Red herring, definition: noun; from the practice of drawing a red herring across a trail to confuse hunting dogs; something that distracts attention from the real issue; something unimportant that is used to stop people from noticing or thinking about something important.
My readers know I favor one across the board percentage fee cap for public adjusters (PA’s) of 10%. In Florida, with America’s highest cap, this means cutting in half the 20% non-catastrophic limit. Reasons and benefits have been detailed in numerous postings on this blog site. (See NOTE #1).
While it won’t happen this year, many like minded PA’s also favor Florida’s legislative proposal to nudge the fee cap down to 15%.
In anticipation of next year, however, maybe now’s the time to debunk the only ostensibly rational argument justifying opposition to any reduction.
It’s called the “small claim” argument and it’s a red herring!
For what it’s worth, the PA community is sharply divided on fee reductions. The loudest and most proximate advocacy group, the Florida Association of Public Insurance Adjusters (FAPIA), seems alone in opposition to Florida’s recent proposed reduction. I suspect AAPIA agrees. (See NOTE #2 below).
While there are nuances to why members of other groups (NAPIA or CPCPI for example) actually favor caps on their own revenues, it undeniably flows from the belief that higher percentages stimulate bad behavior hurtful to consumers and thus to the PA community. In fact, much of their legislative testimony supports the direct causal relationship between a “higher” fee cap and consumer mistreatment.
The red herring: When the percentage is “too small” smaller claims don’t yield enough dollars to compensate a public adjuster thus denying claimants access to services they want or need.
Putting aside whether policyholders need the services of a public adjuster at all, this argument has been the clarion call against fee reductions or caps generally, by AAPIA in other states and by FAPIA in Florida, ever since fee caps first emerged as a way to fight consumer abuse.
The argument is accepted on its face. Percentages are bandied about without even disputing its legitimacy. The “small claims” argument is even partially why we have two different caps in Florida instead of 10% across the board.
I realized it to be a red herring when responding to an email from Gene Veeno, the head of AAPIA who, in attempting to prove the “small claims” argument, asked my assistance in helping a Washington DC policyholder with a “small” claim to find a public adjuster. Veeno said the claimants dilemma was “…a prime example of why fee caps don’t work for homeowners…”
Here’s the claimants email:
Dear Mr. Veeno:
Would you be kind enough to recommend a public adjuster in the DC area? My home sustained water damage in the basement from a leak and I need to improve the insurance company’s estimate. I don’t think the damage will exceed 15K, so the job may be too small for many adjusters.
Thank you very much,
Veeno, a friend and talented spokesperson for AAPIA and public adjusters generally, said: “Scott, this may shed some light on your recent blogs on fee caps… if you have a PA who can assist this homeowner’s request regardless of membership in any national association I ask kindly you send PA name and email/phone number to me ASAP and I will see homeowner receives their information…”
I responded as follows:
The insurer has admitted the claim is valid by making an offer–the only dispute is over the amount. The claimant wants more & maybe he deserves it, maybe not.
Don’t know about DC, but…in Florida he would only need to make one toll-free call to the number the insurer provided in the claim response to find “free” state sponsored mediation that almost always results in a higher payout; without legal fees and without paying a public adjuster 20% of his claim amount. I’ve used this service myself and it worked quite well to almost double my original offer.
By the way, in Florida, every claimant is required to receive a state approved explanation of this process along with the toll-free number. We also have an insurance commissioner and an Insurance Consumer Advocate who will help. Again, without taking anything out of the claimants payout.
It is frustrating for the state of Florida to provide these services for free, while claimants continue paying 20% of their payout to public adjusters for services they sometimes don’t need.
Would AAPIA support the state mediation approach in DC?
When and if I receive an answer to this last question I’ll be sure to let my readers know.
In the meantime I think it’s safe to say that, with state sponsored free mediation for claim disputes and with most adjusters already charging somewhere in the neighborhood of 10% anyway, there is nothing but gain for consumers with a 10% across the board fee cap.
Any argument to the contrary is just a red herring.
NOTE #2: I say this because the National Association of Public Insurance Adjusters (NAPIA) has embraced caps of 10% in other states and favored the reduction to 15% in Florida. An organization of past presidents of FAPIA, called The Council of Property Claim Professionals Inc. (CPCPI), favored the reduction to 15% as well. And, despite Florida’s 20% cap (the highest in the US) most Florida public adjusters charge 10% as a matter of good business practice. For information on where people stand see Public Adjuster Fee’s…consumer advocates fail consumers! For information on what PA’s usually charge regardless of fee caps, see; PA Fee’s…Florida Consumers pay too much!
NOTE # 3: In its letter to me FAPIA stated that limiting fee’s further can prevent PA’s from handling smaller claims (See letter dated 2/13/14). The American Association of Public Insurance Adjuster (AAPIA) seems to agree based on position papers to lawmakers in New Jersey, articles on its website and the above referenced email from Gene Veeno.
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