Things Everyone Should Understand About Insurance Claims

[The following was written on an airplane somewhere between Puerto Rico and Seattle on September 7th, 2019]

I am currently working a condo claim in which the insurance carrier’s settlement offer was “off” by an ORDER OF MAGNITUDE. That means, in order to achieve a fair settlement (and provide the insured with adequate funds to properly repair), the carrier will need to move the decimal point on their check one digit to the right.

 “How did this happen?” you ask. That’s the wrong question. 

This happens so often in my world that it is commonplace. Underpayment, usually after long delays and inappropriate coverage denials, is STANDARD OPERATING PROCEDURE.

Everyone wants to believe THEIR insurance company is doing right by them.

The better question to ask is, “WHY does this happen?”

 The more time I spend in the property claims economy, the more I understand the nature of the processes. Reality is, the general public has no real understanding of the insurance products they are purchasing. Combine this lack of knowledge with apathy and you begin see the real problems.

 Carriers spend BILLIONS of dollars a year advertising to us. Their messages are intended to create a feeling of safety and security in their products. “You’re in good hands,” and “We’re on your side,” are telling us one thing: “You can trust us.”

 It is this [unsubstantiated] trust and blind faith that leads so many victims of catastrophe to simply accept what the insurance company offers - no questions asked.  

 “This is all my adjuster is willing to pay me.”

 The average claimant wants to believe THEIR insurance company is doing right by them. They believe this so strongly that anyone, like contractors and public adjusters, who says differently is automatically viewed with skepticism.

 I have been working in the property claims environment for twenty years now. I have touched over ten thousand claims. I can count the number of times the carrier paid the full claim adequately the first time using just two hands.

 Allow me to rephrase for clarity: the carrier almost never gets the claim paid in full with the first settlement offer.

 Proper claims handling and payment requires the insured to hire an advocate. The restoration industry is full of smart, capable professionals whose business it is to go to bat for their clients.

 But before the pros can help, their clients must undergo a mental shift. They need to first understand that their insurance company, to whom they’ve faithfully paid their premiums all these years, is not going to willingly help them.

 Making this mental shift requires a lengthy process of education, the expense of which customarily is borne by the restoration contractor.

 I describe this as the fortune telling process. As a service provider, I would be called in during the “emergency”. There in the middle of the night, usually standing in inches of water, I would describe to the desperate and frazzled homeowner or business manager how things were going to go:

1.  We’re going to do our best to suck up all this water and begin the drying process.
2. Tomorrow or the next day you will hear from your adjuster. At that time they will tell you that their “preferred provider” will take over the drying process from my company. If you resist, errr, ask why, they will say something like “we can’t guarantee that we will pay for [cover] the invoice from that company.”

(The good ones push back and my company gets to finish what we started. The less sophisticated fall for this ploy and we’d pack up our gear and proceed to step 3)

1. The preferred provider comes to “finish” the job, which may or may not mean the structure is adequately dried.
2. The preferred provider meets with the adjuster to reach the “agreed cost of repairs”. This scope and cost estimate will not be shared with you before being scrubbed “for errors” by your adjuster.
3. Once the preferred provider and the adjuster have agreed on what it will cost to repair your home/business, they will issue a check in your name and the name of the preferred provider AND the mortgage company. And this amount will be at least 25% shy of what the actual final costs will be to bring your home/business back to the condition it was in before disaster struck.

 If I did indeed get removed from the project, I knew that my client was no longer my client. I would invoice them and get on with life. I have better things to do with my time than try to fight a losing battle.

 “What if I don’t want to perform the repairs exactly how the adjuster estimated?”

“What if the settlement isn’t enough to cover my loss?”

“What about my damaged furniture?”

“Do I have to use the preferred provider?”

“Why is their invoice double your invoice?”

 All good questions. All of which I’m more than happy to answer two weeks later once the smart people realize there is a game being played with their home/business/lives.

Loyalties are self-evident.

Everyone knows who butters their bread.

What most people who have experienced insured losses come to know is that the insurance company likes to control every aspect of the claim. Those preferred providers are loyal... to the adjusters and carriers who “feed” them.

A man cannot serve two masters.

If an adjuster tells a contractor that “we don’t pay for that,” the contractor simply buries the cost of whatever it is somewhere else in the claim. When the adjuster says “refinish those cabinets”, that’s what happens, regardless of whether the client believes they can be adequately repaired to pre-loss condition using this methodology.

 Once the things I describe came true, I would receive a desperate phone call from the client asking for my help. And of course, that’s exactly what I would do. Gladly.

 But now I’m tired, and getting old (and maybe just a little bit lazy). I’m just one person among hundreds of thousands. What I realize is that educating one customer at a time isn’t going to make any meaningful impact in the status quo in my industry.

