjuster • Independent adjuster • Emergency adjuster • Staff adjuster

11. What do you call a self-employed adjuster who works as a contractor for insurers or claims-handling companies ? • Public adjuster • Independent adjuster • Emergency adjuster • Staff adjuster

12. A serve storm rages through OKC, with tornadoes cause multiple square miles worth of damage. All the licensed adjusters in the area are already occupied or deployed to the scene. Who can the insurance commissioner look to for temporary help resolving the rest of the claims from this storm? • Emergency adjusters • Independent Adjusters • Public Adjusters • Staff Adjusters

13. A server storm rages through OKC, with tornadoes cause multiple square miles worth of damage. All the licensed adjusters in the area are already occupied or deployed to the scene. Who can the insurance commissioner looks to for temporary help resolving the rest of the claims from this storm? • Emergency adjusters • Independent Adjusters • Public Adjusters • Staff Adjusters

14. Jane is a salaried employee of drew insurance. Working out of the regional office, Jane is sent to deal with some of the most difficult claims in her area. What kind of adjuster is Jane? • Emergency adjusters • Public Adjuster • Staff Adjuster • Independent Adjuster

15. Jane is a salaried employee of Drew Insurance. Working out of the regional office, Jane is sent to deal with some of the most difficult claims in her area. What kind of adjuster is Jane? • Emergency adjusters • Public Adjuster • Staff Adjuster • Independent Adjuster

16. After a storm demolished Greg's house, his insurance company sent an adjuster out to adjust his claim. After investigating Greg's claim, the adjuster offered him a settlement which Greg felt was too low. Not knowing much about property insurance, Greg wants a second opinion to make sure he is receiving what he deserves. Who might Greg hire to help with negotiating a fair settlement? • An independent adjuster • Public Adjuster • Staff Adjuster • An Insurance Commissioner

17. After a storm demolished Greg's house, his insurance company sent an adjuster out to adjust his claim. After investigating Greg's claim, the adjuster offered him a settlement which Greg felt was too low. Not knowing much about property insurance, Greg wants a second opinion to make sure he is receiving what he deserves. Who might Greg hire to help with negotiating a fair settlement? • An independent adjuster • Public Adjuster • Staff Adjuster • An Insurance Commissioner

18. After Jeffy pulled the fire alarm, the indoor sprinkler system came on and flooded the offices at Elliot designs, causing thousands of dollars in damage. Elliot designs filed a claim with walker insurance, who dispatched miguel to investigate and process the claim. Who is claimant in this scenario? • Elliot Designs • Jeffy • Miquel • Walker Insurance

19. After Jeffy pulled the fire alarm, the indoor sprinkler system came on and flooded the offices at Elliot Designs, causing thousands of dollars in damage. Elliot Designs filed a claim with Walker Insurance, who dispatched Miguel to investigate and process the claim. Who is claimant in this scenario? • Elliot Designs • Jeffy • Miquel • Walker Insurance

20. Claimant When someone suffers a loss that he thinks would be covered under an insurance policy, he may submit a claim to the insurer requesting payment for his loss. At this point he becomes a claimant. However, simply filing a claim does not guarantee indemnification. All it means is that the claimant believes he is entitled to payment under the terms of an insurance policy. Before being paid, he will have to prove the loss to the insurer. Then, if the loss does indeed fall under the terms of the contract, the insurer will accept his claim and indemnify him. This process of handling claims for coverage under an insurance policy is known as the claim function, and it is the primary role of the adjuster. Who is the Claimant? An individual or business that makes a claim for payment after a loss occurs • Must believe loss is covered by an insurance policy • Claimant’s own policy • Policy of a liable party • Must prove the loss to the insurer • If loss is covered, insurer will indemnify claimant

21. What kind of adjuster represents the insured rather than the insurer? • Public adjuster • Emergency Adjuster • Independent Adjuster • Staff Adjuster

22. What kind of adjuster represents the insured rather than the insurer? • Public adjuster • Emergency Adjuster • Independent Adjuster • Staff Adjuster

