Understanding EML and PML: The Dilemma Facing Policyholders in Property Insurance

Understanding EML and PML: The Dilemma Facing Policyholders in Property Insurance

Insurance is a cornerstone of risk management, especially when it comes to safeguarding valuable assets like property. However, the concepts of Estimated Maximum Loss (EML) and Probable/Possible Maximum Loss (PML) have been causing ripples of discontent among policyholders. Let's delve into what these terms mean and why they are becoming a concern, especially for commercial clients such as hotels and apartment complexes. 

What are EML and PML? 

Estimated Maximum Loss (EML): This refers to the highest potential loss that might be expected from a single perilous event. It’s a calculated risk estimate that insurers utilize to determine how much they might have to pay out in a worst-case scenario. 

Probable/Possible Maximum Loss (PML): PML can be seen as a more realistic assessment of the maximum loss an insurer might face. Unlike EML, which predicts the worst-case scenario, PML considers factors like existing risk mitigation measures and the statistical likelihood of a maximum loss event occurring. 

Why are they causing problems for policyholders? 

  • Limited Coverage: When insurers heavily rely on EML and PML calculations, it can limit the amount they are willing to cover. If an insurer believes the EML for a property is particularly high, they might be reluctant to provide full coverage, leaving policyholders potentially underinsured. 
  • Higher Premiums: A high EML or PML can result in elevated insurance premiums. If a property is deemed to have a high potential loss, insurers might charge more to offset this risk, making insurance less affordable for policyholders. 
  • Complex Valuation: Calculating EML and PML is not an exact science and can often be subject to interpretation. Policyholders may find themselves questioning the accuracy of these evaluations, especially if they result in higher premiums or reduced coverage. 
  • Inhibits Full Indemnification: Insurance is meant to put the policyholder back in the same position they were in before a loss. However, if a policy is based on restrictive EML or PML estimates, policyholders might not receive full compensation for their claims, leading to out-of-pocket expenses. 
  • Disputes and Delays: Disagreements over EML and PML calculations can lead to disputes between policyholders and insurers. This not only strains the relationship but can also lead to delays in settlements. 

As an example, this is a big issue for hotel and other commercial real estate clients who may be offered limited coverage. Banks are having a difficult time finding affordable insurance (if at all) to cover the insurance gap required to protect their interest. Properties with insufficient have even decided to sell. And you can imagine the dilemma with insurance claims when a major catastrophe like a fire or storm require a major rebuilding project.

In Conclusion 

While EML and PML are tools to help insurers manage their risk portfolios, an over-reliance, manupulation or misinterpretation of these concepts can be detrimental to policyholders. It is essential for policyholders to understand these terms and their implications, and to actively engage with their insurers to ensure they receive adequate coverage and fair treatment. On the flip side, insurers need to ensure transparency and fairness in their application of EML and PML, always putting the best interests of the policyholder at the forefront of decision-making.

Total: 0 Comments


"On Property" Insurance Claim Tips Blog

Tips and advice about how to properly file and protect your property damage insurance claim and get a fair settlement. We invite all readers to ask questions about their claim so our public adjusters can post answers for others to benefit. Insurance claim expert guest bloggers welcome to submit posts via our contact form.

Tags

#HurricaneSally#law and ordinanceActual Cash ValueAdditional Living Expensesadjuster licensingAdjuster Michael PlattsApartment DamageAppraisalAssignment of BenefitsBad FaithBahamas AdjusterBankBest Public Adjusterblack waterBuilt to LastBusiness Interruptioncar crash into buildingCaribbean Public AdjusterCatastrophe InsuranceCeiling CollapseChattanooga tornadoCitizens Insuranceclaimclaim delayclaim denialClaim Paymentclaim settlementclaimsClaims AdjusterClaims Tipscollapse claimCommercial ClaimCommunity SupportCondo associationsCondominium ClaimsConsumer ProtectionContents DamageContractor EstimatesCovid ClaimDamage AssessmentDeductibledenied claimDepartment of Financial ServicesDepreciationDisaster Planningdock damagedorian adjusterElectrical damageelectrical fireFEMA FloodFIGAFirefire claimsFloodflood adjusterFlood claimFlood DamageFlood DamageFlood Damage RestorationFlood FilingFlood InsurancefloodadjusterFlorida Property InsuranceFlorida public adjusterfrank fortsonfrozen gutterfrozen pipesHail Damagehome Inventory ValuationHomewowners be AwareHurricanehurricane claimsHurricane DamageHurricane DebbyHurricane DorianHurricane EtaHurricane FlorenceHurricane HarveyHurricane HeleneHurricane HenriHurricane HermineHurricane IanHurricane IdaHurricane IdaliaHurricane IrmaHurricane LauraHurricane MatthewHurricane MichaelHurricane MiltonHurricane NicoleHurricane SallyHurricane Season 2018ice damageice damsindependent adjusterInspectionInsuranceInsurance AdjusterInsurance ClaimInsurance Claim TipsInsurance ClaimsInsurance CoverageInsurance LitigationInsurance PolicyInsurance Rate IncreasesInsurance RecoveryInsurance Reforminsurance settlementinsurance umpireJean Eagleshamlasthousestandinglaw & ordinanceLightning Damageloss adjusterLoss Assessormanaged repairMediationMike StabileMoldMold DamageMortgageNashville adjusterNashville public adjusterNashville StrongNashville tornadoNatural DisastersNFIPNick ChaseNorth Carolina AdjusterOrlando Public Adjusteroverhead & profitPanama City Public AdjusterPanhandle FloodingPensacola public adjusterPinellas TornadoPipe Burstpipe leakPittsburgh Claims AdjusterPittsburgh loss adjusterPittsburgh Public AdjusterPittsburgh tornadoplumbing leakPolicyholders Firstpollution claimPower Outage Insurance ClaimPreferred ContractorsPreLossPrivate Adjusterproof of lossProperty Damageproperty damage adjusterproperty insurance appraisalProperty Insurance ClaimProperty Insurance RatesPublic AdjusterRepairsresort insurance claimRestorationrestoration contractorRick TutwilerRoofRoof DamageRoof InspectionRoof RepairRoof ReplacementSandy FloodSarasota Public AdjusterSettlement CheckSewer Back-upSewer DamageShower leakSinkholeSinkhole AdjusterSinkhole ClaimSinkhole Damagesmoke damageSouth Carolina AdjusterSt. Augustine public adjusterStorm Damagestructural damagesubrogationSuperstorm SandySurplus Lines InsuranceTampa Public AdjusterTampa Tornadotemporary housingTennessee adjusterTexas Public AdjusterThe Last House StandingTheftThird PartyTornadoTornado adjusterTornado ClaimsTornado DamageTornado HelpTropical Storm ElsaUmpireunattended death claimVacation Home Damage ClaimVandalismWaterWater DamageWater LeakWINDwind damagewindstorm insuranceWindstorm insurance networkwinter stormZachary Flora

Local Office

Tutwiler & Associates Public Adjusters, Inc.
Licensed Public Insurance Adjusters & Loss Consultants
Offices: Tampa, Orlando, Palm City, Florida; Dallas, TX; Pittsburgh, PA

Executive Office
4300 W. Cypress St.
Suite 780
Tampa, FL 33607
Phone: 813.287.8090
Toll Free: 800.321.4488

Licensed in Florida # W840088 &
Texas #1399706 plus 16 other states
and the Virgin Islands