Much is being made of a recent call by Florida Insurance Commissioner, David Altmaier, for insurance companies to “redouble efforts to resolve all open claims…” related to Hurricane Michael. Here’s the story in Insurance Journal. He’s right. These claims need to be evaluated on their merits, paid as appropriate, and closed so that the people of Florida’s panhandle can find their new normal.
Most people who don’t live and work in Florida, and many who do, only remember Hurricane Michael as a vague event from sometime last year. In case you’ve forgotten, Michael made landfall in Florida’s panhandle on October 10, 2018. I wrote about my experience driving out into the panhandle after Michael. 148,347 claims were filed and as of the end of July, 20,484 claims were still open. That sounds like a lot of open claims, but what do these numbers really mean?
They really only mean that these are the numbers as of this date.
Numbers without context can tell you anything that you think they are telling you. If I told you that I was sending you $100,000 (I’m not), without telling you anything else, you would probably think that I’m going to get $100,000 to you (I’m still not) soon. You might think that it’s coming in a cashier’s check. You might think that I’m delivering it to you (still not). What I actually meant was that I was planning on mailing you a $5 bill every month until the total was $100,000 (actually not doing that, either).
The numbers only mean that as of July 26, 2019, the Office of Insurance Regulation (OIR) knows about 148,347 claims and that as far as they know, 20,484 claims are still open.
That’s it. That’s the list. There’s really much more that those numbers don’t tell us.
They don’t account for recently filed claims.
Can we be fair to the insurance companies for a few minutes?
Not all Hurricane Michael claims were filed in the first few weeks after the storm. In fact, many customers that evacuated weren’t able to return home quickly. Others may have been living in another home. Still others may have had other life issues that kept them from dealing with their property there. Some people may not have initially filed claims because they didn’t think there was any damage, or enough damage to overcome their hurricane deductible.
The numbers that the OIR reported are accurate, but they don’t indicate the age of the claim. They can’t tell you how long the insurance company has had to deal with it. This reminds me of another fact that these numbers can’t tell us.
They don’t account for claims that were closed and then reopened because of additional information.
Some of those 20,000 open claims were closed at some point in the process. Claims can be reopened for a number of reasons. The insured could discover additional damage that wasn’t apparent when the original claim was paid and closed.
Understand that a claim is a stressful time for the insured. When you ramp up the volume of claims from a normal Wednesday to the number of claims that are reported after a hurricane, you have stressed out customers and stressed up claim adjusters. The adjuster is going to have pressure from their supervisor to get as many claims moved forward as possible. That’s not completely true. They are being asked to move more claims than humanly possible. They are being asked to get claims paid and closed. The more claims that can be paid and closed the better.
Before you impute some nefarious motivation to that, understand that the company often has more claims than their internal staff can handle. That’s why they hire independent adjusters to boost their capacity. They also heard the message loud and clear from the OIR after the claim. They were concerned that claims get paid and closed as quickly as possible.
All of this rush to pay and close claims is a good thing at first. The idea is that companies are getting payments out quickly to people so that they can start to find normal again. The problem is that you have people in the mix and because of that, things can be missed. In the rush to do the right thing, we make mistakes. Hence, claims are reopened because something got missed the first time.
That’s not the only reason claims get closed and reopened. Sometimes, a claim is settled to the apparent satisfaction of the customer and then they meet someone. It might be that a friend tells them about this wonderful person who got them so much more money from the insurance company. It also might be that this wonderful person shows up at their door and tells them how they can get more money from the insurance company.
You guessed it. They met a public adjuster. This isn’t about the good or bad of public adjusters. It’s about how claims can be closed and reopened. We’ll leave the conversation about the good and bad of public adjusters for another day. Oh yeah, they might also have hired an attorney because they suddenly felt like they didn’t get enough money (for whatever reason, but probably because they heard an ad on Spotify).
They don’t account for the complexity of the claims.
A few insurance companies that I know of used some wonderful technology after Hurricane Michael. They used aerial imagery from before the storm and compared it to imagery from after the storm. These images were geocoded so that the company could identify the precise addresses of buildings that they were insuring. Those before and after photos allows those companies to pay total loss claims almost immediately.
Come to think of it, a total loss like that shouldn’t require much investigation. Picture one includes a building. Hurricane Michael comes through. Picture two does not include a building. The math feels really simple. One picture + one category five hurricane + second picture without a building = policy limit payout.
The problems occur when you are dealing with partial losses, especially where the water level rose up to cause some of the damage in the building. If the insured was wise and bought a flood policy, at least the only argument is going to be over how much each insurance company will pay for the loss. If there’s no flood policy in place, the argument moves to between the insurance company and the customer to decide how much of the damage was flood related damage (which is likely not covered).
It could be that the complexity of the loss has to do with the complexity of the building that was insured. High value homes include custom and expensive interior design elements. They often aren’t just a square house. They may have expensive out buildings.
They don’t account for claims with outside representation.
I know. I already mentioned public adjusters and attorneys. Our friends in these professions need to be brought up again. Some customers, for whatever reason (such as the proliferation of attorney billboards and Spotify commercials) feel like they need to hire a public adjuster or and attorney to represent them when they file a claim with their insurance company.
The customer has every right if they feel that their insurance company hasn’t dealt properly with them, or adjusted their claim equitably, to hire someone to represent their interests. I can’t judge anyone who hires a public adjuster or an attorney. I can simply remind us all that when that happens, it takes longer to negotiate the claim settlement, pay, and close the claim. It’s just a part of the process when you involve those parties in the conversation.
When I read stories about someone complaining about the huge number of open claims from a catastrophic event, I’m inclined to understand that there’s more to it than the numbers. I’m on board with the insurance commissioner. I think claims need to be adjusted, paid, and closed in an equitable manner. I also think people need to be open to the idea that by and large, the players in this space are doing the best that they can in difficult conditions.
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