Are Public Adjusters Useful or A Menace? The Need to Raise Standards to Gain and Maintain a Public Adjusting License

Sarah Parker and Cal Spooner

The words to the question of this title are not mine. They were read aloud to the National Association of Insurance Commissioners (NAIC) from a letter written by the Pennsylvania Insurance Commissioner Thomas B. Donaldson. The insurance commissioner also stated:

I want to make certain that my opinion of the public adjusters in my city—not referring to the exception—is clear in your minds. If any man came to me and asked, my advice, saying that he contemplated becoming a public adjuster of fire claims, I would say to him, ‘You have a very small chance of remaining honest. You have every possible chance of becoming a trimmer, trickster, liar, perjurer and briber. Eventually you are almost certain to be indicted.’ I have put this in mild language.

His fellow commissioners applauded Donaldson’s presentation. This was a little over one hundred years ago at the 1921 NAIC proceedings, which is attached for your study.

So, are public adjusters useful or a menace? This question, posed over a century ago by Commissioner Donaldson, reflects a longstanding skepticism towards the public adjusting profession. Do not kid yourself if you are a public adjuster, Donaldson’s harsh critique of public adjusters as potential “trimmers, tricksters, liars, perjurers, and bribers” would still be met with applause from many in the insurance industry, underscoring a deep-seated mistrust. Through bad faith cases, I have been able to read many internal memorandums from claims executives explaining these emotions. So, the debate over the role and integrity of public adjusters continues.

I have suggested that elevating the standards for public adjuster licensure is a means to combat these negative perceptions and ensure the profession is viewed with the respect it deserves in Raising the Bar in Public Adjusting Licensing: A Friendly Conversation. The need for higher licensure standards is not just about changing perceptions; it’s about ensuring that public adjusters are competent and fully capable of handling the complex and significant responsibilities that come with representing policyholders. The revelation that one could obtain a public adjuster license with minimal study and no prior experience raises concerns about the current barriers to entry into the profession.

This is not to say that all public adjusters lack competence or integrity, but rather that the profession as a whole could benefit from more rigorous entry requirements.

Elevating licensure standards would serve multiple purposes. First, it would help to ensure that public adjusters possess the necessary knowledge and skills to effectively advocate for policyholders. Second, it would contribute to improving the profession’s reputation, making it more difficult for critics like Donaldson to justify their skepticism. Finally, higher standards could protect the profession from potential threats to its licensing, particularly from those within the legal, insurance, and construction industries who may view public adjusters as competitors rather than collaborators.

Some may say that strengthened licensing requirements do not guarantee ethical and honest actions. I agree. It’s true that strengthened licensing requirements alone cannot guarantee ethical and honest actions. However, they serve as a critical foundation for professional integrity.

Meaningful licensing standards ensure that individuals entering a profession meet a baseline of knowledge and competency, which is essential for protecting policyholders and the public and maintaining and raising trust in the public adjusting profession. Moreover, these requirements include ethical training, which helps to instill a sense of moral responsibility and awareness of ethical standards. Although no system can completely eliminate unethical behavior, higher standards for licensure can significantly reduce its likelihood by filtering out those less committed to professional and ethical excellence. Ultimately, the combination of rigorous licensing requirements and ongoing professional development, including ethics education, creates a culture that encourages ethical behavior and deters misconduct. Raising the bar of licensing presents no downside to the policyholder or to public adjusters truly committed to a profession that historically has been attacked for not having competent members.

Some may suggest that public adjusters do not need higher licensing requirements until the insurance company adjusters have the same requirement. They correctly note that many insurance companies and independent adjusters are leaving the insurance industry. The average level of competence of the insurer adjuster has fallen with this exodus of talent. So, who is left to competently adjust the loss for the policyholder? I suggest that this situation further calls for the need and an opportunity for the public adjusting profession to stand up for policyholders by raising its level of competency and thereby value to policyholders and the industry. Two wrongs never make a right, and incompetent people should not be adjusting insurance claims.

I want to give a huge shout-out to Cal Spoon and Sarah Parker. Sarah Parker and I collaborate and discuss issues of the day regarding public adjusting. She has an intelligent and creative view of how public adjusting can be improved. Her ideas are enlightening. I mentioned Sarah and her wonderful blog in Insurance Brand Advertising Versus Insurance Company Treatment.

Sarah told me she had obtained the historical NAIC materials from public adjuster Cal Spoon. I have known Cal Spoon for almost 20 years. In 2013, I wrote a post, Roofers Posing as Public Adjusters, noting how Cal and I spent an afternoon together in Dallas:

Public adjusters are not exactly enamored with some roofing contractors either. Last year, public adjuster Cal Spoon took me around the Dallas area and showed me billboards on which roofers promised to perform adjusting services for policyholders who suffered massive hail damages. He had evidence of more than 20 different advertisements that made such promises.

The point Cal Spoon was making that afternoon is that he is not a roofer and a roofer is not a public adjuster. Both have legitimate services and different honorable purposes for sharing their expertise with the public. But the two should not be confused and should stay in their lane.

For the serious public adjuster who views the purpose of public adjusting as one of service to policyholders in their time of need, my considered opinion is that strengthened licensing enhances the distinction of what public adjusters do, increases the value of the profession, and will ensure that public adjusting will remain a distinctive profession for many years to come.

Thought For The Day

Trust is a function of two things: character and competence. Character includes your integrity, your motive, and your intent with people. Competence includes your capabilities, your skills, and your track record. Both are vital.

—Stephen Covey