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Adjusters seek to cut red tape

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Independent claims adjusters want to be treated the same way as insurance agents and brokers when it comes to the issue of nonresident state licensing. The independents say they face many of the same problems agents and brokers with interstate business faced before legislation was enacted to establish the National Association of Registered Agents and Brokers.

When fully operational, NARAB will allow producers doing business across state lines to avoid getting multiple nonresident state licenses, which, they had said, resulted in duplicative, expensive efforts that did nothing to serve consumers.

Independent adjusters now argue that they face the same problems.

So it's not surprising that the Washington-based American Association of Independent Claims Professionals has lined up behind the Claims Licensing Advancement for Interstate Matters Act that Rep. Stephen Fincher, R-Tenn., introduced last year in the House of Representatives.

H.R. 2998 would allow adjusters to be members of NARAB. “Under current law, independent claims adjusters face a hodgepodge of inconsistent state regulations that only serve to delay the prompt adjustment of claims for natural disasters, accident victims and other tragedies in life,” Rep. Fincher said in introducing the bill.

Independent adjusters have to take a license exam in each state, requiring them to travel there and increasing their costs, he said.

Allowing independent adjusters to be licensed through NARAB would lift “a big administrative burden,” said Cari Miller, counsel at Gallagher Bassett Services Inc. in Itasca, Illinois, and co-chair of the independent claims association.

“This year we're hopeful it will get passed,” Mr. Miller said. “We're working on a Senate bill right now, and working to get some co-sponsors. We have some really good advocates on the House side.”

The measure also enjoys support of the Risk & Insurance Management Society Inc., which endorsed the bill last year.

“While it has become increasingly important for risk professionals to implement proactive strategies, insurance and the processes for settling claims remain critical to protecting an organization's assets,” said Rick Roberts, then-RIMS' president and currently director of risk management and employee benefits for Ensign-Bickford Industries Inc. “Allowing claims adjusters to practice across state lines is particularly important when natural disaster or catastrophe strike.”

But the proposal is far from a shoo-in. Rep. Fincher, who is not seeking re-election, has introduced the bill several times. The House Financial Services Committee has yet to hold a hearing on it, and no companion bill has been introduced in the Senate.

In addition, the National Association of Insurance Commissioners opposes it.

“Given state regulators' experiences with recent disasters, we have not found adjuster licensing to be a problem that needs this kind of federal tool,” the NAIC said earlier this month in an email. The NAIC's producer licensing task force is looking at the issue and is “committed to working with stakeholders to update licensing and reciprocity guidelines and handbooks as appropriate,” the organization said.

David Farber, a partner in the Washington office of King & Spalding L.L.P. and counsel to the independent claims adjusters group, said about 35 states licensing adjusters sets up “a true patchwork of requirements that severely impedes efficient claims management, consumer service and the day-to-day business for adjusting companies. The CLAIM Act would cut through those problems by motivating the states to adopt uniform and reciprocal adjuster licensing.”

“We know this model will work; it has worked for agents and brokers, and will do the same for adjusters,” he said.

Industry observers agreed.

While the Council of Insurance Agents and Brokers does not represent claims adjusters, “they have many of the same challenges in nonresident licensure,” said Joel Wood, senior vice president of the Washington-based council. We “are completely fine with their legislation with one caveat — that we shouldn't relitigate any of the core language of NARAB itself,” which the council supported for years.

“The practical problem that they face is strong opposition from the NAIC, and it made quite a difference for those of us who supported the version of NARAB that passed in the TRIA extension that we enjoyed the support of the NAIC,” Mr. Wood said.

Refinements to the initial NARAB proposal were part of a bill last year that extended the federal terrorism insurance program, established by the Terrorism Risk Insurance Act of 2002, through 2020.

A single license would benefit adjusters and claimants alike, some say.

“If an adjuster in one state passes an exam and goes through the fingerprint and background check process, there's no good reason to have to do that in another state,” said Kim Brown, vice president of government relations at Sedgwick Claims Management Services Inc. in Memphis, Tennessee, and a co-chair of the AAICP. “It doesn't create value for the consumers in any given state to duplicate efforts.”

“It helps claimants a lot, too, since we can focus on adjusting instead of worrying so much about the regulatory burdens of maintaining multiple different state licenses,” said Gallagher Bassett's Ms. Miller. “We have adjusters who have 17 different state licenses.”

Not all states have licenses. For those that do, both the individual adjuster and the company can face fines, sometimes as much as several hundreds of dollars for each claim file handled, if they aren't properly licensed, according to the AAICP. The amount depends on the state.

In addition, the company itself can be subject to the same financial penalty plus risking their license to do business in the state.

Penalties levied against individual adjusters are entered into a national database, which can cause the adjuster problems when he or she attempts to relicense in the future.