23. Power to Bind – Non-Waiver Agreement Non-Waiver Agreement Sometimes, the insurer will keep an independent adjuster from having this authority by requiring the insured to sign a document called a “non-waiver agreement.” A non-waiver agreement is a written document, executed by the insurer and the insured, wherein the insured acknowledges the insurer’s right to deny coverage in the future. This document enables this office to continue to investigate this claim while protecting the Insured’s rights also. This agreement states that the adjuster may investigate the loss, but that any decisions on the claim must come from the insurer directly. In other words, the claimant agrees that any statements or actions of the adjuster are not binding on the insurer. Non-waiver agreements are typically used in catastrophe situations, where the large number of claims makes it impossible for the insurer to oversee every claim carefully, while still getting all the losses inspected in a timely manner. • Claimant agrees that adjuster’s words and actions do not bind the insurer • Insurer then proceeds with the claim investigation • Typically used in catastrophe situations (i.e. natural disasters) • Allows insurer to inspect damages without relying completely on independent adjuster

24. When is a non-waiver agreement often used? • After a claim is paid • When an adjuster must negotiate a settlement with a claimant • When an independent adjuster is investigating a claim in a catastrophe situation • When a policyholder makes a claim that exceeds the policy reserve

25. When is a non-waiver agreement often used? • After a claim is paid • When an adjuster must negotiate a settlement with a claimant • When an independent adjuster is investigating a claim in a catastrophe situation • When a policyholder makes a claim that exceeds the policy reserve

26. Adjuster Reports Initial or Preliminary Report • Often required after 15 days • Also called the “initial report” or “field report” • Time-lines and deadlines (expediency issues) • Apparent losses • Liability issues (when known) • Applicable coverages • Initial claim reserve An adjuster’s preliminary report is often due within 15 days of receiving a claim. This report, which is also sometimes called the initial report or field report, will list the findings of the adjuster’s initial investigation. It will include the date that the adjuster first contacted the claimant and the timeline of the claim so far, including any deadlines that the insurer must meet. A preliminary report should list any information that is relevant to the claim, such as the apparent losses, the liability of parties involved, when known, and any applicable policy coverages. And finally, an adjuster’s preliminary report should always establish an initial claim reserve. A claim reserve is the amount of money that the insurer sets aside in preparation for paying the claim. Initial Report Interim Report Final Report

27. Adjuster Reports Interim (a.k.a. Status) Report • Update on claim progress • Due at set intervals as long as a claim is open • New evidence (depositions, statements) • Medical information • Repair estimates An interim, or status, report is meant to update the insurer on a claim when a certain amount of time has passed without a resolution. Most insurers require an interim report every 30 days that a claim remains open, although some require it as often as every 15 days. This report will list any new or important information, such as depositions being taken, repair estimates, new medical information, special damages, etc. Initial Report Interim Report Final Report

28. Adjuster Reports Final (a.k.a. Full) Report • All facts and evidence of the claim • Policy coverages applied • Adjusted losses • Final claim disposition An adjuster makes a final, or full, report after closing the claim. This report will list all the facts, statements, and evidence of the claim, any policy coverages that were applied, the adjusted loss totals, and the final disposition of the claim. Initial Report Interim Report Final Report

29. In which report to the principal would an adjuster include all witness statements and other supporting evidence, in addition to the total settlement amount? • Preliminary report • Interim report • Settlement report • Final report

30. In which report to the principal would an adjuster include all witness statements and other supporting evidence, in addition to the total settlement amount? • Preliminary report • Interim report • Settlement report • Final report

31. An Insurance Adjuster: • Acts as the Fiduciary Agent • Has the Power to Bind • Must Report to the Principal Adjuster Responsibilities

32. Fiduciary Agent The adjuster acts as a fiduciary agent for the principal (the insurer). In order to be a fiduciary agent, an adjuster must: • Have authority granted by an insurer via a contract. • Act for, and on behalf of, the principal (the insurer) • Protect the principal’s financial and property interests Adjuster Responsibilities This means that, when handling claims, the adjuster is responsible for making decisions in place of the insurer and for the insurer's benefit. Fiduciary Agent Power to Bind Report to the Principal

