One common question we often hear from new insurance adjusters is: How do independent adjusters get paid? Unlike staff adjusters, who are typically salaried or hourly employees of an insurance company, independent adjusters generally work as independent contractors and are paid according to the terms of their assignments.
For both catastrophe (CAT) claims and daily claims, compensation is often tied to an independent adjuster fee schedule. Some independent adjusting (IA) firms may instead offer a daily rate, hourly rate, stipend, or other compensation structure, depending on the assignment.
What is an independent adjuster fee schedule and how does it work?
An independent adjuster fee schedule is a compensation structure that establishes the fee paid for handling a claim. The fee may be a flat dollar amount, a graduated amount based on the size of the claim, or a percentage of the claim amount. The specific rates and terms vary by insurance carrier, IA firm, type of claim, and assignment.
When an IA firm is paid according to a fee schedule, the fee is usually split between the firm and the independent adjuster who handled the claim. For example, if an adjuster works on a 70% fee split, the adjuster receives 70% of the applicable fee, while the IA firm retains the remaining 30%.
New adjusters may hear terms such as a 60/40 split or 70/30 split when discussing independent adjuster pay. These percentages describe how the applicable fee is divided between the adjuster and the IA firm, not the percentage of the total claim settlement that the adjuster earns.
It is industry standard for adjusting firms to pay between 55 and 70% of the adjuster fee to the adjuster in the field.
It is worth noting that during periods of heavy demand for adjusters, fee percentages can sway more heavily towards the adjuster. For example, after the back-to-back catastrophes of Hurricanes Harvey and Irma, IA firms were in a bidding war for experienced adjusters – some offering higher percentage cuts than the industry had ever seen. But with the flow comes the ebb, and the employment landscape will always right itself back to a more standard split.
In addition to market demand, the percentage of the fee the adjuster receives is determined by a multitude of factors. Some firms offer slightly better percentages based on experience levels, the type of catastrophe or severity of claims, the location, your skills and qualifications, etc. Offering better fee splits is one way IA Firms compete with each other to obtain and retain the best adjusters for their company.
Again, this isn’t the only way insurance adjusters earn their money. But it is the most often used and the most confusing for new adjusters.
Adjuster Fee schedule examples
The top section lays out 12 possible category amounts under which a claim settlement could fall – from a simple ‘erroneous assignment’ where you are given nominal compensation for the trouble of determining the error, to a claim settlement of over half a million dollars.
The Fee listed in the second column cites how much the insurance carrier will pay out for the adjusting services rendered. This fee amount is what will then be split between the adjuster and the adjusting firm, with between 55%-70% typically going to the adjuster and the remainder staying with the firm. So on a $10,000 claim, for example, an adjuster should actually take home somewhere between $600 and $700.
You’ll also notice that this is for daily claims or inspections. If you look to the next graph, you’ll see higher fee amounts for significant events and hurricanes. Additional fees for a variety of claims and circumstances are listed further below. I included a few other examples of fee schedules at the end of this article.
Remember, independent adjusters are paid as 1099 independent contractors without taxes taken out by the employer. Unfortunately, we have seen some people learn the hard way that this doesn’t mean you don’t still owe taxes. It is vital that new adjusters modify their personal accounting accordingly and set aside sufficient funds to pay taxes either quarterly or at the end of the year. A good, reliable accountant is indispensable for those who want to set themselves up for long-term success as a claims adjuster.
More examples:
