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Challenges in the Claims Response to Hurricane Ian

Hurricane Ian struck Florida as a massive Category 4 storm. According to AccuWeather, it was the deadliest storm to hit Florida since 1935 and some parts of the battered state resemble a war zone.

The Costliest Hurricane in Florida’s History

Although the full extent of the damage is still being determined, it’s clear that Hurricane Ian caused huge losses.

According to CoreLogic, total losses (including both insured and uninsured losses) are expected to be between $41 billion and $70 billion. Most of these losses are in Florida, but some are in South Carolina and other states. In Florida alone, the insured wind losses are expected to be between $22 and $32 billion, the insured flood losses between $8 and $16 billion, and the uninsured losses between $10 and $16 billion.

For comparison, the Insurance Information Institute says Hurricane Katrina caused around $89 billion in insured losses in 2021 dollars, making it the costliest hurricane in U.S. history by far. The second-costliest hurricane was Hurricane Ida, which caused $36 billion in insured losses.

According to Axios, RMS estimates Hurricane Ian caused around $67 billion in insured losses in Florida and the Carolinas, making it the costliest hurricane to ever hit Florida and now the second-costliest in the nation’s history.

More Trouble for the Florida Insurance Market

Hurricane Ian came at an especially bad time for the Florida property insurance market.

According to The Actuary, the Florida Governor’s Office shows that 79% of all homeowners’ insurance lawsuits occur in Florida. The average homeowners insurance policy is $4,231, compared to the national average of $1,544.

High rates aren’t the only problem Floridians have faced: some insurers have dropped policies or even folded. The Palm Beach Report says that six insurers have been declared insolvent in 2022 so far and the Florida Office of Insurance Regulation has placed 27 more companies on its watchlist based on concerns that they might lack financial stability. The massive losses from Hurricane Ian could cause more of these insurers to fail.

Claim Disputes and Litigation

When an insurer fails in Florida, the Florida Insurance Guaranty Association (FIGA) may pay outstanding claims. However, insurer insolvency could certainly complicate the claims process during an already chaotic time for property owners.

Even if insurers avoid insolvency, disputes and litigation may be coming. According to Politico, records from the Florida Office of Insurance Regulation show that insurance companies denied approximately 30% of claims stemming from Hurricane Irma in 2017 and 40% of claims from Hurricane Matthew in 2016. Given this high rate of litigation, more litigation from Hurricane Ian seems like a real possibility. Disputes may occur even when the denials are justified; for example, if a homeowners insurance company denies a claim for flood damage.

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Claims Handlers Have Their Work Cut out for Them

Bloomberg says only 18% of Florida homes have flood insurance. Unfortunately, some homeowners who lack flood insurance may incorrectly believe that their homeowners insurance policy provides coverage for flood losses.

When these homeowners find out that their flood losses from Hurricane Ian aren’t covered, they’re likely to react with anger and frustration. Claims handlers will be at the receiving end of this.

At the same time, claims handlers will be dealing with a high volume of claims while conditions in many parts of Florida remain bad and possibly unsafe.

On top of everything else, claims handlers will also be working with many elderly policyholders since Florida is a retirement hotspot. According to Property Casualty 360, Section 69B-220.201 of Florida’s administrative code states: “An adjuster shall exercise extraordinary care when dealing with elderly clients to assure that they are not disadvantaged in their claims transactions by failing memory or impaired cognitive processes.”

Claims handlers will need to balance the rights of the policyholders with the rights of the insurance companies, all while keeping up with the massive claims volume and prioritizing their own safety. It will be a challenge.

At VCA Software, we understand the vital importance of efficient, reliable claims management technology – especially when disaster strikes. Please let us know if there is anything we can do to support your mission as you respond to Florida homeowners with speed, transparency and compassion. We’re here to help.

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