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A home destroyed by Harvey; image courtesy of www.cnn.com.
A home destroyed by Harvey; image courtesy of www.cnn.com.

You pay your premiums faithfully, are never late, and bought into the promises made by your home insurer that you would be protected in the event of an emergency. Along comes a hurricane of epic proportions – Harvey had 130mph sustained winds, an enormous storm surge, and dropped several feet of rain in a relatively short period – and you lose everything. “But,” you think, “at least I’m insured. Everything will be fine.” Sadly, that’s not proving to be the case for many people. Delayed insurance claims are the new storm slamming Texans.

Texan Jeni Kite told KPRC2 in Houston, “You can’t fix anything until insurance comes through. Well, we haven’t heard anything from insurance, so how do you keep moving on? You’re just frozen.” As of two days ago, nothing had changed for Kite. Even though an insurance adjuster had already inspected her home and advised her to “gut it,” she’s still waiting for help.

She said, “We went to get the information, the adjuster didn’t turn it in, they thought maybe, he took off maybe he moved on we don’t know.” So, her insurer, the Texas Windstorm Insurance Association (TWIA) arranged for another adjuster to inspect the damage on September 25. According to Kite, “I have not heard a word from him.”

Rockport resident Kevin Baker isn’t faring much better. Despite TWIA’s mission statement, Baker told Channel 2 Investigates, “I’m on my third claims examiner, my second field adjuster and I have yet to receive their report.”

TWIA’s website states that it “is a residual insurer of last resort and is not a direct competitor in the voluntary insurance market. TWIA provides coverage to residential and commercial properties in certain designated portions of the Texas seacoast territory. The designated catastrophe area is that portion of the seacoast territory where the Commissioner of Insurance has found that windstorm and hail insurance is not reasonably available.” TWIA issued over 234,000 policies totaling $67.6B.

Harvey as seen from the International Space Station; image courtesy of www.theatlantic.com.
Harvey as seen from the International Space Station; image courtesy of www.theatlantic.com.

Clay Morrison, a public adjuster whose experience “includes adjusting claims in every major hurricane of the last two decades,” helps home and business owners when insurers drag their feet. Morrison told Channel 2, “We have a lot of files down in Port Aransas and I know numerous people down there and very few have even gotten their first check a month after the storm.”

Morrison and fellow adjuster David Lee are surprised by what they consider to be “grossly low estimates.” Additionally, TWIA is working with Veracity Research Company (VRC), “an investigative professional service firm specializing in all aspects of insurance defense investigations,” another move that surprised Morrison.

He said, “I’ve been through several of these storms and I have never, ever seen an investigation unit like this.” One of the issues he has with VRC is something Channel 2 Investigates discovered, which is VRC’s people asking policyholders to see the contracts they have with public adjusters. Morrison said, “My problem is if they are a private investigation group, they have zero authority in any kind of process of getting any kind of information like that.”

Indeed, Channel 2 Investigates was told by many public adjusters that “this is simply harassment to disrupt the process and ultimately delay a payment.” Morrison concurs, adding, “I don’t know why they would be investigating the claims themselves when there are so many people with so much damage that need so much help, it seems counterproductive to me.”

An answer to Morrison’s concern could be found by looking at history. Following Super Storm Sandy in 2012, CBS’ 60 Minutes aired a piece called “The Storm After the Storm.” The piece detailed findings of “wide scale fraud where original damage reports were later changed to make it look like the damage wasn’t as bad.” This also happened after Hurricane Katrina back in 2005. The issue then was wind vs. water claims. The difference? Who pays the claims.

In cases of wind vs. water, some engineering reports were found to fraudulently identify the cause of property damage as water, instead of the real culprit, wind.

For TWIA, a finding of water damage lets the company off the hook. Its policies don’t cover anything but wind and hail damage. So, who does cover flood damage? The National Flood Insurance Program (NFIP) offers flood insurance. The NFIP is managed and underwritten by FEMA, the Federal Emergency Management Agency. Policies must be purchased through an agent as the NFIP doesn’t sell policies directly.

The NFIP is facing its own challenges. The program is heavily in debt due to Sandy and Katrina payouts and has a cap on how much money it can borrow from the government. During an interview with the Corpus Christi Caller Times on September 4, “FEMA Deputy Associate Administrator Roy Wright, who oversees the nation’s flood-insurance program, said he expects Harvey payments to climb well above the $7.5 billion immediately accessible to the cash-strapped flood insurance program.”

However, he added, “I am confident that Congress will pay this bill in full.” Even so, FEMA expects the claims payout process to take up to one year to complete. Discussions in Congress are ongoing to determine if anything can be done to speed up the process, as well as examining potential reforms to the program.

Back to wind claims, what can you do if TWIA (or any other insurer) is dragging its feet on paying your claims? Dan Karr, CEO and founder of ValChoice, a site providing free reports on home and auto insurance, has some ideas that he recently shared in an OpEd piece for Fox News.

Karr discussed the most common means of handling insurers’ delays in paying claims: lawsuits and arbitration. While these means can be quite successful, if they end in a settlement, the parties typically enter a mandatory confidentiality agreement. Karr’s take on such agreements is that they do more harm than good as they keep other consumers in the dark regarding the misdeeds of their insurers. Given that regulation and legislation have also failed to correct the problem, he suggested a new approach: transparency. He believes that transparency will have “little cost and will be highly effective.”

What does this new approach look like?

In his words, “Public embarrassment is a powerful tool, and the insurance industry has been shielded from public accountability for too long. Texas regulators need to encourage homeowners to file complaints with the insurance department when they don’t get the service they expect from their insurance company. Regulators need to quickly vet these complaints. Once vetted, complaints need to be published and publicized. The publication of the data will inform consumers in Texas, and across the entire country, which insurers do not honor the promise to protect that is implicit with insurance. Texas regulators also need to publish their findings from market conduct examinations. Regulators routinely perform market conduct examinations, but the findings are considered confidential.”

Karr’s new approach is novel in the insurance industry, but not in other consumer-focused areas. We know that businesses, such as retailers, depend as much on public opinion for their success as they do on clever marketing campaigns. Many people refuse to do business with companies that have consistently low ratings from other customers.

As Karr said, “When carriers realize they will lose customers across the entire country if they do a poor job of protecting policyholders in Texas, two important events will take place. First, the service Texas homeowners receive will improve. Second, insurance companies will start to measure their performance based on data available to the public. This will have a powerful, positive effect on both consumers and the industry.”

It’s a good idea, with proven results found in other fields. One potential drawback, especially for those in coastal areas, is that other options may not be readily available. While there are some private insurers offering flood coverage, for instance, most policies are underwritten by the NFIP. Policies covering wind damage, other than those provided by TWIA, may also be hard to find.

In the meantime, despite Karr’s opinion on the mandatory confidentiality agreements typically required with settlements, those homeowners left waiting for help may best be served by contacting a reputable law firm. Additionally, consumers should file complaints with the Texas Department of Insurance Consumer Help Line. This can be done by phone at 1-800-252-3439 or online at www.tdi.texas.gov/consumer/complfrm.html.

Sources:

Insurance company accused of delayed response to storm claims
Houston, we’ll have a problem — insurance companies that won’t pay
FEMA flood insurance program begins to pay Harvey claims as expiration date looms

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