at a glance… for more information and to review the entire study commissioned by the Florida Legislature visit: http://www.oppaga.state.fl.us/reports/pdf/1006rpt.pdf
The number of licensed public adjusters in Florida has grown significantly in the last six years, and the incidence of complaints, regulatory actions, and allegations of fraud involving public adjusters is generally low. Florida’s public adjuster laws are comparable to and in some cases more restrictive than those of other similar states.
Our analysis of Citizens Property Insurance Corporation claims data found that cases took longer to reach a settlement but received higher payments when claimants used public adjusters for claims filed in 2008 and 2009. Public adjusters represented policyholders in 26% of non-catastrophe and 39% of catastrophe claims filed during this period.
As directed by Chapter 2009-87, Laws of Florida, this report examines Florida’s regulation of public insurance adjusters and answers three questions.
- How does Florida regulate public adjusters?
- How does Florida’s regulation of public adjusters compare to that of other states?
- How frequently do public adjusters represent Citizens Property Insurance Corporation policyholders, and what have been their outcomes on claims processing and payments?
Individuals and businesses purchase insurance to protect their property against monetary losses that can occur due to both non-catastrophic and catastrophic events, including theft, fire, and natural disasters such as hurricanes. When a loss occurs, policyholders can submit claims to their insurance companies to seek monetary compensation for their losses.
In general, when an insurance company receives a claim, it reviews the claimant’s insurance policy to determine whether the policy covers the loss and investigates the type and extent of damage to determine the company’s liability. The company then estimates the amount of compensation and pays the claim.
Policyholders that disagree with their insurance company regarding claim settlements (e.g. scope of loss, damage estimate) can resolve the dispute through mediation, appraisal, or litigation. Mediation is a process by which a neutral third party helps to facilitate an agreement and is non-binding, whereas appraisal is a binding form of alternative dispute resolution used to establish the amount of the loss. Litigation is a binding resolution via the court system, achieved through a negotiated settlement or trial.
An important part of the claims process is insurance adjusting, which is the practice of investigating claims to determine the extent of the insurance company’s liability. There are three types of insurance adjusters—company, independent, and public.
- Company adjusters work directly for an insurance company.
- Independent adjusters contract with insurance companies to provide adjusting services.
- Public adjusters are independent contractors that work for the policyholder in settling claims.
The insurer typically arranges for a company or independent adjuster to visit the claimant’s property to adjust the claim. However, a policyholder may choose to hire a public adjuster to assist in settling the insurance claim due to these persons’ expertise in filing claims and negotiating settlements with insurers.
In Florida, public insurance adjusting has received heightened attention because of two key events affecting the state’s property insurance industry. First, the state was struck by eight major hurricanes in 2004 and 2005, causing widespread property damage.1 This resulted in an influx of claims to all property insurers, including Citizens Property Insurance Corporation (Citizens), the state-created insurance company.2
1In 2004, the named hurricanes were Charley, Frances, Ivan, and Jeanne, and in 2005, the named hurricanes were Dennis, Katrina, Rita, and Wilma.
2Citizens Property Insurance Corporation is a not-for-profit tax-exempt corporation, whose public purpose is to provide policyholders with affordable property insurance protection. The Legislature established the corporation in 2002 to serve the needs of homeowners who could not obtain property insurance on the open market. As of September 30, 2009, Citizens had 1,064,287 policies in force, annualized premiums of $2.1 billion, and related loss exposure of $413 billion.
Second, the 2007 Task Force on Citizens Property Insurance Claims Handling and Resolution examined Citizens claims processing and identified consumer protection issues related to public adjuster involvement in claims. The Legislature created this task force to review and make recommendations regarding Citizens’ handling, service, and resolution of claims arising from the 2004 and 2005 hurricane seasons.3
3Chapter 2007-1, Laws of Florida.
During its review, the task force identified issues related to public adjusters, including their fees, solicitation practices, and training. The task force cited the large number of new and re-opened claims submitted to Citizens years after the hurricanes occurred, which insurers attributed to solicitation by public adjusters. In addition, the task force heard testimony that some public adjusters were not properly trained or qualified to represent policyholders.
Questions and Answers
How does Florida regulate public adjusters?
The Department of Financial Services licenses public adjusters and investigates complaints through the Divisions of Agent and Agency Services, Insurance Fraud, and Consumer Services. As of June 2009, Florida had 2,914 licensed public adjusters, which represents a significant increase since 2004. Florida has more public adjusters than other states we examined that have experienced declared disasters in recent years. Complaints and regulatory actions against Florida’s public adjusters are generally low.
Florida’s current regulatory system includes licensing requirements and various consumer protections. Florida’s laws regulating public adjusters address licensing, solicitation, and compensation. Florida requires applicants for public adjuster licenses to pass a licensing exam, have experience or training related to adjusting, post a $50,000 surety bond, and submit fingerprints for a criminal history review. In addition, licensed public adjusters must complete 24 hours of continuing education every two years.
In response to the findings of the Task Force on Citizens Property Insurance Claims Handling and Resolution, the Legislature amended state laws regulating public adjusters. These new provisions, enacted in Chs. 2008-220 and 2009-87, Laws of Florida, were intended to enhance consumer protection. The new provisions
- require applicants to pass a written examination;
- require a one-year public adjuster apprenticeship prior to applying for a public adjuster license;
- restrict the hours public adjusters can solicit policyholders to Monday through Saturday between 8:00 a.m. and 8:00 p.m.;4
- prohibit public adjusters from contacting or soliciting policyholders until 48 hours after an event; and
- restrict public adjuster fees to 10% of the payment for claims related to declared emergencies and 20% for all other new claims.
4Section 626.854(6), F.S., specifies that this restriction applies to face-to-face and telephonic communication.
Three divisions within the Department of Financial Services manage licensing, complaint processing, and enforcement of public adjuster laws—Agent and Agency Services, Insurance Fraud, and Consumer Services.
The Division of Agent and Agency Services licenses public adjusters and investigates complaints alleging violations of the Florida Insurance Code. The division accepts complaints about licensed and unlicensed agents or adjusters from consumers, insurance companies, licensees, and regulatory agencies, including other Department of Financial Services units and the Office of Insurance Regulation.
The Division of Insurance Fraud investigates criminal acts related to insurance transactions, including fraudulent claims and allegations against insurance agents to determine whether a crime has been committed. The division accepts referrals from numerous sources, including insurance carriers, private citizens, and regulatory agencies.5
5Section 626.989(6), F.S., requires insurers and other regulated entities in Florida to report suspected acts of insurance fraud to the Division of Insurance Fraud.
The Division of Consumer Services provides consumers information and assistance about insurance products and services. The division, which also serves as a mediator between consumers and insurers, accepts and refers complaints relating to public adjusters from other Department of Financial Services divisions.
Florida provides additional consumer protection through its Office of Insurance Consumer Advocate, which represents the interest of the public in insurance matters. The office recommends specific actions in regulatory matters under consideration by state entities such as the Department of Financial Services and the Office of Insurance Regulation and appears in insurance related proceedings conducted by these entities. The office also performs legal research, obtains public input, and proposes legislation that serves the interest of insurance consumers.
The number of licensed public adjusters has grown significantly in recent years. As shown in Exhibit 1, the number of licensed public adjusters in Florida has