What Happens in Kentucky, Doesn't Stay in Kentucky

Every once in a while, a bill is proposed that will reverberate through an entire industry like a targeted drone strike that would be felt by all in an industry for decades to come. I appreciate that this sounds like hyperbole, but the proposed bill in Kentucky is just such a bill. As I have become more involved in this industry as a whole, I’ve had an opportunity to step out of the courtroom and onto the legislative floor. And while I have been home based in Pennsylvania and New Jersey, I have had great opportunities to protect policyholders in states all over our country. I no longer see this industry of insurance as a local issue, but rather a national issue. So lets start with a review of why every state should care what happens in Kentucky.

What happens in Kentucky, Does Not Stay in Kentucky.

This isn’t Las Vegas. This is a legislative bill that will be reviewed by every state’s Insurance Department, Senate, and House. If there is one thing I know from being in this industry as long as I have, states are not wholly autonomous. From the legislature to the courtroom to the tactics, there are nearly infinite interstate communications that effect the daily lives of insureds, carriers, public adjusters, IA’s, you name it. We have seen carriers test new policy language in one state only to expand it to their national offerings. We have seen first hand state legislatures review other state laws and data to determine what should be done in their state. So when you hear about this bill, the question is not whether or not it will effect you in Kentucky, the question is, what will happen if this is passed in my state?

The Kentucky Public Adjuster Licensing Bill Biggest Problem

So what does this bill propose anyway? There is a lot to fully unpack in this proposal, and I will be happy to discuss them with you individually if you’d like, but I want to focus on what I see as the biggest attack on policyholders contained in this bill. This bill proposes three fee caps:

1. 2.5% fee cap on the first $25,000 of a claim;

2. 10% fee cap on all amounts over $25,000;

3. 10% fee cap on for catastrophe claims

These caps are a direct attack on policyholders and would give insurance carriers a nearly free pass on over 90% of all claims. That means, for over 90% of all claims, the insurance carrier conduct would go unchecked and uncontested by any professional able to represent the insured. Let me explain.

The Important Data

1. 87% of all claims nationwide are valued at between $2,494 and $7,163, between 2008 and 2012. (Insurance Information Institute 2010, 2015 Insurance Fact Book)

2. $13,814 was the average payout on a claim between 2014-2018. (2021 Insurance Fact Book)

What It All Means

Given the proposed fee caps and the current data we have, over 90% of all claims would fall under the $25,000 threshold for the 2.5% fee cap. There is no secret as to the effect this will have. No public adjuster could handle a claim under $25,000. Period. In fact, I would venture to guess most claims under $50,000 would not have a public adjuster because the net fee would equate to 6.25%. Even with a loss at $100,000, the net fee would be 8.125%.

As a result, those insureds, who make up the vast majority of all claims being handled by insurance companies, are left without a single resource to protect them. This is an unacceptable outcome. Every insured, whether it be a homeowner, small business owner, landlord, tenant, or multibillion dollar corporation deserves the choice of representation. This bill will functionally eliminate that choice. This bill will allow insurance companies to run unchecked and unchallenged on over 90% of the claims they handle.

So I only have one question for anyone, whether individual or organization, who supports this bill; Why does the little guy not deserve protection and help on a claim?

The Choice of Assistance is Not the Only Choice Lost

In a free market society like we have in the United States, the individual has the option of choices within a marketplace. Someone can choose to buy the Honda or the Mercedes, the Casio or the Rolex, the sterling silver or the platinum jewelry. The daily choices we make on products and services are essential to our society. Lets be clear, not all products and services are made the same. This is just as true for public adjusters as it is for cars, watches, contractors, and any other product or industry out there.

As a result of this bill, the homeowner with the $10,000 loss will have no choice in a public adjuster at all, let alone a choice between multiple. Lets looks at a simple example. Lets say a person has a water claim that will actually cost $20,000 to repair. The insurance company limits the scope of damage and lowballs an estimate that only totals $2,300. There is a $1,000 deductible so they are netting $1,300. The homeowner goes in search of help. Without this bill, they call and find 3 adjusters able to help who will charge anywhere between 20% – 30% to handle the loss. They then choose between them based on reviews, recommendations, gut feeling, etc. on who to go with. Perhaps the best reviews and results come from the person charging 27.5%, so they go with them. Great. The market has worked as intended.

Now lets flip to the exact same situation, but now the Kentucky Public Adjuster Bill is in place. As soon as that homeowner starts calling around, they will have no one to help. No public adjuster can possibly justify coming in on a claim with $17,700 in dispute being capped at 2.5%. The amount of work needed to inspect, estimate, present the loss, letter writing, phone calls, and negotiations could never justify the best case scenario of $442.50.

There are many things we can do to help this industry. We can grow, learn, work together to make things better. We can educate the public as well as the public adjusters. But we need boots on the ground to be a check and balance on carriers. And for the record, the carriers need to be the checks and balance on public adjusters too. They are both the first line of defense to bad actors. But the only way we have those mutual checks and balances is to not have a bill like this in place. This proposed Bill in Kentucky will be a free pass granted to carries that we simply cannot agree to.

What can you do?

There are a few things you can do today to help, so let me make them clear:

1. Join an association that will lobby and contest this bill to expose it for what is is (AAPIA – American Association of Public Insurance Adjusters).

2. Reach out to Holly Soffer or me, Anthony DiUlio to ask how you can help

3. Contact the Kentucky Governor’s Office to voice your objection (Contact Here)

4. Contact Robert Duvall, the Legislator responsible for this bill (Contact Here)

We need to make sure everyone is aware of this. It doesn’t just effect Kentucky, it effects everyone in this industry. Let us make sure our voices are heard.