We talked about adjuster income a week or so ago here in this blog due to the frequently asked question by new adjusters about income. I commented in that blog about comments often made on forums that we shouldn’t discuss it in public as it’s not appropriate. Well, I hate to be the bearer of the news but adjuster income is regularly discussed by the news media and it’s time we speak up and set the record straight so the media understands the reality of independent and staff adjuster income and the many types of payment methods and schedules that exist.
Sam Friedman, Editor/National Underwriting, runs a blog I particularly enjoy following. Sam invited Bob Hunter of Consumer Federation of America to address the wind/water issues and the allegations of damages being moved to NFIP here in this article on “Hunter blasts Insurer Conflicts on Flood “. Hunter was invited as he is a past federal administrator of the program. His comments indicate the financial incentive is to move the claim to flood in these comments from the article:
“Worse, the insurer gets fees for settling the flood insurance claim that go up as the size of the payout goes up. The temptation for insurers to determine greater flood damage than is justified—and less wind damage—is great. ”
Apparently, Mr Hunter isn’t familiar with the September 21, 2005 FEMA directive on NFIP claim handling expediting procedures put out to WYO(write your own)carriers which instead limited fees under the 2005 to flat fees if 2 of the 3 claim handling procedures were used by carriers. Here is a copy of that directive. See page 2 for those fees. I’d imagine you could poll any experienced adjuster who could verify the carrier wind fee schedules paid more to adjust serious losses. A bit off topic but it might also interest you to read the Single Adjuster program by FEMA for WYO companies dated in 2005 just prior to Katrina since Mr Hunter advocates for seperate adjusters on the wind and flood program. In addition, staff adjusters that work directly for a carrier are not paid on fee schedules but are normally salaried employees earning a base salary with possibly a daily additional small flat rate per day out on the road plus per diem to cover expenses and meals while traveling. Staff adjuster hotels are located and paid for by the carrier. They do not perform under fee schedules used to compensate independent adjusters brought in to help with the burden of a large influx of claims during major catastrophes. Let me be the first to apologize to the well respected Mr Hunter if I have misinterpreted his comments on incentives to move the damages to flood.
Rebecca Mowbray of the Times-Picayne also commented on the fees in this article in June 2007. I’ve read many other news articles around Florida misinforming or providing incomplete information to the public on the way adjusters are paid. These are just a few of the examples out there.
While it’s difficult to post carrier wind fee schedules for independent adjusting firms, we’ll use this published schedule found on the web by the NC Joint Underwriting Association for comparison. This is a typical type of gross damage fee billing schedule where the fee bill is based on the amount of damages which is what Mr Hunter apparently was referring to. This type of schedule is commonly used on losses but the figures on the gross sliding scale differ greatly from carrier to carrier. During 05, I reviewed many schedules and fees for the same amount of gross loss on a major stuctural loss varied from $1,700 to $3,500 depending on carrier for the same amount of damage. Factors included differences in residential schedules versus commercial fee schedules and other issues.
There are component based fee billing schedules that rather than pay based on a gross fee schedule, the carrier will pay based on the item inspected until meeting a dollar threshold such as $15,000 in damage then the schedule moves to a percentage of the loss such as 2-3%. This would include a fee allowance for inspecting the roof such as $150.00, another allowance for inspecting the interior, another for handling the contents,etc. I don’t have one I can find on the web but this is a common practice with some of the large carriers and adjusting firms.
There are daily rate schedules often used for adjusters such as inside adjusters, reinspectors, claim managers and adjusters remaining to handle reopens on files which occurs frequently on claims as insureds get in higher estimates in from contractors due to market price increases or supplemental damage to roofs and interior leaks as new rain storms happen prior to completing repairs. Here is an example of daily fee rates on page 8 in this publicly posted Citizens FL RFP manual for adjusting firms servicing their claims. Note also this includes a gross fee schedule on page 7 and time and expense billing information found on page 8.
Don’t overlook other limitations and additions to these fee schedules. You can see an example on Citizens schedule above which are common with carrier fee schedules such as the limit on this one to hold the reinspection allowances (good luck finding adjusters to handle reinspections for new damage to $50.00 and only if it’s new damage- they apparently aren’t thinking ahead to the fact an adjuster staying for clean up handling reopens for other adjusters who have left will not reinspect a claim for free when it’s a case the original adjuster missed damage in their scope….that’s why you move adjusters staying behind to handle reopens to a daily rate!). There are allowances such as shown on this schedule for steep/two story losses due to the extra training and equipment needed for rope and harness qualified adjusters.
Time and Expense billing is another fee schedule option used by some adjusting firms to handle fees. You will often find this type of fee arrangement on large commercial losses, daily claims, and liability losses. Here is an example from an adjusting firm publishing theirs on their website. Normal ranges seem to run between $65.00- $125.00 per hour with other allowances for expenses such as mileage, photos,etc. while the one above for Citizens allows $58.00 per hour. We ran into this in 05 with the state of LA wanting to pay only $50.00 per hour on some large commercial claims ( I’m not sure how that story ended).
