In January, we posted that Alabama may consider licensing public insurance adjusters, and while a bill has been proposed, it appears critics are trying to dissuade Alabama from licensing public adjusters.
According to the Insurance Journal article, "Alabama Seeks to License Public Adjusters," Ragan Ingram, the Alabama Department of Insurance chief of staff, thinks the law is necessary because the department could then regulate and educate the adjusters. In a Birmingham News article, "Post-tornado law would allow Alabama residents to hire private insurance adjusters," Ingram said, "A law would provide standards of education and training and would allow the state to know who is assisting Alabama consumers."
As of January of 2012, Alabama had not had a single complaint filed against any public adjusters arising from the April 24, 2011, tornado losses, but the Alabama State Insurance Department said complaints have been lodged in past years about roofers negotiating insurance claims for Alabama policyholders.
The National Association of Public Insurance Adjusters is backing the bill that, if passed as written, would regulate the actions of public adjusters in several ways:
Section 17. Standards of conduct of public adjuster.
(a) A public adjuster is obligated, under the adjuster’s license, to serve with objectivity and complete loyalty the interest of the client alone; and to render to the insured such information, counsel, and service, as within the knowledge, understanding, and opinion in good faith of the licensee, as will best serve the insured’s insurance claim needs and interest.
(b) A public adjuster shall not misrepresent to a claimant that the adjuster is an adjuster representing an insurer in any capacity, including acting as an employee of the insurer or acting as an independent adjuster unless so appointed by an insurer in writing to act on the insurer’s behalf for that specific claim or purpose. A licensed public adjuster is prohibited from charging that specific claimant a fee when appointed by the insurer and the appointment is accepted by the public adjuster.
(c) A public adjuster shall not solicit, or attempt to solicit, an insured during the progress of a loss-producing occurrence, as defined in the insured’s insurance contract.
(d) A public adjuster shall not permit an unlicensed employee or representative of the public adjuster to conduct business for which a license is required under this act.
(e) A public adjuster shall not have a direct or indirect financial interest in any aspect of the claim, other than the salary, fee, commission, or other consideration established in the written contract with the insured, unless full written disclosure has been made to the insured as set forth in subsection (h).
(f) A public adjuster shall not acquire any interest in salvage of property subject to the contract with the insured unless the public adjuster obtains written permission from the insured after settlement of the claim with the insurer as set forth in subsection (h).
(g) A public adjuster shall abstain from referring or directing the insured to get needed repairs or services in connection with a loss from any person, unless disclosed to the insured:
(1) With whom the public adjuster has a financial interest.
(2) From whom the public adjuster may receive direct or indirect compensation for the referral.
(h) A public adjuster shall disclose to an insured if the adjuster has any interest in or will be compensated by any construction firm, salvage firm, building appraisal firm, motor vehicle repair shop, or any other firm that performs any work in conjunction with damages caused by the insured loss. The word "firm" shall include any corporation, partnership, association, joint-stock company or individual.
(i) Any compensation or anything of value in connection with an insured’s specific loss that will be received by a public adjuster shall be disclosed by the public adjuster to the insured in writing including the source and amount of the compensation.
(j) A public adjuster shall not give or offer to give a monetary loan or advance to a client or prospective client.
(k) A public adjuster or any individual or entity acting on behalf of a public adjuster shall not directly or indirectly give or offer to give any article of merchandise having a value in excess of fifteen dollars ($15) to any individual for the purpose of advertising or as an inducement to enter into a contract with a public adjuster.
(l) Public adjusters shall adhere to the following general ethical requirements:
(1) A public adjuster shall not undertake the adjustment of any claim if the public adjuster is not competent and knowledgeable as to the terms and conditions of the insurance coverage, or which otherwise exceeds the public adjuster’s current expertise.
(2) A public adjuster shall not knowingly make any oral or written material misrepresentations or statements which are false or maliciously critical and intended to injure any person engaged in the business of insurance to any insured client or potential insured client.
(3) No public adjuster, while so licensed by the Department, may represent or act as a company adjuster or independent adjuster on the same claim.
(4) The contract shall not be construed to prevent an insured from pursuing any civil remedy after the three-business day revocation or cancellation period.
(5) A public adjuster shall not enter into a contract or accept a power of attorney that vests in the public adjuster the effective authority to choose the persons who shall perform repair work.
(6) A public adjuster shall ensure that all contracts for the public adjuster’s services are in writing and set forth all terms and conditions of the engagement.
(m) A public adjuster may not agree to any loss settlement without the insured’s knowledge and consent.
(n) A public adjuster who is not actively licensed as an attorney in this state shall not give legal advice or otherwise engage in activities which are the practice of law.
While the Insurance Journal article recognizes that public adjuster can benefit policyholders on a claim, it also presents the critics’ point of view. Insurance groups allege that the law would only drive up the price of insurance in the state.
Monique Kabitzke, the state director representing the industry’s Property Casualty Insurers Association of America, was quoted as stating that "Licensing public adjusters would do more harm than good when it comes to settling claims and holding down claims costs." But what information did Ms. Kabitzke use to form this opinion? The article mentions a PCI white paper on the issue that shows even though Alabama has a higher median home value than its neighboring state Mississippi, which has a public adjuster law, Alabama’s overall claims cost is 16 percent lower.
Merlin Law Group‘s attempts to locate this PCI white paper have been unsuccessful.
The report that is available to policyholders and insurance companies alike, is the 2010 OPPAGA Report. This report gives unbiased statics from Florida that show public adjusters increase the amount of insurance claim payments for policyholders.
While Alabama residents are currently being told that insurance company adjusters are supplied "free of charge" to help them with claims, Alabama insureds must remember insurance company adjusters work for insurance companies.