Not surprisingly, CFO Jimmy Patronis’s statement to the press has caused a lot of interest especially from the media, some of whom were in attendance when his comments were made. Following both print and internet articles of the CFO’s opinion, I have gotten a number of calls from various media folks across the state asking me to respond.

As I explained to one reporter, I do not know where the CFO got his facts to support this pronouncement. But given the gravity of his words, I think he should have enlightened folks with some credible facts and figures. The comments I have read and heard is that the press and the public is not buying what he had to say including the reporters I spoke with who share my confusion about where the data (or anecdotal evidence) is coming from. You can read Lawrence Mower’s reporting here: Florida CFO Blames Public Adjusters, Lawyers for Hurricane Michael Insurance Claim Delays.

One thing I have learned in my career is that when a politician or group starts looking for a fall guy, it’s best to hold on to your wallet and take a closer look. It makes me wonder why Public Adjuster voices were not present during the latest Florida Banking and Insurance hearings on Hurricane Michael claim delays, although the lawyer advocates present did an outstanding job, explaining the plight of the policyholder a full year after Hurricane Michael.

Now, let’s be realistic. There is no way given the complexity of major catastrophe adjusting any one professional group can be blamed for claim delays expressed by Florida’s CFO. Adjusting losses in these types of events where just about every rabbit hole that you can think of has to be addressed is not for the faint of heart.

Take for example multiple causation issues, coverage questions ad nauseam,  policy limitations as to dollar amounts available for covered losses, timing issues of the impact of different  perils on an insured property, some covered others not, law and ordinance issues such as zoning and building code upgrade requirements and wrapped up in all of this is the byzantine line-by-line of complex policy language that attempts to explain the practice and procedures an insured policyholder has to wade through in order to comply with the terms and conditions of their policy.

And let’s not forget the mortgage companies who will be named as a payee on any structure they have a mortgage on. Try dealing with a mortgage company (who plays a bigger role than you may realize in post loss adjusting) when making inspections with all the red tape that goes along with them making sure their security interest is preserved. That’s assuming enough actual cash value payment has been made to the policyholder in order to hire a contractor with a promise more money is coming... some day.

These are not public adjuster issues but are in fact problematic every day loss adjusting issues professional public adjusters have to deal with.

And if you can get through all the above, let’s not forget the end game which is attempting to reach an agreement on the covered scope and price of the loss with the insurance adjuster sent out by the insurance carrier. And try negotiating with an adjuster after the first adjuster or the second or third who were reassigned or abandoned the claim. Hopefully that person has the file notes from all the other adjusters. But that person likely has no authority in today’s adjusting environment. All authority typically rests back at some Cat claim center or corporate office, likely geographically far removed from the impact zone.  As I said, this whole process is not for the faint of heart, and my guess is very few policyholders are capable of dealing with this tedious and time-consuming process which requires rigorous processing all at a time of extreme stress.

Take for example two essential elements of loss adjusting mentioned above; the scope of the loss and the price of the loss. Without agreements on both, the file or loss will not settle. If you think price is not an issue, consider that Florida and in fact the rest of the country is red hot with construction projects. This means finding labor and material is much costlier than the period before Hurricane Michael. Notwithstanding the basic adjusting process, files will remain open due to the insured’s inability to make the repairs. This is not a public adjusting issue, it is in great part an insurance policy problem due to the construction of the complex insurance policy contract language.

So, what impact will all of the above have in settling claims?  Well, if you read the big print and then the little print of a standard property policy, there are all those pesky details about how a claim is settled.

But before we get to a point where the file is actually closed, let’s peak under the hood and enlighten the public about an insider secret.  While it may seem counter intuitive, in general, the longer a claim stays open the more it’s going to cost the insurance company, and conversely the more money a policyholder will get. But that assumes you have a well-seasoned, trained, and experienced advocate working for you. Want proof? A study done by the State of Florida called the OPPAGA Study found that while claims take longer on on average when handled by a public adjuster, the amount of money recovered for the policyholder was much greater. Again, more time, more money in your pocket as you are pulling dollars out of the insurance coffers. And yes, I am aware of the diminishing returns theory which is why it is so critical you choose the right advocate. Folks, representing policyholders is work and requires a high degree of varied skills and experience.

From my experience working ten years with one of this country’s largest insurance companies, the mantra was always to close the files. You see, the measurement of success in both domestic and surplus lines claim departments is judged by the ratio of open files to closed files. The longer a file is open, typically the reserves set aside to pay a claim have to be adjusted upward, which in the end increases loss ratio results.

Yes, I get that people need money fast to start the long road to recovery, but fast is never good when dealing with financial matters especially given all the players (many who are external to the adjusting process) involved post loss. Policyholders would be surprised at the hurdles they have to go through to get a basic building permit as well as a final certificate of occupancy. 

Now let’s take a closer look at some reasons files may be still open after a year following Hurricane Michael landfall.  Many have nothing to do with public adjusters and everything to do with insurance companies’ policies and the hard-working lobbyist they employ.  

As an example, let’s take a look at a replacement policy (new or old) which despite the misleading lead-in language, in fact does not pay you the replacement cost of your loss but something else called actual cash value. With it, you replace your items with your money and the hold back the carrier retains might be paid some months or years down the road assuming you pass an audit of the full billing you submitted. Then and only then will you get a full replacement payout. How many people can come out-of-pocket to fund the full repairs of their property and then wait for an insurance company to reimburse them?  Not many in my experience.