Should insurance news reporters come across these type of published fee schedules they don’t seem to have any idea of how those published figures are then distributed to adjusters so let’s discuss some of the fee schedule deductions for adjusters.
All fee schedules are not handled the same. Some carrier fee schedules are the same for daily and cat claims. Some carrier fee schedules have different rates depending on the strength of the storm such as a Category 1 or 2 being X schedule while a Category 3 or 4 brings a higher fee schedule. Supply and demand of catastrophe independent adjusters plays a part in the reason for these different allowances by severity of the storm. Carriers also differ on full versus partial assignments further limiting an adjusters income when the carrier handles the contents and additional living expense and other claim components that independent adjusters used to handle for them. Carriers and even adjusting firms are in greater numbers using preferred contractors or unlicensed estimators to scope the damage at much lower adjusting fee allowances for scopers with their staff adjusters settling the claims although the staff adjuster has never viewed the damage or personally met in the field with the insured.
First there is a fee split. The adjusting firms typically place the fee schedule split in their contracts with adjusters. Typical fee splits are 60% to the adjuster and 40% to the adjusting firm. Daily claim (non catastrophe losses) may be less to the tune of 50/50 splits. Some firms do reward the more senior adjusters by paying a larger fee split such as a 70/30 split to retain a more experienced staff. Last year, newer adjusters advised many of the firms were offering them 40% of the fee schedule due to the increased need for trainers, helpers, and additional management needed to supervise less experienced adjusters.
In addition to deducting the adjusting firms percent of the fee split with the adjuster on the damage, firms vary on what miscellaneous expenses they also take a percentage of on photos, mileage, gas allowances and the like. Adjusters need to be sure this is spelled out in their contracts. This can make a remarkable difference in an adjuster’s gross income.
Adjuster expenses are much more than the public can imagine. Here is a great outline on expenses an adjuster incurs annually to work on the road as a catastrophe adjuster found on a catastrophe training firm’s website. You have to remember these dedicated adjusters are seeking out of town housing facilities under the worst possible of conditions when insureds are also seeking temporary housing when their homes are damaged. While carriers pick up the tab for housing for their staff adjusters, independent adjusters must pick up their own tab. I have personally driven adjusters around for days after Ivan seeking any possible location to house. During 04, I actually slept in our small cat office on a lawn chair for six weeks joining a local gym nearby to go in and shower each morning before the support staff came in for the day. We do what we have to to handle insureds claims- stories abound on just such deplorable living situations for independents trying to find housing the first few weeks of storm while still trying to meet quotas carriers set and deadlines the insurance department sets for carriers. There are few exceptions when housing may be paid for an independent manager or as the Citizens schedule shows per diem allowances may be made to Q & A reinspectors,etc. but the norm is for an independent to pay their own housing running into thousands each month. The expense problem is compounded by the fact independent adjusters go 30-60-90 days or longer before seeing their first dime due to the delays having closed files reviewed and approved and the lag time from carrier payment to adjusting firm who then passes the split fee payment to the adjuster.
Gas expenses are also becoming a major issue for field adjusters with gas in the $3.00 range even prior to a major storm hitting. Here’s the headline from an AM Best special report A.M. Best Special Report: U.S. Hurricane Catastrophe Review — One Blow Away From $10 Gas in May 2007 – here’s a quote from it:
“A Category 5 storm moving on Houston through the northern Gulf would dwarf energy industry disruptions from Katrina and Rita. Forty percent of U.S. refinery production could be shut, as well as nearly all offshore production facilities. In the short term, a spike in gasoline prices proportionate to that seen as Katrina targeted the Gulf and made landfall would take the national average for all grades within striking range of $5 a gallon. In a protracted disruption to supplies, $6 a gallon or more would not be out of the question.”
Here is also another article from CBS4 News indicating that FL now requires generators at the gas stations which may further drive up gasoline costs.( Adjusters should keep this link as there is a link to the stations that will have generators should you have to go there on storm duty).
This article found on the Fl Dept of Financial Services site reminds us of other problems adjusters faced with fee schedules in 04 with the firms who did not share the carrier schedules with the adjusters who were underpaid based on the fee split type of billing. Luckily, the RFP’s for this carrier are now published and adjusters should not experience that issue this year.
We need to do our part in helping educate the press so the real facts and issues regarding adjuster income is known. The time to remain silent is over. I’ll refer everyone once again to the reality of adjuster’s income in this Claims Magazine article here. The title Overworked, Underpaid, and Under Appreciated accurately describes the real world of adjuster workload and payments. I hope you’ll take the time to look this over. Share it with a reporter when you see articles misinforming the public to help educate everyone on the realities. We are getting bad press and need to work to enhance understanding of our jobs in the media.