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Experts say hundreds of thousands of insurance claims are expected following the Harvey and Irma hurricanes.

On September 11, the Consumer Federation of America (CFA) advised consumers on how to prepare to file claims for damage and offered tips on how to get all you are entitled to from your insurance company.

J. Robert Hunter, CFA’s Director of Insurance and former Texas Insurance Commissioner and Federal Insurance Administrator (who ran the National Flood Insurance Program), was deeply involved in Florida in the aftermath of Hurricanes Andrew and the storms of 2004/2005. Seeing that the insurers were threatening to sharply raise rates and drop homeowners’ policies after Andrew, Hunter devised a moratorium and price freeze that Governor Lawton Chiles and the legislature adopted, keeping affordable insurance in place. After the 2004/2005 storms, when reinsurers were severely price gouging in the Florida market, Hunter worked with Governor Charlie Crist and Commissioner Kevin McCarty to put a layer of state reinsurance in place at actuarial rates, lowering homeowners insurance premiums by 20 percent and earning tens of billions of dollars for the state.

“Our thoughts and prayers go out to the people of Florida, Alabama, the Carolinas and Georgia as they face the aftermath of this huge storm,” Hunter said. “Unfortunately, we believe that families will have to dig deeper into their pockets than ever, because insurers have been steadily increasing hurricane wind coverage deductibles and imposing other new homeowners insurance policy limitations. This shift of costs to consumers under homeowners insurance policies may take some by surprise, since disclosures are often buried in renewal paperwork that consumers may not understand or even read. Because so many consumers experienced severe claims problems in the wake of Hurricanes Katrina and Superstorm Sandy, we urge homeowners dealing with losses caused by Hurricane Irma to be vigilant with their insurance companies, including the insurers settling National Flood Insurance claims, to ensure that they receive a full and fair settlement.”

Although the storm sharply weakened, Hurricane Irma is still a huge event, which will leave a pattern of claims in Florida, Alabama, South Carolina, North Carolina and Georgia that is quite different than what Hurricane Harvey did in Texas and Louisiana. While the claims of Harvey were predominantly flood claims, with wind damage limited mainly to the western part of the Texas coast, Irma’s claims promise to be mainly wind damage across these states with the most significant flooding mostly occurring along the coast. CFA believes that Hurricane Irma could result in about 450,000 claims for insurance payments. We expect more than 300,000 claims for wind damage by homeowners and another 150,000 claims for federal flood insurance. Insurance payments for wind damage from Hurricane Irma could exceed Hurricane Andrew’s wind insurance payments of about $25 billion (in current dollars) while FEMA insured flood claims will be about $15 billion. Private flood insurance will also be paying some claims.

In the areas hit by flood it appears that about 30 to 40 percent of homeowners with flood damage have insurance protection, a penetration ratio which varies from community to community in different parts of the impacted area. This compares with estimates of under 20 percent flood insurance penetration in communities hit by Harvey related flooding. Unfortunately, the number of flood insurance policies written by FEMA in Florida dropped by 15 percent since 2012, according to that agency. There has been some growth in private flood insurance in Florida in recent years. We will see how that works for consumers and if Irma will encourage or dampen the private market’s enthusiasm for entering the flood risk arena.1. Wind and Water Claims at the Same House

Homes with both wind and water damage could face some unique insurance problems. Some insurers use an “anti concurrent causation” clause in their policies that, insurers allege, removes coverage for wind damage if an uninsured flood happens at about the same time, a potentially serious problem in claims from Hurricane Irma. CFA believes that these egregious clauses are impossible for consumers to comprehend as most people cannot believe that their insurance company would sell them a policy with wind coverage that could disappear through a trap door hidden deep in the policy language. Florida’s (and the other impacted states) political leadership should stand up and demand that these clauses not be enforced. “The clauses are often ambiguous, so if an insurer points to such a clause to deny your wind claim or to offer an inadequate payment, read the provision carefully to see if you think it is ambiguous and, if so, contact an attorney right away,” Hunter explained.

We anticipate a significant number of homes will have suffered both wind and water damage from Irma. While the National Flood Insurance Program (NFIP) is financially backed by taxpayers, it is often a policyholder’s homeowners insurance company that will handle the claim for both the wind and the flood damage, even though the flood portion will be covered by the NFIP and taxpayer money that supports it. Because of this unique situation, it is very important that consumers verify that insurers do not attribute an unjustifiably large portion of the losses they experience to flood damage. Consumers must be the first line of defense against insurers shifting costs for wind losses to the NFIP and thus to taxpayers, something of significant concern in Hurricane Irma given the abundance of both wind and flood claims. Representative and Senators so they can make sure that taxpayers are protected.