If you are facing code upgrade requirements and had the good financial sense to purchase this necessary and extra coverage, guess what? You will not be paid to cover this cost until the work is approved and completed. Again, the file stays open until the policyholder complies with all those little pesky details. Not a public adjuster delay issue.

Faulting public adjusters for open files is not a credible argument.  They did not write the policies or for that matter approve all the forms the carriers submitted to the Office of Insurance Regulation. And if you think all those filings which can include rate requests, are beneficial to the policyholder, then you best think again and apply some common sense.

These are just a very small set of issues facing the policyholder following a cat loss, none which are public adjuster driven delays. They are insurance policy issues driven by the wordsmith folks who write the policies, adding to the confusion of the policyholder.  Public adjusters had nothing to do with these complex insurance policy construction forms.

So, unless the CFO or others can support a position, with some facts about public adjuster delay, best to look deeper into the process.  As a starter, the readers may want to keep alert to articles and print media particularly from insurance trade publications. As an example, I read an article a few weeks ago from an insurance trade association blaming the public adjusting profession for the slow payment of benefits to their policyholders. Really? No facts or sources to support this statement were presented, just kicking the can down the road. When the insurance lobby has to blame someone, best to deflect to the public adjuster professional who is usually right behind the contractors. 

So now we have the CFO of Florida making similar comments with one of the more egregious statements that somehow looking at Facebook allows the viewer to determine the progression or delay of the claim process. Quite frankly, that’s a new one on me and I respectfully ask that Florida’s CFO explain how his colleagues in government are using Facebook as a market conduct tool to audit open files and claim payments, etc.

Then there are statements that the legislators will be taking up some type of reform. Really, let’s see how that worked out in the recent past.  Remember the 2004 Big Four hurricanes, that struck Florida within roughly 45 days of each other? What followed was total chaos, not enough adjusters to handle claims was just one of many issues that followed in the wake of these multiple strikes. But then when settlement talks finally came around, guess what, yes, those little pesky details of insurance policy construction whipsawed unsuspecting Florida policyholders. You see the insureds were told that even though they had “REPLACEMENT COST COVERAGE” they in fact were not going to get paid the replacement cost of their personal property, or the full cost to repair their property. The policyholders were told that their policy says they have to pay out of pocket the difference between how the insurance company calculates actual cash value and what the policyholder determines is the replacement cost of the loss.

Needless to say, this was a bomb that reverberated all the way to Tallahassee and of course our legislators said they would not stand for it any longer. How dare the insurance companies pull the wool over our constituents’ eyes, we will fix that--replacement cost should mean replacement cost. And that’s just what they did by putting an unsustainable fix in. Then with the passing of several years and rising losses, the bomb finally went off in the board rooms of the insurance industry. Board room discussion and questions were likely about how this new law was impacting the bottom line.  You mean now we have to pay the replacement cost of policyholders for 10-15 year-old television set or other electronics, or their clothes that in many cases had not seen the light of day for years and maybe in generations. I remember thinking at the time about the cost of my father’s WWII army uniform still hanging in my upstairs closet.

To say that everyone was dumbfounded by this legislative fix was an understatement. And I mean everyone which included the public adjuster profession. But this great political folly was not to last. Seems some folks said the legislature created a moral hazard for allowing payment for replacement cost of building and personal property, regardless of its age or usage.  In other words, you get new for old for everything. Just get a little fire or water damage claim going and thank your Florida legislators for this huge windfall while it lasted.

Well the good times didn’t last long. The insurance industry in Florida was going nuts and losing money. But then they are always losing money at least according to them. So, they hired the best and brightest lobbyists and off to Tallahassee they marched. As you can well imagine, soon the fix was no more new for old payments, some called it unjust enrichment.

Now back to Hurricane Michael, files stay open while policyholders come up with the money to buy or hire contractors to replace or repair insured damaged or destroyed property so they can collect their full replacement cost. Not a public adjuster issue, but insurance policy provisions overseen by the bureaucratic claims process, underwriters, and of course our esteemed legislative body who seemingly following the last person to speak wins the day’s theory of governance. 

In closing, my opinion of Florida’s CFO comment was done for political reasons, a nice soundbite you might say. “Public Adjuster are at fault for open Hurricane Michael claims.”  BALONEY! --show us the data that supports this.

As the old saying goes, “when the legislature is in session, no one is safe.”  And remember about unintended consequences, as in the last legislative fix following the 2004 hurricanes, rates were raised to recoup money to pay for the new for old scheme that was a short-term attempt to placate the victims of those four-big storms.  My condolences, if you did not have a claim during that golden period with help of the Florida legislature which allowed you to get new for old. That period was truly a gold rush for policyholders, notwithstanding the moral hazard it created.

If the insurance carrier pundits had their way, the insurance companies' adjusters would simply come out, tell you what they want to pay you and that would be that. In storm after storm, we’ve all seen how that works out. Things are a bit more complicated than politicians like to make them and it will take hard work and transparency to make them right. While no one insurance profession is perfect or has the complete answer, if we all work together with a focus on the policyholder, we might make the insurance claims process better for all.  

Let us know what you think!