AAICP FEDERAL PRIORITIES

Background

In today’s marketplace, independent claims adjusters handle the majority of the nation’s insurance claims and are relied upon by claimants and insurers alike.    Responding to the needs of consumers quickly and efficiently requires flexibility and mobility to apply the right expertise to adjusting losses from natural disasters or individual accidents especially in cases occurring across state lines in today’s global market.

Unfortunately, a patchwork of often conflicting state laws frustrates interstate claims adjusting and prevents the most efficient, timely, and cost-effective customer service across state lines, whether for workers’ compensation, disability, residential, auto, crop, or other claims.  

The Problem

The complex array of state laws and regulations can frustrate qualified out-of-state adjusters.  Especially in this age of advanced telecommunications, these adjusters otherwise would be able to meet customer needs over the phone and online across state lines, including from home and while traveling.  

Currently, claims adjusters have to deal with inefficiencies and outdated restrictions that impose otherwise avoidable costs that ultimately affect consumers.

What is outdated and inefficient with the current insurance claims process?

1. Residency Restrictions:  At least three jurisdictions refuse to license an adjuster who is not a resident of that jurisdiction.  Such restrictions are likely unconstitutional under the Interstate Commerce Clause. 
2. In-state Office Requirement:  Several states require a physical business location for adjusters operating within the state,[1] despite the fact that there is no need for an adjuster to have office space in a state to effectively and efficiently adjust claims within that state.
3. Refusal to Recognize Licensing Reciprocity:  Thirteen states  do not grant reciprocity for out-of-state adjusters who have passed the licensing exam in their designated home states (so designated because their state of residence does not require licensing).
4. Refusal to Adopt Uniform Application:  Only ten states use the uniform application for adjuster licenses developed by the National Association of Insurance Commissioners.
5. Refusal to Accept Online Applications:  Seventeen states do not allow for online submissions of applications and renewals for nonresident adjuster licenses.  Four more states allow for electronic submissions of renewal forms, but not license applications.
6. Impediments to Adjusting Disaster Claims:  Despite the need for disaster-ravaged consumers to have their claims adjusted quickly, four states require time-consuming, case-by-case state approval before nonresident adjusters can act in that jurisdiction.  A better way would be to provide instant, temporary access to adjusters to handle claims in declared disaster areas, as long as they are properly licensed in their designated home states, as some states already do.
7. Failure to Post Catastrophe Adjuster Forms:  Only three states have posted their emergency adjuster forms online, even though quick access to them is urgently needed.
8. Unreasonable, Changing Requirements:  With no advance notice, one state is requiring out-of-state adjusters seeking reciprocal licensing to produce copies of their original test and test scores from their home states, even if they earned their license decades before.  Moreover, in a February 22nd, 2008 response to an inquiry about this policy, the licensing director stated wrote that his state “does not have reciprocity with any state for adjuster licensing….” 
9. Discriminatory Reference Requirement:  One state requires that out-of-state candidates provide certificates of character signed by “five reputable citizens of the community in which such applicant resides or transacts business, each of whom shall certify that he has personally known the person or individual for a period of at least five years…”  This rule effectively denies licensure to new U.S. citizens or legal aliens, since the state in question refuses to consider certificates from persons in the applicant’s prior country of residence.
10. Arbitrary Changing of Rules:  An adjusting firm in Missouri, a non-licensing state, recently selected another state to serve as the “designated home state” for its adjusters for the commonly accepted purpose of achieving reciprocity with other states.  However, shortly after several of the firm’s adjusters passed the adopted state’s exam, the state changed its policy and refused to issue home state certifications to them.  The adjusters then had to repeat the pre-licensing requirements and examinations elsewhere to qualify in other states.
11. Costly, Time-Consuming Snafus:  One state’s Department of Insurance has had difficulty properly capturing fingerprint records on out-of-state adjusters’ license applications, so adjusters have had to re-submit those applications two or three times.  The Department announced in a January 2008 e-mail that it would encourage adjusters to incur an additional expense for a special “fast pass” fingerprinting process.
12. Uncertainty When Adjusting Disaster Claims:  In the event of a catastrophe, it is often unclear, particularly in three states, whether temporary licenses for out-of-state adjusters are valid for a set number of days or until a disaster designation has been lifted for an area.
13. Impediments to Assigning Claims:  Costly, time-consuming problems also emerge when an adjuster assigns claims to a licensed adjuster in another state.  For example, Adjuster #1 in Illinois may assign a Florida claim to be handled by Adjuster #2 in Florida.  Adjuster #2 is properly licensed in Florida, but Adjuster #1 is not.  Some then argue that, by talking over the phone to Adjuster #2 in Florida, Adjuster #1 still “handled” the Florida claim, even though the claim had been assigned to an adjuster with the proper Florida credentials.  Congressional legislation could help to eliminate this ambiguity by enabling Adjuster #1 in Illinois to receive reciprocity more readily in Florida.
14. Redundant Filing Requirements:  Certain states, such as New York, require insurers to provide names of out-of-state adjusters receiving temporary licenses to handle that insurer’s claims.  However, in New York, an independent adjusting company contracting with that insurer cannot bring in out-of-state adjusters directly under that same arrangement.  Instead, the insurer must file the out-of-state adjuster information on the company’s behalf.  This time-consuming step benefits neither consumers, nor independent adjusters, nor the insurers who have already made the decision to delegate their adjusting responsibilities.

The Solution:   THE CLAIM ACT

The CLAIM Act advances uniformity, reciprocity, and consumer protections for claims adjusting across state lines by implementing the following provisions:

• Each state has three years to work with the National Association of Insurance Commissioners (NAIC) and every other state to adopt uniform educational, training, and ethical criteria needed for the proper licensing of independent claims adjusters.  The bill also calls for the NAIC to develop a multi-state exam to test those criteria.     In addition, each state also has three years to work with the other states and the NAIC to adopt reciprocity standards to enable adjusters properly licensed in their designated home states to assess and settle claims across state lines without discrimination. In other words, the state-based regulation of independent adjusters remains in place, but the states must undertake needed reforms during those three years.  The CLAIM Act urges the NAIC to adopt a Model Act to help the states enact those reforms.
• After that time, if such uniformity and reciprocity has not been achieved by a certain state, then the CLAIM Act automatically authorizes independent claims adjusters to operate there, if they are properly licensed to adjust claims in their designated home state, and they have passed a multi-state adjuster exam as established by the NAIC.   If the state fails to achieve uniformity and reciprocity within three years, the CLAIM Act provides needed Congressional incentives to improve state regulation of independent adjusters while giving the state-based system enough time to adopt reforms on its own.
• The CLAIM Act also will enable disaster victims to receive expedited, quality service, as adjusters who are properly licensed in their home state will be automatically authorized to adjust disaster-related claims in a Presidentially-declared disaster area.

AAICP, founded in 2002 has been focused on introducing and advocating for enactment of legislation to resolve the current inefficiencies with the claims handling process. The CLAIM Act represents a balanced approach, enabling adjusters to handle claims more efficiently and effectively across states lines with reciprocal licensing reforms.  More importantly, The CLAIM ACT protects consumers and facilitates accelerated adjusting of personal claims related to natural disasters by encouraging states to adopt uniform licensing criteria and by creating incentives for adjusters to take a multistate exam proposed by the National Association of Insurance Commissioners (NAIC).