33. Being a Fiduciary Agent When the Adjuster is the fiduciary agent for the principal these are their responsibilities: • Act in the principal’s best interest with utmost good faith (honesty, fair dealing, and full disclosure) • Never act with self-interest (ex. Inflating the cost of a claim to earn more money) • Never profit without express permission (ex. Receiving kickbacks in any form) • Never act if a conflict of interest exists Adjuster Responsibilities Fiduciary Agent Power to Bind Report to the Principal

34. The Power to Bind An adjuster has the Power to Bind the principal. This means that the principal must honor any actions and decisions of the adjuster while the adjuster is acting on the principal's behalf. For example, if Alice decides to accept and pay a claim on behalf of the insurer she is working for, the insurer cannot then reverse her decision. It is bound by Alice's decision to accept the claim. Even if Alice made a miscalculation and paid the claimant the wrong amount, the insurer would have to honor her mistaken decision. This means that an adjuster must be very careful when acting on behalf of an insurer. Since the claimant reasonably believes that the adjuster can act on the insurer's behalf, the insurer will be bound by the adjuster's decisions and actions. Adjuster Responsibilities This authority: • Is granted to adjuster in writing • Means the adjuster may act on behalf of the employer • Binds the employer Fiduciary Agent Power to Bind Report to the Principal

35. Adjuster Responsibilities More on the Power to Bind When an insurer gives an adjuster written authority to act as its fiduciary agent, the adjuster's actions are legally considered the actions of the insurer itself. Thus, an adjuster must: • Take the utmost care to act ethically and responsibly when performing her duties in relation to a claimant. • Take special care when determining the exact value of loss, If an adjuster leads the claimant to believe something is covered, the insurer may be required by law to cover it, even if it turns out that the policy did not technically cover it in the first place. Since the insurer will not be able to alter her valuation. Her decision will bind the insurer. This applies especially to written and verbal communications. Fiduciary Agent Power to Bind Report to the Principal

36. Power to Bind – Non-Waiver Agreement Non-Waiver Agreement Sometimes, the insurer will keep an independent adjuster from having this authority by requiring the insured to sign a document called a “non-waiver agreement.” A non-waiver agreement is a written document, executed by the insurer and the insured, wherein the insured acknowledges the insurer’s right to deny coverage in the future. This document enables this office to continue to investigate this claim while protecting the Insured’s rights also. This agreement states that the adjuster may investigate the loss, but that any decisions on the claim must come from the insurer directly. In other words, the claimant agrees that any statements or actions of the adjuster are not binding on the insurer. Non-waiver agreements are typically used in catastrophe situations, where the large number of claims makes it impossible for the insurer to oversee every claim carefully, while still getting all the losses inspected in a timely manner. • Claimant agrees that adjuster’s words and actions do not bind the insurer • Insurer then proceeds with the claim investigation • Typically used in catastrophe situations (i.e. natural disasters) • Allows insurer to inspect damages without relying completely on independent adjuster

37. Adjuster Responsibilities Report to the Principal It is important to define again: who is the principal? • The source of authority • The contracted employer • Insurer • And/or whomever contracts the adjuster The third responsibility of an insurance adjuster is to report to the principal. First let's review who the principal is. In the context of insurance adjusting, the principal is the source of the adjuster's authority. This can be the adjuster's employer, an insurer, or anyone who contracts the adjuster to work on their behalf and gives her the authority to do so. Fiduciary Agent Power to Bind Report to the Principal

38. Adjuster Responsibilities Reporting to the Principal This is How Adjuster Should Provide Good Reporting: • Give frequent status and progress reports to the principal • Provide private information for the benefit of the principal only "Reporting to the Principal" simply means that the adjuster must give the principal frequent and regular updates of her progress on any given claim. These reports often contain private and confidential information, which should be shared only with the principal. Fiduciary Agent Power to Bind Report to the Principal

39. An adjuster who acts as a fiduciary agent for an insurer must: • Have authority granted by the insurer through a contract • Deal with the insurer's lawyer instead of directly with the insurer. • Represent the policyholder in her interactions with the insurer • Be a salaried employee of that insurer

40. An adjuster who acts as a fiduciary agent for an insurer must: • Have authority granted by the insurer through a contract • Deal with the insurer's lawyer instead of directly with the insurer. • Represent the policyholder in her interactions with the insurer • Be a salaried employee of that insurer

