Property & Casualty Insurance Exam (National Portion)Producers and AdjustersMedium
An independent insurance adjuster is hired by an insurance company to investigate a complex commercial property claim. During the investigation, the adjuster discovers evidence of potential fraud by the policyholder. What is the adjuster's primary responsibility regarding this discovery?
- AAlert law enforcement authorities directly without involving the insurer.
- BConfront the policyholder directly and demand an explanation.
- CDismiss the claim immediately without further investigation.
- DReport the findings to the insurance company that hired them.
Show answer & explanationAnswer & explanation
Correct answer: D. Report the findings to the insurance company that hired them.
An independent adjuster works on behalf of the insurance company that hired them. Any significant findings, especially concerning potential fraud, must be reported to the principal (the insurer) so they can decide on the appropriate course of action, which may include further investigation or legal steps.
Why the other options are wrong
- A. Alerting law enforcement directly bypasses the adjuster's principal and could interfere with due process.
- B. Confronting the policyholder directly is not the adjuster's primary role and could jeopardize future actions.
- C. Dismissing the claim immediately is premature and exceeds the adjuster's authority without insurer's directive.
Adjuster Reporting Obligations
Adjusters have a duty to report all relevant findings, including suspicious circumstances or potential fraud, to the insurance company that appointed them.
- Report all material facts.
- Includes potential fraud.
- Report to the hiring insurer.
Memory trick: An adjuster's loyalty is to their hiring hand.