Loss Adjustment Principles and Professional Ethics
This domain tests the adjuster's role, mandate and independence. Questions here are often short scenario items: an adjuster is offered a favour, asked to endorse a coverage opinion, or pressured to inflate quantum. The exam wants the principled answer and the reason.
Scope and mandate
- The adjuster is an independent fact-finder, not the insurer's advocate and not the insured's negotiator. The mandate letter defines powers: investigate, quantify, recommend - not bind.
- Standard sequence: verify the policy and premium status, check coverage and exclusions, establish cause and date, quantify, credit salvage, consider subrogation, and report with a reserve recommendation.
- Reports must be evidenced, dated, referenced to documents, and must separate fact, assumption and opinion.
Ethics
- Impartiality and equal transparency toward insurer and insured; the same facts to both.
- No contingent fees - remuneration must not vary with the amount allowed.
- No accepting gifts or hospitality that could influence the outcome; disclose conflicts and decline the instruction if independence is compromised.
- Confidentiality of insured data, and no public comment on a claim or on suspected fraud.
Worked example
An insured offers an adjuster "a percentage" to raise the stock figure. The adjuster refuses, records the approach in the file, discloses it to the insurer, and quantifies from purchase invoices and tax filings instead. Reasoning: the offer is both an ethical breach and a fraud indicator, and the file must show the refusal.
Traps that cost marks
- Opining on legal liability or policy coverage beyond the mandate.
- Negotiating a final settlement without written authority.
- Recording opinion as though it were verified fact.
- Failing to disclose a prior relationship with the insured or a repairer.