Who Pays Flood Insurance Adjusters?

On Quora, I saw a question regarding adjusters and how they earn their money. And so, I answered it. I’m happy to share the answer here and provide a little more information as well.

States regulate insurance adjusting. Most states have a process for obtaining a claim adjuster’s license. But some states and the District of Columbia do not. Residents of these states have the option of designating another state as their “home state” for a resident state’s license. This is especially important for catastrophe adjusting and the benefits of reciprocity. Alabama, Indiana, and Texas all have a DHS license for residents of non-licensing states.

To properly answer the question about who pays insurance adjusters, I’ll define the three types of adjusters. The type of adjuster is NOT determined by the claim type, such as flood related or some other type of insurance claim.

There are essentially three types of adjusters.

There are Staff Adjusters, Independent Adjusters and Public Adjusters.

Staff Adjusters and Independent Adjusters do the same type of work. They prepare claims for damaged property. They prepare these claims on behalf of the company that insures that property. This can include any type of property, including structural (residential or commercial) property, automobiles, recreational vehicles and more. Damage can occur to any and every type of insurable property and consequently require an insurance claim.

How are a staff adjuster and an independent adjuster different? 

Their employment status determines who pays them and how. Staff adjusters are full-time employees of an insurance company. They work exclusively for one company. They receive an annual salary including benefits. Typically they are assigned to a specific territory. That means that any claim that comes into that territory, insured by that insurance company, may be the responsibility of that staff adjuster.

Self-employed independent adjusters can work on behalf of different insurance companies. In the past, in the aftermath of a catastrophic storm, independent adjusters received calls for help. These storms would create an excess of claims  beyond the resources of the team assigned to that territory. In such circumstances, the insurance carriers would call an independent adjusting agency to request additional adjusters to help cover that event. This, by the way, is how independent adjusters became known as “cat-adjusters” or “storm chasers.” They would travel around the country as needed, handling storm claims.

Staff and independent adjusters prepare claims for the insurer. The insurer pays both the staff and independent adjusters for services. They may not have your best interest at heart.

Today, with the cost of benefits rising, more and more insurance companies are electing to cut back their staff adjusters and rely more on independent adjusters. Because independent adjusters can handle damage claims more cost-efficiently, insurance companies call on them. This includes flood claims, fire, vandalism and smaller wind/hail storms.

Today’s insurance industry is certainly trending toward independent adjusting.

Public Adjusters are different from Staff and Independent Adjusters.

A public adjuster is an advocate, working on behalf of the claimant, to negotiate with their insurance carrier. In most circumstances, they are not preparing the initial claim estimate. If a claimant feels that a second estimate is a good idea, a public adjuster can supply one. If a claimant requires a skillful negotiator to help get the highest value for their damaged property, a public adjuster can offer that professional service.

Because you hire and pay a public adjuster, they should have your best interests at heart. You get their assistance in filing and adjusting your claim so that you receive the maximum amount of money allowed by the terms of your insurance policy. Your paid adjuster can and should talk to the insurance company’s adjuster if there are some discrepancies as to damage and the cost of the damaged items.