A few days ago, we were asked a question that made us stop and think. We were asked, what is an adjuster? While we’ve written in the past about problems with Allstate insurance adjusters and even taking a look at how an attorney can negotiate with an insurance adjuster on your behalf, and even what a typical day for an insurance adjuster is like, we’ve never really explained what an insurance adjuster really is.
Before we can explain that, we have to take a step back and look at how insurance companies make money. One of the most popular misconceptions out there is that insurance companies make money off of the premiums you pay–that isn’t actually how it works.
Because many customers demand the cheapest possible rate, insurance companies have to price their premiums very competitively. In some cases, insurance companies even lose money on premiums–which they view as a marketing expense.
One very popular business model in the insurance industry is to invest the money the insurer takes in as a premium. When you pay your bill, the insurance company decides how likely it is that they will need to use that money to pay out a claim–and over what period of time they would have to pay the expense. Based on those calculations, the insurance company is able to invest or loan that money to someone else. When the insurance company does this, it often keeps the profits it makes.
That’s why it’s ok for an insurance company to lose money on premiums. They don’t actually need the premiums to make a profit. As long as enough money comes in each month to keep their investment fund funded, and they are smart about their investments, the insurance companies stand to make a very handsome profit.
Because of this, insurance companies have a vested interest in making sure that the amount they take in in premiums is as close to the amount they pay out on policies they’ve underwritten.
The person on the front lines responsible for making sure this happens is the insurance adjuster.
While each company utilizes insurance adjusters in their own way, the job is generally the same from company to company. An insurance adjuster often serves as the go between for the customer and the insurance company. That can mean that the insurance adjuster is responsible for collecting information from the customer and preparing that information for executives at the company to review.
As far as most customers are concerned, the payment they receive for their injury has come directly from the claims adjuster. While it’s true that insurance adjusters have a tremendous amount of discretion when it comes to doing their jobs, they are also bound by very stringent policies.
That’s one of the reasons why we recommend that you don’t attempt to negotiate with your insurance adjuster on your own. As we explained earlier, the modern insurance company is too complex for one individual to take on alone. While each insurance company operates differently, you’ll likely have an easier time negotiating with an experienced litigator at your side.