The Role and Regulatory Framework of Public Adjusters in Property Insurance Claims

What Public Adjusters Are and What They Do

At its core, a public adjuster is a licensed insurance professional who works exclusively for the policyholder — not the insurance company — in the handling of first-party property insurance claims. Their main functions include:

• Evaluating and documenting property damage after a loss.

• Reviewing policy language to identify all applicable coverages and exclusions.

• Preparing and submitting a claim package to the insurer.

• Negotiating with the insurer to secure the best possible settlement for the policyholder.

Public adjusters differ from company adjusters (who represent the insurer) and independent adjusters (who are typically contracted by insurers), because public adjusters represent only the insured’s interests

2. Role in the Claims Process

In property insurance claims, public adjusters act as advocates and experts on behalf of the policyholder. They:

• Conduct thorough damage assessments with documentation, photos, and third-party input.

• Interpret complex policy terminology to fully capture covered losses.

• Build detailed proof-of-loss packages and lead negotiations with insurers.

• Advise on deadlines, technical requirements, and policy rights.

Their involvement often leads to higher settlements and faster resolutions, especially in complex or commercial claims, because they bring specialized expertise that most policyholders lack.

3. Regulatory Framework

Public adjusters operate in a regulated professional environment under state insurance laws. Key regulatory elements typically discussed in a technical paper include:

Licensing

• Nearly all U.S. states require public adjusters to be licensed by the state’s insurance department. Only a very small number do not.

• Licensure generally requires education, a state exam, background checks, and continuing education.

• The National Association of Insurance Commissioners (NAIC) Public Adjuster Licensing Model Act

Definition

Under the model law and most state statutes, a public adjuster is defined as someone who, for compensation, acts on behalf of the insured to negotiate, adjust, or settle first-party property insurance claims.

Contracts & Disclosures

• Contracts with public adjusters must be written, explicit about compensation, and generally disclosed to the insurer.

• Some states impose additional requirements such as notification of the insurer, right of rescission, and caps on fees for certain residential claims.

Ethical & Conduct Standards

Regulations typically include codes of conduct — e.g., loyalty to the insured, prohibition of certain solicitation practices (especially right after a loss event), transparent fee practices, and prohibition on conflicts of interest.

4. Consumer Protections and Accountability

State regulatory frameworks also emphasize consumer protection, such as:

• Written disclosure of the adjuster’s role and fees.

• Rights to cancellation of the contract within a specific period (e.g., a few days after signing).

• Clear ethical standards that guard against fraud and unfair practices.

These protections are vital because public adjusters work on a contingency fee basis — usually a percentage of the claim settlement — which must be transparent and reasonable.

5. Why Regulation Matters

Without regulation:

• Consumers could hire unqualified or unscrupulous representatives.

• Misconduct could go unchecked, leading to poor outcomes or harm to policyholders.

Proper oversight helps ensure:

• Adjusters have verified competence.

• Ethical boundaries are enforced.

• The claims process remains fair and balanced for the insured.

6. Trends & Evolving Frameworks (Industry Perspective)

Recent legislative and regulatory work — such as model standards from organizations like NAIC and the National Council of Insurance Legislators (NCOIL) — continue to refine public adjuster regulation. These efforts aim to standardize licensing, disclosure, and professional standards across states.