What Are the Negatives for Using a Public Adjuster?

A public adjuster is a professional hired by an insurance policyholder to manage and negotiate a claim with their insurer. These adjusters represent the policyholder’s interests, aiming to secure a fair settlement for damages covered under an insurance policy. While public adjusters can offer support in complex claim situations, policyholders should also consider several potential downsides before engaging their services. This article explores those considerations, focusing on aspects that may impact the policyholder’s financial outcome, involvement, and overall experience with the claim process.

Financial Considerations

Engaging a public adjuster involves a financial commitment, as their services are not free. Public adjusters usually charge a percentage of the final settlement amount, which can commonly range between 10% and 20% of the total payout. This fee is deducted directly from the policyholder’s settlement, meaning that even if the gross settlement amount increases due to the adjuster’s efforts, the net amount received by the policyholder will be reduced by this percentage.

The policyholder is responsible for this fee, not the insurance company. For instance, if a claim is relatively straightforward and would have settled for a reasonable amount without intervention, the adjuster’s fee still applies, potentially making their involvement less cost-effective. Furthermore, some public adjusters might pass on additional costs to the policyholder, such as fees for expert consultants like engineers or contractors, which can further diminish the net settlement.

Policyholder Autonomy and Engagement

Hiring a public adjuster often means relinquishing direct control and communication regarding the insurance claim. Once engaged, the public adjuster typically becomes the primary point of contact between the policyholder and the insurance company. This arrangement can limit the policyholder’s direct oversight and understanding of ongoing negotiations or specific claim developments.

Communication gaps or delays can also arise between the public adjuster and the policyholder. This can lead to uncertainty about the claim’s progress or a lack of transparency regarding specific decisions being made on their behalf. Despite delegating the negotiation, the policyholder retains ultimate responsibility for the accuracy of all claim details and information submitted. Additionally, a policyholder might feel subtle pressure to accept a settlement recommended by their public adjuster to finalize the process and satisfy the fee agreement, even if they harbor reservations about the proposed outcome.

Variability in Professional Standards

The quality, experience, and ethical conduct among public adjusters can differ significantly, much like in any professional service industry. Policyholders must exercise due diligence when selecting an adjuster, as an inadequately chosen or inexperienced professional might not effectively represent their best interests. An adjuster lacking sufficient expertise could potentially secure a settlement that is not substantially better than what the policyholder might have achieved on their own, rendering their fee an unnecessary expense.

Potential ethical concerns can also arise within this profession. For example, some adjusters might be perceived as encouraging unnecessary repairs or inflating claim values to maximize their percentage-based fee. Verifying an adjuster’s licensing, checking for any disciplinary actions, and reviewing professional complaints are important steps to ensure a reputable and competent professional is chosen.

Applicability to Claim Complexity

For certain types of insurance claims, engaging a public adjuster might not offer substantial benefits and could even be a financial disadvantage. Simple, straightforward claims, which involve clear liability, easily quantifiable damages, and minimal disputes, may not require the specialized services of a public adjuster. In such uncomplicated scenarios, the public adjuster’s percentage-based fee could potentially consume any marginal increase they achieve in the settlement amount.

Many policyholders possess the capability to successfully negotiate directly with their insurance company for common and uncomplicated losses without external professional assistance. The decision to hire a public adjuster should therefore be a strategic one, carefully weighing the actual complexity, potential value, and likelihood of disputes associated with the specific claim. Furthermore, some public adjusters may decline to take on claims they deem too small, as their fee might consume too large a portion of the potential payout, making their involvement economically unviable for both parties.