 I’m writing this article, in hopes of start a new conversation. I will end up writing several articles along this vein, and with luck, a new dialogue will emerge.

AFTER YOU FILE YOU ARE A COMBATANT.

Here goes. Things that everyone should understand about insurance claims. Let’s call this Part One.

 1. THE ADJUSTER’S OPINION IS NOT A PROFESSIONAL OPINION.

Insurance adjusters are not professional contractors, engineers or tradesmen. They are paid to control claims severity [cost] on behalf of their employers [insurance companies].

 2. YOU ARE A CLIENT BEFORE YOU FILE A CLAIM. AFTER YOU FILE YOU ARE A COMBATANT.

Insurance companies are not in the business of paying claims. They are in the business of MAKING MONEY. Once you file a claim you are in direct conflict with their shareholders. They have more money to fight than you do.

 The title of my next book will be “Your Insurance Company Hates You.” I’m looking forward to publishing.

Once you understand that you’ve unknowingly stepped onto a battlefield, you can begin to build your own strategy to win.

 3. YOUR JOB IS TO TELL THE ADJUSTER HOW MUCH TO PAY FOR YOUR LOSS. (NOT THE OTHER WAY AROUND)

Asking your adjuster “how much am I getting” is like asking your sister for money; you’re not going to get as much as you would like. It is your job as the claimant to STAKE YOUR CLAIM. Gather experts who are loyal to you. Ask questions. Educate yourself.

It is your responsibility to quantify your loss, present your claim then defend it.

 4. YOU ARE IN CONTROL. AND YOU HAVE THE ADVANTAGE.

I know it is difficult to see sometimes. Most people can’t afford to do their repairs on their own - that’s why we have insurance in the first place, right? Insurance companies know this too.

If you don’t have the $300k in the bank to fix your house, you are more likely to take $225k and count yourself lucky for having at least some money to start.

 Insurance laws were designed with this conflict in mind. You have the right to demand a new adjuster. You have the right to demand appraisal. You can choose the service provider and be fully reimbursed for costs incurred.

 In some states, if you take your carrier to court and you win just $1 more than their settlement offer, THEY have to pay YOUR attorney fees. I know several millionaire attorneys who do nothing but sue insurance carriers on behalf of policy holders.

5. YOUR INSURANCE COMPANY IS COUNTING ON YOU TO GIVE UP.

They actually bank on it. They understand that you are more likely to take a smaller amount early in a claim, than fight for more later.

 Carriers bully contractors and engineers to sing a song of their choosing. And those who don’t play ball are slow-paid to death or blackballed all together.

 6. CHANGE INSURANCE COMPANIES EVERY THREE YEARS.

Your insurance company is not going to be loyal to you, so why should you be? An agent friend of mine introduced me to the term “rate creep.”

 He used it to describe the way your premiums never go down, only up. It makes sense from a financial point of view. Costs of goods and services rarely go down, so the cost of insuring them shouldn’t fall either.

 But, he said, if you shop insurance every few years you will find some carriers offer “new client” discounts. Or they simply want to “earn” your business by artificially dropping premium rates. It’s like a loss leader. They don’t make much the first couple years, and count on the fact that most of us don’t notice when our premiums “creep” up over time.

 Keep them honest. Shop that policy every three years.

 I believe I’ll stop this here for now. My flight lands in an hour, and I’d like to watch Avengers one more time before hitting Seattle.

 Be well. Let me know what you think. And spread the word.

Andrew G. McCabe

[email protected]

~ Andy McCabe founded the property claim estimating and claims consultancy called Claims Delegates. Claims Delegates retains an army of dedicated professionals who write Xactimate? estimates for contractors, attorneys and adjusters across the country. They also consult on Large Loss and CAT events. They are currently accepting new client applications: https://www.claimsdelegates.com/ClientIntake

https://www.claimsdelegates.com/xactimateestimates/

One-On-One Restoration/Estimating Advice & Coaching: https://clarity.fm/andrewmccabe

www.ClaimsDelegates.com | APPRAISALS | XACTIMATE? | CLAIM SUPPORT

#restoration #matterport #xactimate #droneinspections #adjusters #contractors #estimates #profitfirst #nextleveltech #wehavebetterdata #insuranceclaims #TheClaimDoctor

Facebook - https://www.facebook.com/ClaimsDelegates

Instagram - @claimsdelegate

Twitter - https://twitter.com/claimsdelegates

The 24HR TECH mitigation documentation system: www.waterdamageprofit.com 

This training system and documentation package will help you train techs faster and get paid more for mitigation projects. The 24HR TECH on Amazon: https://amzn.to/2NVpZ9Y

The Claim Clinic Podcast: www.theclaim.clinic

iTunes Link https://itunes.apple.com/us/podcast/the-claim-clinic/id982839824?mt=2