Ethics, fraud, and adjuster standards
Domain 5: Ethics, Fraud, and Adjuster Standards
This domain tests the adjuster's professional conduct and the fraud controls around NFIP claims. Expect questions on licensing and certification, conflicts of interest, documentation, confidentiality, and the duty to report suspected fraud.
Core rules
- NFIP adjusters must be properly licensed in the state where they work and must hold the FEMA flood-adjuster certification required for the assignment. They must follow the SFIP, the NFIP Adjuster's Manual, and the claims handbook.
- Adjusters must not have a financial interest in the loss, must not steer insureds to contractors, and must not accept rebates or referral fees. Confidential information should be used only for the claim.
- Files must support the payment: photographs, measurements, scope, depreciation rationale, proof of loss, and correspondence. A payment without a documented basis is an ethical and audit problem.
- Red flags include a policy purchased shortly before a flood with maximum limits, inconsistent loss descriptions, altered receipts or estimates, prior losses, staged damage, and refusal to provide records.
- Suspected fraud should be documented and referred through the proper NFIP fraud-reporting channel; the adjuster does not accuse the insured or negotiate a fraud settlement.
Worked example
An adjuster reviews a contractor estimate that has been handwritten over an original typed amount, raising a $12,000 line to $21,000. The insured says the contractor "updated" it. The adjuster should not pay the altered line. The adjuster documents the discrepancy, obtains an independent estimate, and refers the matter for fraud review while continuing to evaluate the legitimate flood damage.
Traps
Do not ignore altered documents because the insured is cooperative. Do not discuss claim details with neighbors or unauthorized third parties. Do not let a contractor act as the insured's representative without authorization. Do not approve a payment just because the proof of loss is signed.