Hurricanes always generate a certain dread as well as excitement within the insurance industry.
While insureds may be boarding up windows and packing to leave the area, adjusters may be packing to enter those same areas as soon as the damage is done.
Some are getting ready to go to areas that get struck to handle an onslaught of claims, remaining adjusters will have to handle extra loads, and underwriters will enforce moratoriums and refuse new policies within a given areas.
One of the first things that happens when a storm is building is the enforcement of moratoriums on new business. Most carriers have guidelines providing that once a tropical depression, storm or hurricane watch or warning has been issued by the National Weather Service, coverage can’t be written until a certain number of hours after the watch or warning expires, usually anywhere from 24 to 78 hours. This is to avoid a person buying insurance because the applicant needs coverage immediately.
Flood policies have a built-in waiting period of 30 days before coverage takes effect. This avoids having to put moratoriums in force for any given storm in any given area. Flood policies also have a particular definition of flood, so not every situation is covered even with a flood policy.
Adjusters are impacted the most when storms occur. They’re required to know the policy coverages and exclusions, and be able to explain them to insureds. Adjusters may have a company-issued go kit: a jacket with the company name and logo clearly displayed so that insureds can identify representatives, drafts that can be written onsite and given to insureds for immediate expenses, flashlights, tape measures and other tools that may assist in reviewing damaged areas. Adjusters also need access to copies of the policies for reference to ensure coverage is available. Often adjusters are located out of the storm area to have access to electricity and other necessities that may be out of service.
Once the adjusters have processed a claim and issued payments, repairs are the immediate issue. Insureds are required to make temporary repairs to protect property as much as possible. What many don’t realize is that these temporary repairs may have to last longer than a few days due to lack of available contractors to do the work and materials to do the repairs. Prices are then driven up by supply shortages against a large demand. Insureds may have to stay in alternative housing for a longer period of time.
Insured misperceptions are an enormous problem. Many don’t read their policy nor pay attention to warnings from the Federal Emergency Management Agency (more commonly called “FEMA”) or states that Homeowners’ policies don’t cover damage from floods. When a storm occurs and their claims are denied, they blame the industry.
Explaining lack of coverage to insureds is a daunting task that adjusters and agents face anytime there is a major storm. The state insurance department may be swamped with complaints for things that are clearly excluded in the policy.