Anthony DiUlio

The Battle We’re In

Both the NAIC (National Association of Insurance Commissioners) and the NCOIL (National Coalition of Insurance Regulators) are pushing a national bill that has a mandatory 15% cap on public adjuster fees and that all fees are only on amounts received after date of contract. Many states closely model their laws on the NAIC Model Public Adjuster Act.  The bill provides that a public adjuster cannot take any fee on money already offered and a PA is capped at 15% of any new money received, and  the goal is to get all states to adopt this bill. While AAPIA worked hard to get this amount raised from 2.5% to 15%in Kentucky, and to push for this provision to be optional at the national level, push back is occurring from surprising sources. Here is what we are up against: an alignment of  insurance companies and NAPIA, the National Association of Public Insurance Adjusters).  NAPIA has stated in written comments that they will not  oppose the mandatory fee cap and limitation of fees to new money only. The organization specifically stated, “NAPIA will not oppose the proposed fees caps in Section 14. D.” (Link to the letter is here, pg. 123).

The Position

I want to make my position, and the position publicly taken by AAPIA, crystal clear. A blanket cap on public adjuster fees will only benefit insurance companies and hurt the everyday homeowner. This isn’t an opinion, but rather a fact. 92% of all insurance claims are under $25,000. That means that the mass majority of those with average value claims will not be able to support any type of professional assistance. In other words, insurance companies will not have a check or balance on its conduct for 92% of claims.

The Example

This example is not hard to imagine. A homeowner has a wind or hail claim to their roof. The carrier says that the roof is just old and has wear and tear, no wind or hail damage. The homeowner tries to hire a PA, but can’t because of the fee cap. The carrier has gotten away with underpaying a valid claim. The same holds true for water damage claims and countless other claims where there is difficulty for homeowners to understand what is covered, and the advice of a professional is needed.

Now let’s do the math. The III (Insurance Information Institute) indicates that 5.3% of insured homes had a claim in 2021. Approximately 88% of homeowners have insurance and there are approximately 144 million homes in the US. So that means that there are about 6.7 million claims per year in the US. If 92% of those go without professional representation, there would be around $94 BILLION* unchecked in claims per year. Yes, I meant to say billion. And this doesn’t even account for improperly denied or underpaid claims. You can see why insurance companies wouldn’t want public adjusters on the average claim.

The Problem To Fix

I also want to recognize that there are some bad public adjusters out there and that the industry should work on efforts to minimize the harm done by those adjusters, but this bill is not the answer. Sure, some bad adjusters handle small losses and may feel the impact of this bill, but there are many more good adjusters who would be harmed. And more importantly, there are even more homeowners who would ultimately pay the price. For anyone claiming this bill is an attempt to deal with “bad” adjusters, this is the perfect example of cutting off your nose to spite your face.

What Should be Done?

A flat fee cap simply doesn’t make sense. The open market is open for a reason, it allows for a person to decide if they want to hire the cheapest contractor or the most expensive for the same job. Perhaps reviews are different, perhaps the quality of the work is different. There are 1001 reasons a person may choose a service industry professional and a person should be allowed to make the choice freely.

One area NAPIA had it right before was to advocate for “reasonable fees.” This language is far more productive to the end goal than a flat fee cap. If the concern is unscrupulous public adjusters, then a law requiring “reasonable fees” can be reviewed on a case by case basis as complaints are made. But not every claim is the same and not all services are the same. As a result, if NAIC wishes to regulate fees, then the only viable option is “reasonable fees.”

What You Can Do

So if you have read this and think any of the following:

1. It would be terrible if homeowners couldn’t get professional representation simply because the claim is small;
2. The insurance company should not go unchecked on $94 Billion in claims;
3. The government should not be regulating service pricing for public adjusters, that is what the free and open markets are for;

then you need to be part of the organizations helping protect ALL public adjusters and property owners. Go to AAPIA.org and either donate to its legislative fund to help fight this bill (Click here and click “Get Involved“) or join AAPIA to be a member and show your support for all adjusters across the country (JOIN HERE).

*this math uses the average claim value of $14,031.00 as reported in 2019 by III rather than an assumption of $25,000 for a claim.