Fee Schedules
A common area of confusion to new and aspiring adjusters is the method or mechanism by which independent adjusters are paid. Rather than a traditional employee position with a monthly salary, independent adjusters handling both catastrophic and regular daily claims are compensated as independent contractors on an entirely different basis. Occasionally, IAs will work on a daily rate or stipend but in the vast majority of cases they are remunerated per closed claim file based upon a fee schedule. What is a fee schedule and how does it work?
A fee schedule in independent insurance adjusting is a system of accounting whereby insurance companies pay out the adjuster’s “fee” based upon a graduated “schedule” of the final claim settlement amount. The adjuster fee that is paid is then split between the adjusting firm and the individual independent adjuster who handled the claim.
Thus, one might hear in the course of industry parlance reference to 60% or 70% fee percentages. This refers to the percentage amount that the individual IA makes from the fee schedule amount. The remaining 30 to 40%, as stated above, then goes to the adjusting firm that oversees the adjuster.
It is industry standard for adjusting firms to pay between 55 and 70% of the adjuster fee to the adjuster in the field. Anything less would be considered unusually low and anything higher may be too good to be true!
Fee schedules are best understood by actually examining one. Take a look at this fee schedule taken from the NFIP (National Flood Insurance Program).
The Claim Range column lays out 14 different possible categories 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 $250,000.01. The Fee listed in the second column cites how much the insurance company will pay out for the adjusting services rendered. Again, this amount, say $750 for claims falling between $10,000.01 and $15,000 will then be split between adjuster and adjusting firm with 60-70% to the adjuster and 30-40% to the adjusting firm. So, on a $10,000 claim, an adjuster should actually take home somewhere between $450 and $500.
Remember, IAs are paid as 1099 independent contractors without taxes taken out by the employer so sufficient monies should be set aside for payment of taxes either quarterly or at the end of the year. A good, reliable accountant is indispensable for the well-adjusted claims adjuster.
Thanks for the great info. It has taken a lot of the guess work out of the process for myself as a future adjuster. I am a Louisiana resident. There are several schools that informed me that the Texas license would be enough to get me going. Louisiana gave me a different story so I have done nothing. I see now that I must get my Louisiana license first and go from there.
Thanks Again
Paris
Paris, thanks for writing in. Louisiana is a bit new to this issue of reciprocity – having only started licensing adjusters in 2007. Their rules are a bit difficult to interpret and, to be honest, I’m still not 100% certain where they stand. If you read their rules regarding reciprocity it would indicate that you could obtain a Texas non-resident license and then reciprocally obtain your Louisiana resident license. I tend to believe this is the case. But, depending on who you talk to (internal communication within bureaucracies appears to be lousy) at the Louisiana Dept. of Insurance, you may be told differently. Let me know how it goes. – Daniel Kerr
I have had a custom home building co for almost 35 years. I have built mostly extremely expensive homes in the 1 to 4 million range in New England. I am looking to slow down a bit, and semi retire. Do I NEED to take the 40 hour course pryor to exam? Not to be smug, but I would find it hard to believe there in anything I do not know ot havent encountered in my years of building.
That’s a great question and not smug – I understand completely. If we’re talking about pre-licensing studies either in preparation for the state exam or for a pre-licensing type of exam (Texas and Florida), the answer is going to almost always be an emphatic Yes! you do need to take the coursework. The reason is that the content of the exams has very little do to with the nuts and bolts of inspecting a loss and consequently with construction, etc. It has everything to do with insurance policy, regulatory statutes governing the claims process, and a host of other fairly technical insurance related information. So, how much do you know about Inland Marine insurance? General liability? Fair Claims Settlement Practices? If you’ve got that all dialed in already, then your fine. If you don’t, and I don’t know why anyone would unless they were already in the insurance industry, then I would strongly recommend the coursework. Let me know if this helps and thanks for writing in!
I’m not sure if this is the right page to ask this but, when first starting out in this career and you get the appropriate documents so to speak would you apply to become a staff adjuster for a company or try and head out independently?
It really depends on what type of work you’re interested in doing and how you like to work. Staff adjusters tend to have stable gigs that pay a fairly modest entry level salary (35k range) with benefits and nearly all tools of the trade provided. Independent adjusters must be self-directed workers as they set their own schedule and frequent extended travel should be expected. Compensation is commensurately higher and a good independent adjuster earns well over 100k a year. Lots to say about it – what do you have in mind?
Daniel,
I am considering becoming an IA and would like to get some real world feedback on what it takes to get going, where/who are the best independent firms to work with, etc. I have owned my own business’s for the last 20 years mostly in Technology but worked in the Construction Management field for 5 years when I was younger. I have traveled for work as much as 80% of the time and am a well experienced “ROAD Warrior”. Any advise or resources you could point me to would be appreciated
Ejimmyp -
You have a strong background that sounds very well suited to transitioning into this field. The first steps are licensing, certification, and estimating software training (I recommend either the Classroom or Online Total Adjuster Programs offered through AdjusterPro). As you are working your way through these initial steps, you’ll want to joining multiple IA firm rosters and I’d start with the ones that handle contracts for major insurers like State Farm and All-State – firms like Crawford, Pilot, E.A. Renfroe, Worley, Eberls, and so on. Visit the Well-Adjusted Job Board for latest IA opportunities with these and other lesser known firms – and on the subject, lesser known firms can be fantastic to work for with more of a family environment – just be sure to exercise due diligence in considering any employer.
Beyond that, I’d take as much time as you can to pour through the postings here as well as on the Well-Adjusted social network (see Job Board above). There are many articles and countless forum threads that touch upon what it takes to get started.
Let me know if I can be of any assistance and best of luck!