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The other day during a webinar, a student asked: “so who exactly employs independent insurance claims adjusters?

It occurred to me that a post explaining who independent adjusters work for and how they differ from staff adjusters might be helpful. So let’s take a closer look at the two types of adjusters.

Staff Adjusters vs Independent Adjusters

Staff adjusters, also known as company adjusters or employee adjusters, work directly for an insurance company as W-2 salaried employees. They adjust claims on behalf of that company. It’s a more traditional type of employment. One employer. One agreed-upon salary. Staff adjusters receive benefits as part of their employment, etc.

Independent adjusters (IA’s) on the other hand, have a broader definition.  They also adjust claims on behalf of the insurer, but not directly as an employee of that insurance company. Typically, independent adjusters are contracted by a third-party claims-handling company, or “Independent Adjusting Firm.” These adjusters are employed by the IA Firm but operate as representatives of the insurance company.

For example: Let’s say ABC Insurance Company has an influx of claims from a storm – too many for its staff adjusters to handle. So ABC outsources the claims to an Independent Adjusting Firm. The firm then contracts with 10 of their independent adjusters who will go handle the claims as representatives of ABC.

It’s important to note that some states require you to specify which type of adjuster license you are applying for on your application. Most of the time, unless you are already employed by an insurance company directly, you are going to get an independent license. But if you have any questions on license types or appointments, please give us a call.

Employment Status

Historically, independent adjusters have worked as 1099 independent contractors, but that has changed significantly over the last several years. For legal and liability purposes, the current practice is for employers to hire IA’s as W-2 employees, even for catastrophe-related or short-term deployments.

If the firm knows the deployment will be short-term, the independent adjusters are sometimes hired as “seasonal employees” (a status that has some similarities to working as an independent contractor).  Finally, although rarer today, some smaller employers still contract claims out to IA’s as independent contractors.

How to Become an Insurance Adjuster in 5 Steps

Interested in learning how you can become an insurance adjuster? Check out our 5-Step Guide.

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Independent Adjusting Firms

Although I’ve met the odd independent adjuster with an arrangement to adjust claims directly for an insurance company (usually a small one), it is much more common to find independent adjusters working for a claims-handling company. These companies are commonly called  “IA firms” (Independent Adjusting firms), but sometimes “TPA’s” (Third-Party Administrators) or “Bureaus”, depending on the type of claims they handle. 

IA Firms were born out of an economic and regulatory necessity within the insurance industry. To put it simply: continually staffing the number of adjusters that would be needed to handle the massive number of claims from a major catastrophe within the state-required time limits would be very impractical. While the insurance carrier might need 500 adjusters to handle a single hurricane, most of those same adjusters would be sitting twiddling their thumbs the rest of the year.

So IA Firms were started. The firms can employ these adjusters year-round because the firms are contracted by a lot of different insurers. As an independent adjuster employed by a firm, you might handle claims for different insurers for the same storm. Or you might work claims for ABC Insurance Company for a few weeks, and then handle claims for Joe’s Insurance the next few months – all while being employed by the same IA Firm. Or perhaps that firm doesn’t need any adjusters right now. Independent adjusters are usually on multiple rosters and can find work with a different firm. Overall, the flexibility benefits the carriers, the firms, the adjusters, and therefore…the claimants.

The relationship between IA firms and carriers has continued to evolve over time as well. Today, insurance companies regularly rely on IA firms to handle most major disaster work as well as spikes in local “daily” claims. Or they might need to contract daily claims in areas where “holes” have been left from their adjusters who’ve been deployed to a disaster.

There are currently quite a few IA firms. Hundreds, if you count the mom-and-pop outfits throughout the country. Like any industry, there are a few powerful juggernauts with annual revenues reaching a billion dollars, and whose rosters are thousands of adjusters deep.

The Effects

This arrangement has lead to some interesting changes and challenges within the insurance industry.

The insurance companies want the convenience of a large pool of overflow adjusters available through IA firms when there is a claims spike. They don’t, however, want to lose control over the entire claim experience. After all, these are their customers.

This has created some tension in the industry as it creates a lot of pressure for the IA firms. These Independent Adjusting Firms are competing with each other for the same insurance company contracts. Each firm is assuring the insurer that they can do a better job of handling their claims than the other IA firm.

The larger, more successful IA firms have contracts with large, well-known insurance companies, and the pressure for these companies to perform and stay in good graces with them is intense. In turn, the insurance companies have elaborate methods of evaluating the performance of the IA firms to whom they contract, and – 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 you, 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, and they must have the manpower to perform. That’s the good news; IA firms always want more qualified adjusters.

Of course, the flip-side of the coin is that if they hire unqualified adjusters, they can do great damage to their relationship with their clients – the insurers (not to mention the tremendous burden and cost of trying to manage sub-par adjusters during a catastrophe). So an adjuster, you need to perform well. You need to make your IA Firm shine and your manager look good.

The bottom-line message, though, is good news; the industry is strong, and talent is always in demand. As we’ve noted in other articles, the insurance industry as a whole is filled with baby-boomers who have earned their retirement and are ready to take that step. It needs fresh, new talent to re-fill the ranks, especially as weather-related catastrophes continue to increase.

If you’re ready to take that first step, we can help.

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