The text of my letter to the Birmingham (Ala.) News, regarding news that the state legislature could be nearing consideration of law to formally license and regulate public claims adjusters, who work directly for policyholders, rather than insurers:
It isn’t often that insurers and plaintiffs’ attorneys come down on the same side of a public policy issue. When they do, it’s fair to ask why, and whether there is more to it than meets the eye.
Such is the case with Alabama’s consideration of legislation to allow public adjusters to assist policyholders in asserting their rights. As highlighted in Robin DeMonia’s Jan. 6 article, (“Post-tornado law would allow Alabama residents to hire private insurance adjusters”) proposals to allow for state licensing and regulation of public adjusters have in the past faced opposition from both the Alabama State Bar and the Property Casualty Insurers Association of America.
Insurers’ opposition to the idea is easily understandable. As PCI notes, insurers believe public adjusters drive up claims costs and thus lead to higher premiums. But even if true, that should raise lawmakers’ concern only if the higher costs are the result of adjusters abetting insurance fraud or otherwise adding unnecessary administrative burdens to the system. If, instead, adjusters are legitimately helping consumers to recover insurance payments to which they are properly entitled, then claims costs likely should be higher, and market prices should reflect that reality.
In some states, there have been questions about the extent to which public adjusters participate in fraud, but that is an issue best addressed by regulatory oversight. Public adjusters aren’t actually barred in Alabama, but the lack of a proper regulatory regime both makes it more difficult to discipline bad actors, as well as exposing would-be legitimate public adjusters to charges of practicing law without a license.
It is that latter concern that motivates the state bar. In a clear case of what economists call “rent-seeking” behavior, Alabama attorneys want to ensure that they can limit competition from non-lawyers in the market for insurance recoveries. The bar believes the NAIC’s model law for public adjuster licensing currently in place in 44 states does not go far enough in protecting lawyers’ turf, and one can expect they will guard that turf jealously.
As Alabama lawmakers consider legislation to allow policyholders to retain licensed and regulated public adjusters, they should be guided not by the special interests of either Big Law or Big Insurance, but ultimately, by what system would best serve consumers.