Who Employs Insurance Claims Adjusters
Let’s make sure we’re all on the same page about the definition of an independent adjuster.
Staff adjusters are also known as company adjusters or employee adjusters. They work for an insurance company as W-2 salaried employees.
Independent adjusters (IA’s) have a broader definition. Like staff adjusters, they also adjust claims on behalf of the insurer, but not directly as an employee of the insurer. They’re contracted through a third-party claims-handling company, or “IA firm.” The insurance company outsources the claim to one of these third-party claims-handling companies. They, in turn, assign it to an independent adjuster.
In the past, independent adjusters have worked as 1099 independent contractors. That has changed a lot over the last several years. For legal and liability purposes, the current practice is for employers to hire IA’s as W-2 employees. This is for seasonal or catastrophe deployment. For short deployments, IA’s are sometimes hired as “seasonal employees”. This is a status that has some similarities to working as an independent contractor. Although rare, some smaller employers still contract claims out to IA’s as independent contractors.
Staff adjusters and independent adjusters usually have different licenses and licensing requirements. One requirement difference has to do with what’s called “appointment.” Staff adjusters are now appointed to their employers. But, independent adjusters can be self-appointed. IA’s, though, list their own name as the appointing entity and are free to handle claims for any company.
So exactly who are these third-party claims-handling companies? It is much more common to find independent adjusters working for a claims-handling company. These companies are often called “IA firms” (Independent Adjusting firms). Sometimes called “TPA’s” (Third-Party Administrators) or “Bureaus”. This depends on the type of claims they handle.
IA firms exist out of economic and statutory necessity. The relationship between IA firms and carriers has evolved over time. Insurance companies rely on IA Firms to handle most major disaster work and even spikes in local “daily” claims. There are quite a few IA firms. Hundreds, if you count the mom-and-pop outfits throughout the country.
This arrangement has lead to some interesting aspects of our industry. The insurance companies want the convenience of a large pool of overflow adjusters available through IA firms. Especially when there is a claims spike. They don’t want to lose control over the entire claim experience. This creates tension in the business and puts a lot of pressure on the IA firms. These Independent Adjusting Firms are all vying for contracts with insurance companies. They do this by assuring them that they can do a better job of handling their claims than the competitor. The larger, more successful IA firms have contracts with large, well-known insurance companies.
The pressure for these companies to perform and stay in good graces with them is intense. These insurance companies have elaborate methods of evaluating the performance of the IA firms to whom they contract. Based on that rating, the IA firms can win or lose large percentages of that insurance company’s claims year-to-year.
So what does this mean for the Independent Adjuster? First, you should know that the IA firms never have enough qualified adjusters. They’re always looking to fortify their rosters with more and better adjusters. The promises they make to the insurance companies are huge. Also, they must have the manpower to perform. That’s the good news; IA firms always want more qualified adjusters. The flip-side of the coin is that if they hire unqualified adjusters, they can do great damage to their relationship with their clients. Their clients are the insurers. Not to mention the tremendous burden and cost of trying to manage sub-par adjusters during a catastrophe. Now you understand why companies seem so picky about who they hire.
If you are interested in becoming an Independent Claims Adjuster, contact us today!