Approximately one year ago, on Sunday, May 22 at about 5:30 p.m., Joplin, Mo. was devastated by a massive EF 5 tornado that at times was one mile wide and traveled on the ground for more than 20 miles. This storm, Missouri’s largest insurance event, resulted in roughly $2 billion in insurance payouts and nearly 20,000 claims.
As we all recall, the industry’s response was immediate. Catastrophe teams and adjusters swarmed in, and more than $1 billion was paid out within the first 100 days. The insurance payouts jump-started the rebuilding effort, and despite the widespread damage, homes were repaired, schools opened on time in the fall and Joplin’s can-do spirit inspired the nation.
However, following these events we not only see the best in people as neighbor helps neighbor, we also see the seamy underside of society as some seek to prey on the misfortune of others. It is important to remember that Joplin’s recovery, like any recovery effort following a major natural disaster, was not a straight line. Residents were forced to contend with criminal activity and potential scams. Looters stole property from storm victims’ homes, individuals exploited the opportunity and used personal papers and documents that had blown away to commit identity theft, people impersonated government officials and attempted to charge processing fees for disaster assistance — and fly-by-night contractors ran home repair scams.
Whether it is a major event like the Joplin tornado or a small neighborhood hail storm, it is common to see some crooked contractors descend upon a community and take advantage of unsuspecting homeowners.
Over the last few years, these “storm chasing” contractors have had many opportunities to ply their trade. Already, this year’s tornado season is off to a fast start with reports of more than 500 tornadoes across the United States. There were more than 110 reported tornadoes on both April 14 and March 2 this year severely impacting states such as Kansas, Kentucky, Indiana and Oklahoma.
With all of the storm activity in the past few years and the opportunity for contractor fraud, lawmakers and insurers have banded together to advance much needed legislation that could help protect homeowners from contractor fraud and abuse.
Bills were introduced this year in Arizona, Colorado, Indiana, Iowa, Nebraska, South Dakota and Tennessee. As of mid-April, bills have been enacted in Arizona, Indiana, Nebraska, and South Dakota and are still pending in Colorado, Iowa and Tennessee.
Generally these bills provide important consumer protections that require homeowners to receive notices and contract termination rights. They prohibit roofing contractors from requiring deposits or advance payment, except for emergency repairs necessary to protect the property from further damage, pending insurance claim determination. The bills also prohibit rebating or other compensation to induce consumers to enter into contracts.
These consumer protections strike right at the heart of the business model of contractors who use questionable solicitation and business tactics. As an example, the Iowa Attorney General recently investigated an Omaha, Neb., contractor who allegedly took more than $7,000 from an 87-year-old Council Bluffs, Iowa man. The Attorney General alleged that the contractor collected an insurance payment in advance but failed to perform the storm repair work. The contractor was doing business in Iowa but was not registered with the state as the law requires.
Clearly, the vast majority of contractors are honest, reputable business people and these bills will not negatively affect their ability to treat customers fairly and conduct business.
While these bills have sailed through in most states, they have faced stiff opposition from some contractors in states like Iowa and Colorado. Those who are relying on deceptive practices and bogus incentives to lure in customers and shoddy workmanship, are out in force to stop any effort that will impede their ability to make a quick buck.
As a counterweight, it is important for insurance professionals to make their voices are heard and push forward legislation that will protect our customers. On this and other issues, our industry plays a crucial role in providing lawmakers with information that will help them see past the smokescreen and take affirmative steps in protecting the interests of consumers.
Like after Joplin or any event, insurers want to be able to quickly mobilize and meet the needs of their customers. Customers want to know they will not be victimized twice — one by the storm and a second time by an unscrupulous contractor. To maintain the trust of homeowners and businesses, insurers devote many resources to ensure that the claims process is smooth, easy and meets consumer needs. The Storm Chaser bills are designed to accomplish these goals and most importantly, they add vital consumer protections.
Passmore is senior director personal lines policy for the Property Casualty Insurers Association of America.