2-B WHAT IS ADJUSTING?

Question 1

Claimant:

Answer 1

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

Question 2

The Claim Function:

Answer 2

The part of the insurance contract that lets the insurer fulfill its promises to the insured.

Question 3

The Claim Function 2 Main Goals

Answer 3

1. ) Comply with the terms of the contract
2. ) Support the insurer’s financial stability

An adjuster must get claimants the indemnity they deserve while protecting the insurer from fraud and making sure not to pay more than the contract allows.

Question 4

Adjusting:

Answer 4

The process of comparing a claimant’s losses to the promises made in an insurance policy

Question 5

Insurance Adjuster:

Answer 5

An agent who processes insurance claims for a salary, a fee, or commission

Question 6

The Insurance Adjuster works on behalf of:

Answer 6

● An insurer
● A private company
● An adjusting company (an adjusting bureau)
● The claimant

Adjusters can work for the insured or the insurer.

Question 7

Staff Adjuster (Company Adjuster):

Answer 7

● Employed by only one insurer
● They are salaried employees
● Can work either locally, regionally, or nationally
● Also called “company” adjusters
● Work for insurers, such as State Farm, Nationwide Insurance, and Aetna

Question 8

Independent Adjuster:

Answer 8

● 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 + expense
● Sometimes paid on a commission basis (percentage of the final settlement amount)

Question 9

Public Adjuster:

Answer 9

● Hired by policyholder (the claimant)
● Represents the policyholder in the claim
● Charges a commission, usually about 10% 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

Question 10

Emergency Adjuster:

Answer 10

● 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

Question 11

An Insurance Adjuster:

Answer 11

1. Acts as the ​Fiduciary Agent
2. Has the ​Power to Bind
3. Must ​Report to the Principal

Question 12

Fiduciary Agent:

Answer 12

The adjuster acts as a fiduciary agent for the principal (the insurer).

Question 13

In order to be a fiduciary agent, an adjuster must:

Answer 13

● 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

Question 14

Adjuster’s responsibilities as fiduciary agent for the principal:

Answer 14

● Always act in the principal’s best interests with utmost good faith (honesty, fair dealing, and full disclosure)
● Never act with self interest
● Never profit without express permission
● Never act if a conflict of interest exists

Question 15

Power to Bind:

Answer 15

The principal is bound by the adjuster’s decisions and actions.

This authority:
● Is granted to adjuster in writing
● Means the adjuster may act on behalf of the employer
● Binds the employer

Question 16

Power to Bind Example

Answer 16

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.

Question 17

More on the Power to Bind:

Answer 17

The adjuster is expected to:
● Take the ​utmost care​ in written and verbal communications
● Take ​special care​ with determining the exact value of loss

Question 18

It is important to define again: Who is the principal?

Answer 18

● The source of authority
○ the contracted employer
○ insurer
○ and/or whomever contracts the adjuster

Question 19

Reporting to the Principal

Good reporting means:

Answer 19

● Giving frequent status and progress reports to the principal
● Providing private information for the benefit of the principal only

Question 20

Essential Elements of a Loss Report

Answer 20

● Policy inception and expiration dates
● Date of the occurrence, or loss
● Identification of all parties involved in the claim
● Full description of the loss
● Tort and tortfeasors (if applicable)
● Policy form and policy number
● Policy coverages
● Policy deductibles

Question 21

Initial Report:

Answer 21

● 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

Question 22

Interim (a.k.a. Status) Report:

Answer 22

● Update on claim progress
● Due at set intervals as long as a claim is open
● New evidence (depositions, statements)
● Medical information
● Repair estimates

Question 23

Final (a.k.a. Full) Report:

Answer 23

● All facts and evidence of the claim
● Policy coverages applied
● Adjusted losses
● Final claim disposition

Question 24

Fiduciary Agent:

Answer 24

The adjuster acts on behalf of principal and must protect the principal’s interests.

Question 25

The Power to Bind:

Answer 25

The principal may have to honor the adjuster’s decisions, even when made in error.

Question 26

Report to the Principal:

Answer 26

The adjuster must give the principal detailed information on how each claim is going.

Question 27

Adjuster Reports:

Answer 27

● Preliminary: ​initial investigation results, timeline of claim, initial claim reserve
● Interim: ​update on progress of claim due at set intervals
● Final: ​full details of claim investigation, evidence, loss totals, and final claim
resolution