Adjuster Licensing and Professionalism — Part 1

Adjuster License Confusion

One problem in discussing adjuster licenses is that it would require an entire textbook to explain all the variations on state rules. For states requiring a license, it may be just a revenue factor. Pay your fee every two years and you're in. (Georgia, North Carolina, New Mexico and West Virginia licenses are only for one year.) Others have established a massive list of requirements, from exams or years of supervised experience to required continuing education. There are different licenses for company adjusters than for independent adjusters, and different licenses for claims administration representatives, depending on what type of claims they handle, and still different licenses for public adjusters. Those handling National Flood Insurance Program claims have yet other rules.

The National Association of Insurance Commissioners has a suggested model licensing law, but few states use it, preferring to let the politicians in the state legislature make their own rules. And where rules get complicated is in the area of reciprocity: some states allow just about any licensed adjuster in, while others quibble over accepting certain designated home state criteria. In some, filing is electronic, in others a paper application suffices. What is true today may change tomorrow. In short, one size does not fit all.

The criteria of professionalism

Dr. Edwin S. Overman, former president of the American Institute for Chartered Property Casualty Underwriters, cited in his treatise, "The Professional Concept and Business Ethics," six criteria for a true profession:

1. The importance of a highly unified body of specialized knowledge.

2. The significance of a broad educational background containing generalized knowledge.

3. The necessity of a carefully conceived code of personal ethics.

4. A need to strive for the ideal of altruistic attitude and behavior.

5. The role of searching examinations to discern mastery in the specialized skills of the profession; and

6. The role of the professional organization to control entry to that profession and to monitor the professional's continuing adherence to the tenets of that profession.

To this list, the Iconoclast added a seventh factor of a profession: the need for careful mentoring of the professional by colleagues as he or she ventures into the selected field.

It should be obvious that adjusting does not quite measure up to Dr. Overman's standards for a true profession. There is no graduate degree in claims adjusting that is required of those in the field. A college education is no longer required as a basic first step toward becoming an adjuster. This was generally required from the 1950s through mid-1970s, but the federal Equal Employment Opportunity Commission made that requirement null and void.

Today it is rare that even college graduates have a "broad educational background containing generalized knowledge," in other words, a liberal arts degree. Ask many college grads and their degree is in some type of business or computer science with hardly any background in the humanities. But as adjusters it may be important in dealing with people to understand something of literature, geography, economics, sociology, psychology and history.

Do we have a code of ethics? There is one in the pledge of the Society of CPCU, and several other claims organizations have such pledges, but the closest adjusting comes to a Code of Ethics is the National Association of Insurance Commissioners' (NAIC) Model Unfair Claims Settlement Practice Act, 14 conditions of honesty and integrity in handling claims. While a few states have legislated similar rules, only a handful have adopted the complete NAIC Model, with one or two expanding upon it.

Does the 21st century claim representative "strive for the ideal of altruistic attitude and behavior"? Many of us can recall stormy midnights spent helping some insured in a jam, and we don't doubt that CAT adjusters who live in their RVs in a disaster zone for weeks on end are anything but "altruistic." They're certainly not going to become millionaires doing catastrophe duty.

Too many people in the claims field are more like "Walter" in the scene with Edward G. Robinson speaking to Fred MacMurray in Double Indemnity (Paramount Pictures, 1944):

"A desk job! Is that all you can see in it? Just a hard chair to park your pants on from nine to five? Just a pile of papers to shuffle around and sharp pencils and a scratch pad to make figures on, with maybe a little doodling on the side? That's not the way I see it, Walter. To me a claims man is a surgeon and that desk is an operating table, and those pencils are scalpels and bone chisels. And those papers are not just forms and statistics and claims for compensation. They're alive! They're packed with drama, with twisted hopes and crooked dreams. A claims man, Walter, is a doctor and a bloodhound and a cop and a judge and a jury and a father confessor all in one!"

Of course in the 21st century the paper and pencils have become computer terminals and smart phones, but the forms and claims for compensation are the same. Are today's inside claims administrators metaphorical surgeons, judges and father confessors?

