The Rise in Claim Disputes: Unpacking the Role of Public Adjusters

In recent years, the insurance industry has witnessed a surge in claim disputes. This trend is not only affecting policyholders but also insurance companies, adjusters, and even public adjusters.

2022 was particularly challenging for homeowners insurance providers due to severe catastrophic losses, supply chain-related delays, and inflation. This mix of factors led to increased extreme events, rising costs, and longer cycle times, straining customer satisfaction, as reported in the J.D. Power 2023 U.S. Property Claims Satisfaction Study.

This blog aims to shed light on the driving forces behind this increase, focusing on the role of public adjusters—both ethical and unethical.

Why So Many Disputes?

Complexity of Claims

The Evolution of Insurance Policies

Insurance policies have evolved to include various coverages, from natural disasters to cyber threats. This diversification, while beneficial, has also made policies more complex.

Wind and hail damage are the most common types of home insurance claims, often leading to issues like blown-off shingles, dented siding, and damaged roofs or windows.

The Legal Jargon

The language used in insurance contracts often includes legal terms and conditions that can be difficult for the average policyholder to understand. This complexity can lead to misunderstandings and, consequently, disputes.

Multiple Parties Involved

In many cases, especially with commercial claims, multiple parties, such as tenants, landlords, and third-party contractors, are involved. The presence of multiple stakeholders can complicate the claims process and increase the likelihood of disputes.

Lack of Understandting

Information Asymmetry

Insurance companies have experts who understand the nuances of policies, while many policyholders do not. This information asymmetry can lead to unrealistic expectations on the part of the insured.

Emotional Factors

When a loss occurs, emotional stress can cloud judgment. Policyholders may hastily file claims without fully understanding the scope of their coverage, leading to disputes when the claim is denied or underpaid.

The Role of Education

Insurance companies can mitigate this by educating their policyholders about the terms and conditions of their policies, thereby setting realistic expectations and reducing the likelihood of disputes.

Economic Pressures

Rising Costs

The rising costs of labor and materials can put economic pressure on policyholders and insurance companies. Policyholders may need to claim more to cover these rising costs, while insurance companies may become stricter in their assessments.

Financial Instability

In economically challenging times, both parties are more likely to dispute claims as they try to safeguard their financial stability. This vigilance, while understandable, can lead to an increase in prolonged disputes.

The Balancing Act

Insurance companies must balance their need to remain profitable with their obligation to provide fair compensation to policyholders. This balancing act becomes even more challenging during economic downturns, contributing to increased disputes.

Between 2016 and 2020, the average property damage claim payout was $13,804.

The Role of Public Adjusters

Ethical Public Adjusters

Public Adjusters and Policyholders

Ethical public adjusters can be a bridge between the insurance company and the policyholder. They understand the language of insurance policies and can translate this into terms that the average person can understand.

Expertise

These adjusters bring their expertise in policy interpretation, possibly damage assessment, and negotiations. One of their goal is to ensure that the policyholder receives fair compensation for their loss based on the terms of the policy.

Building Trust

Ethical public adjusters build trust through transparent communication. They keep all parties informed throughout the claims process. Sometimes they can reduce misunderstandings and potential disputes. But most often they prepare the claim file to be handled by an attorney that they have aligned themselves with.

Unethical Public Adjusters

Exploiting Vulnerabilities

Unethical public adjusters take advantage of the emotional and financial vulnerabilities of policyholders. They may promise higher payouts from insurance claims, setting unrealistic expectations.

Inflating Claims

These adjusters may inflate the extent of the damage or the cost of repairs to increase their commission. This leads to disputes and can result in legal repercussions for the policyholder.

Prolonging the Process

Unethical practices can prolong the claims process unnecessarily, causing additional stress and financial burden to the policyholder while also increasing the administrative costs for the insurance company.

Drawing the Line

Due Diligence

Policyholders must conduct due diligence when hiring a public adjuster. Look for credentials, read reviews, and, perhaps most importantly, consult with your insurance company, insurance adjuster, and insurance agent. Rarely is there a need to involve a public adjuster.

The Role of Insurance Companies

Insurance companies can also play a role in educating policyholders about the potential pitfalls of hiring an unethical public adjuster. This can be part of the broader educational initiatives aimed at reducing disputes.

Regulatory Oversight

Strong regulatory oversight can help curb unethical practices in the industry. States could implement stricter licensing requirements and penalties for public adjusters found to be acting unethically.

What This Means

Understanding the factors contributing to the rise in claim disputes is essential for all parties involved—policyholders, insurance companies, and adjusters. Ethical public adjusters can serve as allies for policyholders in navigating the complex landscape of insurance claims. They can help ensure that claims are settled fairly and promptly, benefiting the policyholder and the insurance company.

However, vigilance is critical. Being able to differentiate between ethical and unethical practices may make a difference in ensuring a smooth claims process. Communication with the insurance company, insurance adjusters, and insurance agents is the best possible solution.

Don’t navigate the complexities of insurance claims alone. Let Legacy Building Consultants be your trusted partner in resolving disputes and ensuring fair settlements. Contact us today to learn how we can make your claims process smoother and more transparent.

Don’t navigate the complexities of insurance claims alone.

Let Legacy Building Consultants be your trusted partner in resolving disputes and ensuring fair settlements. Contact us today to learn how we can make your claims process smoother and more transparent.