41. Julie works as an insurance adjuster for Drew Insurance. While adjusting a claim, she determines that the claimant is covered by his insurance contract and issues him a settlement check for $5000. The insured cashes the check and performs the repairs. Two months later, the insurer reviews the file and realize that the claimant's damages were not covered by the policy. The insurer demands the settlement money back. Which of the following best explains why the claimant will most likely not have to return the money? • Julie had the power to bind the insurer to her decision to pay the claim • Julie issued the settlement based on guaranties provide by the claimant. • Subrogation does not allow the insurer to recover payment • The settlement payment was a warranty

42. Julie works as an insurance adjuster for drew insurance. While adjusting a claim, she determines that the claimant is covered by his insurance contract and issues him a settlement check for $5000. The insured cases the check and performs the repairs. Two months later, the insurer reviews the file and realize that the claimant's damages were not covered by the policy. The insurer demands the settlement money back. Which of the following best explains why the claimant will most likely not have to return the money? • Julie had the power to bind the insurer to her decision to pay the claim • Julie issued the settlement based on guaranties provide by the claimant. • Subrogation does not allow the insurer to recover payment • The settlement payment was a warranty

43. An adjuster who has just taken witness statements for a claim she is currently investigating, but is not yet ready to close the claim, may submit to the insurer a/an: • Interim report • Witness deposition report • Preliminary report • Full report

44. An adjuster who has just taken witness statements for a claim she is currently investigating, but is not yet ready to close the claim, may submit to the insurer a/an: • Interim report • Witness deposition report • Preliminary report • Full report

45. An adjuster acts as agent for the insurer. As such, it is essential that the adjuster understand: • Her duty to check-in daily with the insurance company • That she must always offer a settlement favorable to the claimant • Her duty to profit from every claim investigation • That her words or actions may bind the insurance company

46. An adjuster acts as agent for the insurer. As such, it is essential that the adjuster understand: • Her duty to check-in daily with the insurance company • That she must always offer a settlement favorable to the claimant • Her duty to profit from every claim investigation • That her words or actions may bind the insurance company

47. Review: Adjuster Responsibilities In review, an adjuster has three major responsibilities. First, he acts as a fiduciary agent. He has the authority to act on behalf of the principal, and he must act in the principal's best interests, rather than his own. Second, an adjuster has the power to bind. Since his words and actions count as those of the principal, they can end up requiring the principal to act in a certain way. Third, an adjuster must report to the principal, providing detailed information about the claim and what progress he has made. • Fiduciary Agent The adjuster acts on behalf of principal and must protect the principal’s interests 2. The Power to Bind The principal may have to honor the adjuster’s decisions, even when made in error. 3. Report the Principal The adjuster must give the principal detailed information on how each claim is going

48. Review: Adjuster Responsibilities Remember: An adjuster’s preliminary report should list any information pertinent to the claim so far, including any investigation results, the timeline of the claim, and the initial claim reserve. Interim, or status, reports update the insurer on the progress of a claim after a set amount of time. They will include any new information that affects the claim. An adjuster’s final report will list all the results of the investigation, any facts and evidence in the case, the loss totals, and details regarding how the claim was resolved • Preliminary Initial investigation results, timeline of claim, initial claim reserve 2. Interim Update on progress of claim due at set intervals 3. Final Full details of claim investigation, evidence, loss totals, and final claim resolution

49. Section B 2C

50. The Claim Claim An insurance claim is a formal request to an insurance company for coverage or compensation for a covered loss or policy event.  • Claimant must prove the loss and submit the total to insurer • Insurer sends an adjuster, who must decide whether claimant has adequately proven the loss While most policyholders do not file a claim, if an injury or damage occurs to a covered property or person the insured has the duty to file a claim with the insurer. When a claimant submits a claim to an insurer, it is the claimant’s job to prove the damages, if necessary. To do this, she may compile what she believes is proof of her damages and submit it to her insurer. From a legal standpoint, the total damages that she presents for payment is her formal request to settle for an amount she believes is due under the terms of the policy. Once the insurer receives the claim, it sends an adjuster to investigate it and determine if the claimant has adequately proven the loss.