Licensing examinations

The first insurance course I ever taught was the Florida Adjusters License exam and the Agents License 240-hour mandatory classroom requirement. There were many in my classes who did not even speak English, but had been agents or adjusters in Cuba. I paid a Spanish-speaking adjuster I worked with to translate the final exam into Spanish and then paid him to translate the answers the students wrote. They were all 100 percent correct. At that time, Florida permitted agents to take the exam in Spanish. I later heard that our students scored better than those at Florida State University who took the exam.

But we're not talking state medical board examinations, the CPA exam or the state bar association examinations here. The agent's or adjuster's exam is usually just an hour or so of questions about standard insurance coverages, ethics and the state's insurance laws. They are not "searching examinations to discern mastery in the specialized skills of the profession." Adjusters are not required to write a thesis or dissertation or get a Ph.D. in insurance claims adjusting any more than passing a drivers license test confers the right to race in the NASCAR Daytona 500.

The state license exams in the 30 states that actually require such exams may even be geared to some specific area of claim adjusting: personal lines (auto or homeowners), workers comp, vehicle damage, etc. In at least one state the license for "third-party administrators" is different than that for a "claims adjuster." Those are two entirely different fields.

If an adjuster or claim representative who handles only personal auto liability and collision claims were faced with an exam such as the one that used to be given in Florida that covered everything from ocean marine to surety bonding, the failure rate would be horrendous. Now some states requiring licensing for workers compensation adjusters limit exams to that subject, and 21 states do not require a license for staff workers compensation adjusters.

For men and women wishing to make a professional career in insurance claims adjusting, obtaining a license, if one is required, is only the first step. The reason for states licensing adjusters is that adjusters deal with the public as representatives of approved domestic or "foreign" (out-of-state) insurance companies that are regulated by the states in accordance with the McCarran Ferguson Act of 1945. That law reserved insurance regulation to the states rather than to the federal government, even though the Supreme Court in the 1944 Southeast Underwriters case had found that insurance was "interstate commerce." But that law is conditional on the states actually doing the regulating. Now many adjusters also represent large, self-insured entities.

All states have an insurance code, but not all states require adjusters to have a license. States not requiring a license include North and South Dakota, Ohio, Pennsylvania, New Jersey, Colorado, the District of Columbia, Illinois, Iowa, Kansas, Maryland, Missouri, Nebraska, Tennessee, Virginia and Wisconsin. Many, but not all states require an exam in order to obtain a license, and most of those require evidence of continuing education units in order to maintain the license. In Texas (things are always a little different in Texas) in lieu of an exam an adjuster can complete a "Certified Adjuster Pre-licensing Course" and is required to complete 30 hours of continuing education, half of which must be classroom or classroom equivalent, every two years.

Reciprocity is desirable

With so many claims being handled across state borders from claims centers, and property adjusters moving from state to state in disasters, the question is whether the state into which an adjuster travels will recognize the original state's license. Some 21 states that require licenses indicate that they are reciprocal with Texas' licenses, but Arizona, Hawaii, Louisiana, Massachusetts,* Nevada and New York, all of which require licenses, are not reciprocal with Texas, but may be with other states. Frequent hurricane target Louisiana, is not reciprocal with other states, but notes that if an adjuster holds a valid license from another state, the exam will be waived for a Louisiana license. Further, in the event of a catastrophe or other emergency, no claims adjuster license shall be required for an individual who is employed or retained by an insurer and brought into Louisiana for the purpose of investigating or making adjustment of losses resulting from the disaster, but must be registered with the state prior to working there as an adjuster.

Florida's adjuster license requires an exam, but is reciprocal with some other states if the adjuster holds a resident license from a state that has license requirements. Florida will also accept unlicensed adjusters from other states without a license requirement if they hold a Texas non-resident license. But all adjusters must register with Florida's Insurance Department, establishing a "MyProfile" detailing certain information.

Should adjusters in states requiring licensing grumble about such a nuisance just to hold a job as a claims adjuster? No way! Adjusters in states without licensing requirements are at a disadvantage. Any old Tom, Dick or Harry who has once read an insurance policy or done house repairs can move in and call him or herself an adjuster, taking business away from those already working in that vocation. Licenses at least guarantee that the adjuster is registered with the state and subject to state disciplinary action for any illegal activities. Licensing may not confer professional status, but it can be a symbol of authorization.

Next month the Iconoclast will examine license exams and the requirements for continuing education in order to maintain a staff or independent adjuster license.