Insurance departments

Adjusters

Other issues

Moratoriums

 One of the first things that happens when a storm is building is the enforcement of moratoriums on new business. Most carriers have guidelines that once a tropical depression, storm, or hurricane watch or warning has been issued by the National Weather Service, coverage cannot be written until a certain number of hours after the watch or warning expires, usually anywhere from twenty-four to seventy-eight hours. This is to avoid adverse selection, the purchasing of insurance because the applicant needs coverage immediately.

 The moratorium may also apply to increases in coverage as well; insureds may not be allowed to suddenly increase the amounts of their property coverage. Also, the declaration of a state of emergency or announcement of evacuation for part of the state may also trigger a moratorium by a given carrier. The moratoriums generally apply to property policies, either home or commercial. Some carriers will still write auto liability policies as those coverages are not affected by storms.

 Underwriters and agents are the key employees when moratoriums are put in force. It is their job to know the territory the moratorium affects and to be sure that no policies within that area are written during the time of the moratorium.

National Flood Insurance Program policies have a built-in waiting period of thirty 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. The NFIP policy defines flood as a temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties, one of which is the insureds, from overflow of inland or tidal waters, unusual and rapid accumulation of runoff or surface waters from any source, mudflow, collapse of land along the shore as a result of erosion that results in a flood.

Private flood policies are now available, and those policies may have different definition of flood and different waiting periods. ISO now has both a personal and commercial flood program. Regardless, once a storm is approaching, moratoriums will be put in place.

 Insurance Departments

 Insurance departments play a part in storm preparation and clean-up as well. They may issue moratoriums restricting the cancellation or nonrenewal of policies that suffer damage from the storm, or they may restrict cancellations or nonrenewals to a small percentage of the book of business. We've seen many departments issue restrictions on cancellations and nonrenewal related to the wildfires over the past few years. Restricting cancellations and nonrenewals ensures that individuals do not lose their insurance coverage due to one storm. After Hurricane Andrew in 1992, Florida took such steps. Even so, hundreds of thousands of homeowners lost their coverage, leading Florida to create a carrier of last resort.

 Many states require adjusters to be licensed in order to work in the state. In event of a large storm, there are often not enough adjusters in the state to handle the volume of losses. Insurance departments that require adjusters to be licensed will issue special provisions in order to allow extra adjusters to enter and work in the state to help settle losses. In 2019 South Carolina issued such a bulletin since Hurricane Matthew was predicted to impact the coast as a category 2 or 3 storm at the time. Tropical storm and hurricane-force winds were expected, as well as flash floods and other hazards. Statute allows non-resident adjusters to enter the state to handle emergencies without being licensed in South Carolina as long as they are licensed in their home state and stay in South Carolina only long enough to handle storm-related claims. The state had determined that the licensure of temporary non-resident adjusters is needed in order to handle the pending storm, and instructions were found on the department website. 

 Basically, a manifest of adjusters the carrier wants approved is needed that shows name, email address, phone number, date of birth, state of residence, if they are licensed in resident state, license number, driver license number, and NPN if licensed in South Carolina. Once a declaration has been made, carriers can appoint emergency adjusters without first having them authorized by the department, although licensed resident and nonresident adjusters must be used first. The emergency appointment lasts for 120 days from date of issue.

 Insurance departments also issue advice for insureds to prepare for the storm, such as filling prescriptions, preparing a home inventory, accumulating important documents, and identifying and mitigating potential hazards. Pet tips, emergency shelter locations, and preparedness checklists may also be provided. Hanging tree branches, patio furniture, and other objects can cause significant damage during a storm and should be taken care of. Some states will suggest boarding windows and other actions as well.

 Adjusters

 Adjusters are of course impacted the most when storms occur. They are required to know the policy coverages and exclusions and be able to explain them to insureds. The availability of GPS and navigation systems makes finding insureds much easier. Before GPS adjusters were using maps and trying to find roads when the signs had been blown down.

 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 in order to have access to electricity and other necessities that may be out of service in the immediate area.

 Traveling adjusters are not the only ones under duress. Adjusters that remain suddenly have double the workload, as they are covering for the losses that occur at the home office. They may be adjusting claims in areas they do not normally handle and working with unfamiliar policy language.

 Drones have the potential to make adjusting in storm areas much easier and faster than before. After a hurricane, drones can be used to access areas restricted by local authorities or too dangerous for adjusters to enter until some cleanup has occurred. 

 Public adjusters face different issues. Some states restrict public adjusters from approaching insureds for at least seven days in a disaster area. In California, it is a felony for adjusters to do so. This is to prevent public adjusters from taking advantage of insureds at a particularly vulnerable time. While public adjusters represent the insured, they also receive anywhere from 2 to 35 percent of the insured's settlement, with the average being 15 percent.

 Other Issues

 Once the storm has occurred and adjusters have been allowed into an area to adjust the claim and issue payments, repairs are the immediate issue. Insureds are to make temporary repairs in order to protect property as much as possible. What many do not realize is that these temporary repairs may have to last longer than a few days due to a lack of available contractors to do the work and materials to do the repairs. After a large storm, it is not uncommon for this to happen. Repair prices are then driven up by the lack of supply against a large demand. Insureds may have to stay in alternative housing for a longer period of time.

 Agents and company staff in the area will have to deal with their own losses while handling those of their insureds as well. It is important for agents to have data on their customers backed up and stored safely so they can access such information to assist adjusters and insureds. Agents and adjusters will need to find places to set up shop and that may be a distance away. Agents will have to be able to communicate with staff and see that they have a safe area in which to work. Adjusters may have issues with lodging and rental cars.

 Insured misperceptions are an enormous problem. Many do not read their policies nor pay attention to warnings from FEMA or states that homeowners policies do not cover damage from floods. When a storm then occurs and their claims are denied, they are upset and blaming the industry for lack of coverage. Explaining lack of coverage to insureds is a daunting task that adjusters and agents face anytime there is a major storm. The insurance department may be swamped with complaints for things that are clearly excluded in the policy.

 Summary

 The focus of storms is always on the damage to property, the effect on insureds, and how long recovery takes. The insurance industry is involved in all of this, assessing the damage, explaining coverage to insureds, and working to get the damage repaired. Insurance departments try to educate and help insureds prepare and avoid or mitigate losses. It often takes months for the repairs to be completed and the claims to be closed. It has been a while since a large hurricane hit the southern coast, but it is an annual possibility. 

Original 10/5/16