Stop Using Licensed Contractor Bids For Claim Estimates—A Quick Analysis of Florida’s Imperfect Emergency Rule of Property Loss Adjusting

The Florida Department of Financial Services (DFS) issued Emergency Rule 69BER24-4, which aims to address issues in the property insurance claims process. While the rule attempts to improve transparency and accountability, it raises several concerns and potential unintended consequences. It is obviously a political response to the CBS 60 Minutes documentary noted in CBS 60 Minutes Exposes Alleged Insurance Company Fraud: Adjusters Reveal Altered Hurricane Damage Estimates by Claims Management.

Positive Aspects

1. The rule acknowledges long-standing issues in the insurance industry, particularly regarding the manipulation of estimates by third-party administrators and desk adjusters.

2. It attempts to create a more transparent process by requiring documentation of estimate changes and collaboration between field adjusters and desk adjusters.

Problematic Areas

Scope of Application

The rule applies to both insurance company adjusters and public adjusters, which seems to unfairly target public adjusters who represent policyholders’ interests. This inclusion fails to recognize the distinct roles and responsibilities of these different types of adjusters. Public adjusters are not having their estimates manipulated and then hidden by “quality assurance” and the insurance company “desk adjusters” from the policyholder.

Disregard for Existing Regulations

The Order appears to overlook previous rulings that allow for contractor bids and other statutory requirements in the claims process. This oversight could create conflicts with existing legal frameworks and potentially harm policyholders’ rights.

Potential for Delays

The requirement for collaboration between field and desk adjusters before finalizing estimates could lead to significant delays in claim processing. We expect that field adjuster estimates will become “drafts” and never a final estimate as claims departments try to game this regulation and still alter the original field adjuster’s estimate, which will now just be a “draft.” This may result in policyholders waiting longer for claim payments, especially in catastrophe situations where timely responses are crucial.

Xactimate Pricing Limitations

The rule’s reliance on Xactimate and other software pricing fails to account for the software’s limitations, particularly in unique or custom situations. Xactimate’s pricing methodology is not comprehensive and may not accurately reflect local market conditions or specific job requirements. Even Xactimate warns of this in its own literature. I noted this recently in Xactimate Price Warning—Xactimate Finally Admits It Is Not So Exact!

Undermining Public Adjusters

Is this just a new way to undermine public insurance adjusters? The inclusion of public adjusters in this rule appears to be an attempt to undermine their profession, which is concerning given their important role in advocating for policyholders. Why include public adjusters, who I teach to always check on and place the highest reliance upon local contractor pricing since that is whom the policyholder will pay? The DFS seems to miss the point that the policyholder does not pay an estimate. My client policyholders have to pay a contractor.

Steven Bush’s Concerns

Steven Bush noted in a Facebook post that the Order confirms long-standing problems in the insurance industry but raises questions about why it took so long to address these issues. The inclusion of public adjusters in the Order is seen as an attack on those who represent policyholders, potentially favoring insurance companies. He noted that there’s a risk that the efforts to level the playing field may inadvertently harm policyholders and their representatives.

Cindy Bootier’s Insights

Cindy Bootier made a comment to Steven Bush’s post which is worthy of consideration. She noted that the Order may lead to carriers delaying estimate writing while waiting for engineering reports, potentially causing significant delays in claim payments. The complexity of the estimating process is not fully addressed, as factors such as adjuster experience, expertise, and care for the claim significantly impact estimates. She noted that the rule fails to address the erosion of adjuster income and the increasing pressure to complete claims quickly, which can lead to inadequate claim servicing.

Etienne Font’s Observations

Merlin Law Group attorney Etienne Font is a CPCU and former office claims manager of an independent adjustment company. He noted that the Order appears to prohibit claim estimates based on contractor bids, which contradicts standard industry practices and may limit accurate pricing. He further sent me an Xactware Pricing summary for your review, which states in part:

In addition, since many structures are unique, there are many items and tasks that are either so custom by nature or that occur so seldom that the research or reporting of a market price is not possible. As such, Xactware’s published price list is not intended to account for or provide costs for every potential item. Xactimate therefore provides users the full capability to create and/ or modify any costs as needed to match the conditions of the specific job or their company.

The bottom line is that Xactimate’s pricing methodology and all software-based estimating software have significant limitations, particularly for unique or custom and commercial structures, which the Order does not adequately address.

Conclusion

While Emergency Rule 69BER24-4 attempts to address long-standing issues in the property insurance claims process, it falls short in several key areas. The rule’s broad application to public adjusters, the potential for claim delays, and reliance on potentially inaccurate pricing methodologies could ultimately harm policyholders rather than protect them. Furthermore, the rule’s failure to address the role of engineers and its potential to undermine public adjusters raises serious concerns about its true intent and effectiveness.

As advocates for policyholders, it is crucial to continue pushing for reforms that truly level the playing field and ensure fair treatment in the claims process. This may involve further engagement with the Department of Financial Services to address these concerns and refine the rule to better serve the interests of policyholders while maintaining the integrity of the claims adjustment process.

Why didn’t Jimmy Patronis send this out as a proposed rule and allow for a quick comment and workshop where skilled professional property insurance adjusters can comment and make a much better rule? It could have delayed this for just a few days and made a much better rule. Even my post is imperfect on this significant topic because there are so many implications to what this Order does and does not do.

Thought For The Day

The glue that holds all relationships together – including the relationship between the leader and the led – is trust, and trust is based on integrity.
—Brian Tracy