Florida's CFO, Gallagher, Jeopardizes Florida's Hurricane Victims

by M. Randolph Hamilton
August 27th, 2004

Update January, 2007

Tom Gallagher ran for Governor in the State of Florida in 2006 and was beat in the primary by Charlie Crist with 64% against Gallagher's 33.5% of the vote. People are just not as stupid as some politicans think they are.

In two separate public addresses since hurricanes Charley and Frances paid their visits to the sunshine state, the Chief Financial Officer of the State of Florida has made statements publicly that has set a hostile environment for independent adjusters. A recent press release posted on the Florida Department of Finance website, states that "Gallagher asked Florida's Insurance Commissioner Kevin McCarty to issue an emergency order today requiring all property and casualty insurance companies licensed in Florida to report any instances of "price gouging" by independent adjusters. Gallagher said that he and McCarty had heard of independent adjusters demanding exorbitant fees from insurance companies desperate to find more adjusters."

The press release then follows this with,"Our first priority is to make sure all claims are handled as expeditiously as possible, and we appreciate the response we have had from adjusters", Gallagher said. "But at the same time we will fight to contain costs that may get passed on to consumers because of the actions of a few rogue adjusters." (emphasis added)(If the press release has been removed you may read it here.)

As though this was not enough Gallagher actually has posted on the home page "All storm victims are urged to ensure they are dealing with a licensed adjuster and to report instances of adjusters low-balling claim settlement offers. Adjusters who low-ball Floridians could lose their licenses."

There are several issues here that should cause concern for Floridian taxpayers. The first is Gallagher's lack of knowledge of how the insurance industry operates. Let's make it clear.

Insurance companies do not keep on staff enough adjusters to handle claims that result from a catastrophe. If they did we would all be paying ten times what we pay for insurance to keep adjusters sitting around waiting for a catastrophe to occur. As a result, insurance carriers rely on independent insurance adjusters to work the claims. Independent catasrophe adjusters are people who do not work until such time that an event large enough to overwhelm the insurance companies occurs. These are people who are ready at a moments notice to pack up and spend a month or two helping people get their lives back together.

Gallagher commented that he wants insurance companies to report "instances of price gouging by independent insurance adjusters". He goes on in the next sentence to say, "But at the same time we will fight to contain costs that may get passed on to consumers because of the actions of a few rogue adjusters."

There would be no costs passed on to consumers if it were only a "few rogue adjusters". The "few rogue adjusters" are the ones not working.

Fees schedules are negotiated with insurance companies. Many companies are leading the way to higher fees in an effort to attract indpendents so they might get there claims resolved more quickly. The concern for Gallagher might lie in fact that Citizens Property Insurance Corporation, a goverment owned corporation, and is now having to compete in the market place like other privately run corporations for the ever more valuable independent adjuster.

The next item of absurdity is the comment regarding "lowballing" by independent adjusters. Independent insurance adjusters are paid on the basis of a fee schedule. The fee schedules pay more money for claim estimates that are higher. The more money the insured gets, the more money the adjuster is paid according to the fee schedule. The reason for this is higher claims tend to take more time to inspect, photograph and estimate. Obviously the adjuster has to be able to prove the claim. As long as there is coverage for the insured, it behooves the independent adjuster to include the loss in the estimate, because it has a direct impact on the adjuster's pay. Many contractors have raised the price of construction since the hurricanes have come through Florida. Many of the estimates written at what was current prices for the area could be viewed as "lowballing" by a hostile government ready to attack the first response group of people who always stand ready to aid those in need after a catastrophe.

Some adjusters have already left the state to work in friendlier neighboring states devasted by Hurricane Ivan. With a shortage of independent insurance adjusters, can Florida really afford to loose more, because of hostility shown toward independents by Gallagher?

On a more basic note, prices going up when there is a larger demand or going down when there is little demand is known as "supply and demand" in a free market and is taught in basic economics. Shouldn't the Chief Financial Officer of a state know that? The government controlling prices is known as socialism, and I know that.

The stupid things politicians say. I'll see you in Alabama.

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