Kickbacks in the Insurance Adjusting Business

November 13, 2008

Do insurance adjusters and claim representatives take kickbacks? If they do, who pays them, how is it done, when do they do it?

It has been ten or fifteen years since I was called by an employee of an insurance company who wanted to do the right thing. He had an elderly woman insured who had lost many things in a move from New England to Arizona. He wanted to settle her claim fairly. He asked me if I would handle herclaim and "don't give me any crap. I don't want an inflated number to settle this claim". He explained to me that his vendors, in an effort to "suck up" to him (his words) had given him numbers that would not indemnify their insured. He wanted me to help.

I signed up the client. She did not know how I got her phone number but assumed it was from someone at her bank to whom she had complained that day. I neither confirmed or denied that someone at the bank had tipped me off that she was having problems with her insurance company.

We obtained professional estimates as to the values of the lost items. I paid for those estimates and selected people with credibility who could support their valuations. We settled the claim rather quickly. The insured was elated knowing that her claim was not going to come up short.

Not long after that, I was asked by the Vice President of Security for this company, who had come to Arizona from his office back East to look into a few issues with their Arizona operation, if I would come to his office. Intrigued at meeting the highest official of this insurance company that I had ever met, I agreed. I was to meet with him and one of his assistants in his Arizona Office on such and such a day.

I did not realize that I was walking into a professional interrogation.

I think that this company must have been tape recording their employees because for every question he asked me about my call from his employee he seemed to have the answer. I didn't want to get this guy in hot water so I tried to downplay what happened. I did not and will not lie for anyone although I could see what was going on here. As I watched what was happening, I came to realize that the only question for which he he did not have an answer was, "how much" did I pay him for the referral.

Of course we pay referral fees. It is a great way to get business. But I didn't pay this guy a thing. I explained that if he would have asked I may have done so if it would have been ethical for him to do so but I knew that he would take nothing. I actually think this insurance company adjuster was a straight up guy.

The Vice President of Security asked for a statement and we put one together and I signed it. The statement said that I had received the referral from him but had paid him nothing.

After I signed the paper, this impeccably dressed, obviously well paid former police investigator sat back in his chair and told me that I was a small fish in a big pond. He then leaned forward, produced a document and asked me if I knew any of the contractor names on that paper. I did but I am uncertain why he asked. For each one that I knew, he gave me a great big smile. Were these contractors providing some kind of consideration to the claims representatives and adjusters for referrals to rebuild fire damaged properties?

As it turns out, every single employee in the Phoenix office of this company, except the manager who was transferred to their home office, was dismissed. The person who had referred me to his insured was axed and is now the owner of his own adjustment firm. I respect him very much. He is a little cheap in settling claims but he has a moral compass.

Over the years we have heard stories of how contractors who depend on insurance adjusters for business take care of their adjuster friends. I am listed in the yellow pages as an adjuster (Arizona does not provide a separate license for insurance adjusters and public adjusters) and not long ago received a call from a contractor who was looking for work. "Do you have any children or grandchildren?" I was asked. "We have been a little slow lately," the contractor explained, "and my guys have put together a nice swing set play house combination I can deliver to your house if we can get a job." I passed but wonder if he called anyone else who took him up on the deal.

Kickbacks can take many forms. Would a contractor pay a kickback to an adjuster or a claims representative? Would a contractor bill and insurance company for a new roof in a rebuild when the roof was put on the insurance adjusters OWN roof. Who knows but if you are interested into looking into this further, you might want to "Google" "insurance adjuster kickback." Many interesting articles come up including a million dollar kickback scheme that was adjudicated in December 2008 in New York.

I am not pointing the finger at anyone but sometimes I wonder WHY some insurance adjusters and claim representatives would tell an insured that they don't need the beneficial services of a public adjuster. Is it possible that, because a public adjuster becomes involved, the insurance adjuster might not be able to refer this claim to their "Friendly" contractor?

You decide.