Mike McCreary was doing what he had been told. For years, he had been riding the fence, but now seemed like the right time to finally get an adjuster's license. Superstorm Sandy had just struck the Northeast seaboard and his uncle and cousin, 7-year veterans of the independent adjusting industry, urged him to get his Texas license to come up and join them. That is what McCreary intended to accomplish before a few things got in the way.

The Texas Department of Insurance (TDI) began enforcing a new interpretation of its statutes, which meant that non-residents of Texas who hailed from a state that licensed adjusters could not obtain a Texas license without holding their home state's license first. McCreary, a resident of Kentucky, was out of luck, not to mention several hundred dollars and more than 40 hours spent on online coursework. Because it took TDI a few weeks to process his application and issue a notification of rejection, McCreary was six weeks into the process and no closer to a license than when he began. Meanwhile, the window for joining a firm for claims work in the Northeast had effectively closed.

McCreary's story illustrates the unfortunate consequences of two common missteps aspiring claims adjusters make when getting started: The first is a simple mistake in timing. He had waited until after a major event occurred to begin the process of becoming a catastrophe adjuster. Consequently, his margin for error within the process was razor thin, at least for that deployment. His decisions were made hurriedly, without proper due diligence, and the result was that he missed out altogether. That mistake was McCreary's alone.

The second mistake is one actively aided and abetted by the IA industry itself. Rather than being counseled to get his home state license first, McCreary was told by his family, and even a few IA firms, to pursue a Texas license. Apparently that route had worked for years, and adjusters licensed in Texas enjoyed something of a privileged status with some benefits when it came to reciprocity. But it didn't work for McCreary, because navigating the waters of adjuster licensing is tricky business. Each state has its own particular rules and regulations. Some states like California require 4,000 hours of work as an adjuster before a person even becomes eligible for a license. On the opposite end are the 16 states that do not require a license at all. Moreover, the rules in each state change often, with little or no official promulgation. Indeed, in McCreary's case, Texas determined in September 2012 to modify licensing rules for non-residents, leaving Mike in the cold.

Home Sweet Home

Amid all this complexity and flux, however, adhering to one basic principle will never steer you wrong—that is, to pursue your home state's adjusting license first. In some states, that means passing the state adjuster exam. Minnesota, Michigan, and New York are examples of states where all resident applicants must pass the state exam. Others, such as Texas and Florida offer an option to take an approved 40-hour pre-licensing course and exam as an alternative to their official State Exam. Others still, such as Indiana, Georgia, and Alabama require both a pre-licensing course and the state exam. Whatever your state's prescriptions for licensing, strictly follow them and get your home state's license first.

For residents of the 16 states that do not license adjusters, the recommended route would be to pursue licensing in another state that can then be designated as your “home state.” For these purposes, two states work particularly well: Indiana and Texas. Both offer an ultra-convenient pre-licensing course available either online or in a live 3- or 4-day classroom setting. More importantly, both states accommodate the designated home state (DHS) status that will maximize your license's capabilities when it comes to reciprocal licensing.

Demystifying Reciprocity

This brings us to the real significance of owning either your resident state's adjuster license or a DHS license—reciprocity. Critically important in adjuster licensing, reciprocity enables you to work in a variety of other states—obviously a valuable asset for catastrophe adjusters working nationwide. The way it actually works, however, is widely misunderstood.

Our friend Mr. Webster defines reciprocity as “a mutual exchange of privileges; specifically: a recognition by one of two countries or institutions of the validity of licenses or privileges granted by the other.” So what would that look like in terms of adjuster licensing?

For illustrative purposes, let's select two states at random: Georgia and Utah. If Georgia and Utah were reciprocal, then that would mean that Georgia would specifically recognize the validity of Utah's license and vice versa. That could play out in a couple of different ways: First, it could mean that licensed Utah adjusters could work in Georgia under the authority of their Utah license…and, of course, vice versa.

This would be similar to reciprocity amongst some country clubs. If I am a member at Crestwood Country Club, then I can play golf at Blue Hills Country Club and a number of other clubs in a mutually agreed upon network through reciprocity. That doesn't mean I am a full member of those other clubs; it just means that I can play there. Thus, as a licensed Utah adjuster, you could “play” or handle claims in Georgia, because Utah also agreed to let licensed Georgia adjusters do the same within their own state lines. Adjuster licensing doesn't work the same way, as you can't waltz into another state and start immediately handling claims under the authority of some other state's license. Perhaps it could mean that Georgia would issue you a Georgia license if you held a Utah license first, with Utah extending the same to Georgia licensees? Now that more so resembles the way things operate in the world of adjuster licensing. You can't operate in a reciprocal state immediately; however, you can get that state's license without having to take the state exam. Sound familiar?

Well, not so fast. It is true that a licensed Utah resident can get a Georgia non- resident adjuster license without having to take the Georgia pre-licensing course and exam but, and it's a big but, it isn't because of any mutually agreed upon arrangement between Utah and Georgia. Rather, it is because you hold a resident license. Georgia, and the majority of states will license you “reciprocally” (except not actually reciprocally) if you hold a resident license somewhere, anywhere.

At a certain point, it appears to be a case of semantics. Who honestly cares if it is true reciprocity if, at the end of the day, you can still obtain another state's license through some kind of process? That's fair enough with one important qualification. Because inter-state licensing turns upon the question of residency more than the question of state, there really aren't any states that are more or less reciprocal.

For years, the Texas license has been heralded as a kind of silver bullet for reciprocity. In reality though, Texas is no more “reciprocal” than Utah, Georgia, or just about any other state that licenses adjusters. That's because true reciprocity doesn't have anything to do with it, while residency does.

Precipitated by the recent changes at TDI, the adjusting industry appears to be increasingly recognizing that reciprocity isn't about one particular state's license over another and certainly not Texas as a uniquely superior preference. Rather, it is (and has always been) about getting your home state's license first and operating from there.

Getting It Right

Now let's rewind to our friend McCreary. What could he have done differently? Ideally, he would have started the licensing process well before storm season was in full swing. He would have pursued a license in his home state of Kentucky and passed the state adjuster exam. With the Kentucky license in hand, he would then obtain through reciprocity a few other key state licenses, such as Texas and Florida. Both represent high-volume areas for claims and are generally well-esteemed by adjusting firms.

Anticipating the Midwest's propensity for hailstorms, McCreary could've secured Oklahoma and Minnesota to further diversify his range of operation. He would've secured a roster position on numerous adjusting firms and could be anticipating the call for deployment. Of course, Sandy hit New York, among other places. New York responded by issuing 6-month temporary licenses to adjusters from out-of-state under one condition: that they held their respective home state licenses. Now McCreary is on his way to New York and an exciting new career!

Amid all the complexities of licensing and reciprocity, one unassailable fact is that you can trust to get off on the right foot by starting with your home state.

Daniel Kerr is COO at AdjusterPro and may be reached at dkerr@adjusterpro.com.

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