2. Solvency of Some of the New Insurers Created to Take Out Homeowners Policies from Florida’s Citizens Insurance Company May be Problematic

On August 22, 2017, even prior to Hurricane Irma forming in the Atlantic, one of the new insurers, Sawgrass Mutual, signed a consent order and went under administrative supervision. Florida’s insurance regulators were trying to get the company’s 20,000 policies moved into another insurer but that has not happened yet. The timing of Hurricane Irma leaves the Sawgrass policyholders in a very tough spot. Many of them may end up having to file claims with the Florida Insurance Guaranty Association, which can delay recovery and also might result in somewhat lower payments.

Sawgrass is not the only concern as Irma wreaks havoc in Florida. Twenty five insurers were formed since 2005 in Florida to specialize in taking homeowners business out of Citizens. These new insurers have not been tested by a major hurricane. The insurer, says Weiss, has “weak overall results on stability tests” and has “concerns about the financial strength of its reinsurers.” The insurer had 577,263 policies in force as of the end of 2016.

Two of the other top 11 insurers had weak “D” financial strength (Tower Hill Prime with 148,000 policies insured and People’s Trust with 146,000). Five of the top 11 had fair “C” ratings, two had good “B” ratings. The only large insurer with an excellent “A” rating is Citizens Property Insurance Corporation, itself. A list of the ratings of the top 25 home insurers in Florida can be viewed here.

Hunter noted that, over many years, the state has been forcing tens of thousands of policyholders out of Citizens and pushing them into these weaker and sometimes failing insurers. “If Irma had not weakened, many policyholders might have found themselves dealing with insurers that were in financial trouble,’ Hunter said. “This should alert consumers to be very careful in selecting or remaining insured by home insurers that could be in trouble when the next big one hits.”

Tips for Consumers Filing Claims

As consumers prepare to contact their insurance companies in the wake of the storm, the CFA offered the following tips regarding the filing of a claim.

1. You have paid your premium and are entitled to coverage. If you have a legitimate claim, do not hesitate to file it. Report your claim as promptly as possible as insurance companies generally handle them first come, first serve. This is particularly important in Hurricane Irma since claims adjusters will be spread thin because of the size of this event and the deployment of many thousands of adjusters to Texas and Louisiana dealing with claims from Hurricane Harvey. Patience will be required here but keep on top of your insurer to make sure you get service as soon as possible.

2. Once your claim is reported, be sure to get your claim number and write it down. Insurance company claims departments can locate your file most promptly using your claim number.

3. Maintain receipts for any expenditures related to immediate repairs you had to make to secure your home as well as any living expenses (hotel, evacuation costs, meals) if you could not return to your home in the wake of the storm. In wind claims you should get reimbursed for such additional living expenses. If your claim is limited to flood insurance, additional living expenses are not covered.

4. will be sending your information.

5. Many insurance companies have repair programs in which they offer to send out one of their approved contractors to estimate your property damage. You may wish to obtain an estimate from their contractor, but you are not under any obligation to use them. The insurance company may encourage their use, as it is to their advantage. Contractors that participate in these programs have likely agreed to unit repair costs dictated by the insurance company or one of their vendors. The unit repair costs are provided to insurance companies by software vendors and are averages by geographic region and may or may not fully compensate you for your damages. It is very important to remember that your claim is unique and individual and should always be treated as such by your insurance company. If your insurer suggests that you cannot get your own estimate, contact your state insurance department to complain.

6. Beware of fly by night contractors who might approach you to repair your home. Make sure the contractor has good references and is insured in case of errors in construction or a worker is injured on your property. Check with the Better Business Bureau near you or with your insurance company if you are not sure about the qualifications of a contractor.

“Not all insurance companies handle claims badly, so go into the claims process with an open mind,” said Hunter. “Be vigilant, though, and be ready to stand up for yourself and your family, or you run the real risk of being shortchanged.”

Keep Good Records

When you file a claim, you should immediately start a notebook documenting contacts with your insurance company. List the date, time and a brief description of every exchange. If you need to complain later, this information will be vital (see below). If an adjuster says he or she will come and does not, write it down. If an adjuster is rude, write it down. If the adjuster is pleasant and efficient, write that down, too.

Make as thorough a list of your possessions as you can. Use pictures of your possessions taken before the storm and keep them in a safe place. If you later realize you have no pictures when you file a claim, don’t forget that family or friends may have pictures of rooms in your house (for example, from Christmas or other celebrations) that can be helpful in recreating a list of your belongings.

You may wish to take your own photos of the damage as part of your documentation, if you can do so safely. Do not climb on the roof. Leave that to the professionals. The adjuster should still take their own damage photos.

As noted above, you may be entitled to money up front for living expenses, such as hotel costs and meals, if your home becomes uninhabitable as a result of wind damage. Keep receipts from emergency repairs as well as any costs you incur in temporary housing. These costs may be reimbursable under the “Additional Living Expense” portion of your homeowners’ policy. Insurers are usually very good about these initial payments, while the media is focused on the hurricane aftermath. Most claims problems, if they arise, come later, when bigger payments are sought and the media has lost interest.
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