A little known or little discussed fact about pubic adjuster-represented claims is that there is only one of two possible outcomes. One result is that the claim is paid correctly at the actual repair/replacement cost and the insured is not indemnified because a percentage of the claim payment goes to the public adjuster. The second possible outcome is that the claim is inflated above the actual repair/replacement cost and the insured is indemnified. Fraud has been committed by the amount of inflation needed to pay the public adjuster's fee and the amount of the claim paid above actual repair or replacement cost of the damage.

Neither of these outcomes is good public policy. Why do insureds contract with public adjusters when both outcomes are negative? Are insureds irrational -- as in the first example -- or do they intend to commit fraud (the second result)? Most probably, neither answer is correct.

One of the most common reasons that insureds retain the services of public adjusters is the perception that insurance companies do not fully disclose and fulfill the promises of the insurance contract. The "all risk (with certain exclusions)" policies created a lot of confusion and unreasonable expectations primarily because insureds tend to hear or read the "all risk" part of the policy and disregard the "exclusions" section. The most disturbing situation that re-enforces distrust of insurance companies is when carriers try to increase their bottom line through the use of restrictive claim payment processes. The recent revelation that some of the personal lines carriers adopted claim practices that resulted in delays, denials, and litigation of valid claim payments has only amplified that perception. Are the carriers assuming these practices irrational in thinking that restricting legitimate claim payments is the key to success? Do they intend to commit fraud by using tactics that may result in paying less than is actually owed? Again, neither answer is probably correct.