According to insurance claim data from the National Association of Insurance Commissioners, the single biggest complaining consumers made was about unsatisfactory settlement offers. Experiencing an event such as a home fire, theft in home or flood is stressful enough, the claims process shouldn’t add to it. In this episode of The Agent of Wealth Podcast, host Marc Bautis is joined by Galen Hair, Owner of Insurance Claim HQ, a practice dedicated to fighting for the rights of policyholders when they experience a loss due to fire, flood, hurricane or from the insurance company not keeping their word. Through property-casualty insurance claims, Galen and his team have helped over 800 families rebuild their homes and businesses.
In this episode, you will learn:
- An overview of how the insurance claims process works.
- The top challenges that customers face when partaking in a claims process.
- What to do if you disagree with an insurance adjuster.
- How the insurance claims process has changed over the years.
- How a property casualty insurance attorney can assist in challenges throughout the claims process.
- And more!
Disclosure: The transcript below has been lightly edited for clarity and content. It is not a direct transcription of the full conversation, which can be listened to above.
Welcome back to The Agent of Wealth Podcast. This is your host, Marc Bautis. On today’s show, I brought on a special guest, Galen Hair. Galen is a Property and Casualty Insurance Attorney and the Owner of Insurance Claim HQ. Through property and casualty insurance claims, Galen and his team have helped over 800 families rebuild their homes and businesses. They’ve dedicated their practice to fighting for the rights of policyholders when they experience a loss due to fire, flood, hurricane, or from the insurance company not keeping their word. Galen, welcome to the show.
Thanks for having me, Marc.
So I think insurance claims is a great topic to educate people on, because unless you’ve gone through the experience, you probably don’t understand what happens when the time comes to file a claim. Can you start us off by walking through the claims process?
Well, there’s the perfect world and then the world we live in. In a perfect world, when something happens to your home, you call your insurance company. Usually you call their claim number, which is the easiest number to find. They’re available 24 hours a day. Once you reach them and they send someone out, they help you figure out what it’s going to cost to fix the damage to your property. They’ll also help you figure out some short-term things, like: do you need somewhere to live? What’s it going to take to recover? Then, about a month later, you get a check and you’re made whole. If there are any little revisions, they get done, but you move on with your life and try to forget the tragedy happened.
That’s the perfect world, and the system is fundamentally set up that way.
Where it suddenly becomes imperfect, and in fact, sometimes as far from perfect as possible, is when insurance companies are supposed to help you figure out the cost to fix the damages. Sometimes this game is designed to reduce the costs, because all insurance claims are a zero-sum game. Right? A dollar to you means a dollar that they don’t have. So suddenly, a game begins where they try to figure out how to diminish the amount of money that they will pay you.
Unfortunately, that’s not diminishing the amount of money by coming up with really cool construction techniques, or getting you really long lasting materials… It’s just not paying you what you’re owed.
That’s where I come in, in that step of the process, which so often frustrates people.
What are some of the things insurance companies do to diminish the amount of money they pay you?
The Top Challenges in the Insurance Claims Process
There’s a ton of different ways they do it. At the end of the late nineties, one of the big insurance companies hired a consulting company to coach them on ways to undervalue and underpay claims. Not only was that incredibly effective, but of course, a decade later the financial market crashed. At that time, a lot of insurance executives lost their jobs. As they were dispersed to other insurance companies, this method of handling claims started to infect the industry across all companies, regions and markets. So what we see now is there’s this entire bag of tricks, but they come in a few basic forms.
The first one is misrepresenting what’s in the insurance policy, which leads to what will be paid for. It’s interesting. You can call your agent or an adjuster, and it seems like they have your policy memorized. The second you tell them about some damage, they say, “Oh, well that’s not covered.” But have they opened the policy and read it? So that’s as close to a lie as you can get – making a statement when you haven’t taken the effort to find out if it’s true.
But that’s not even where most of it happens. Where most of the underpaying happens is in figuring out what that cost of repair actually is. Insurance companies do this in a few ways. They can misrepresent the age or the longevity of your materials, which is called excessive depreciation. They can misrepresent what it’s going to take, or the scope of the damage.
The third way, which has become just absolutely rampant, is hiring “experts” – who are not experts at all – that simply says whatever a carrier needs them to say in order to deny all or part of a claim. I would say that is where the insurance company gets the most bang for their buck.
Wow. At what step does your company get involved?
I get involved in different steps, depending on the nature of the consumer. Some very savvy consumers – perhaps they’ve been through a number of claims before – bring us on the second they have a claim. We literally open the claim for them.
However, consumers who haven’t had a negative experience with insurance companies, or haven’t had to file a claim before, tend to give their carrier an opportunity to make it right first. I have no problem with that, by the way. But then, they come to me at the point when they get a check that feels insulting.
A third segment of customers come to us almost too late. Not only have they gotten an insulting check in the mail, but being the good people that they are, they thought they could get the carrier to do the right thing by collecting bids and showing them the information. By the time they come to us, they are beyond frustrated and have no faith left in the claims process.
There’s one more segment of people, and they’re the funniest ones. They’re what I call the “I’m happys.” What usually happens with them is they file a claim, they were woefully underpaid, but they’ve been conditioned to accept that, so they did. It wasn’t until laten, when they see someone else get treated better – or fundamentally fairly – that they realize they weren’t treated well.
I like those situations the best, because I watch their mindset shift.
After all, everyone has been conditioned to trust the insurance industry. They spend billions of dollars every year on insurance advertising, and that advertising always talks about how great they are.
Yeah, that’s true. Going back to the claim itself, who controls the claims process? Is it always the insurance company or do you play a part in that?
The insurance company controls everything, but the insured has the right to take action or hire out companies to work on their claim. For example, the carrier will send out their own adjuster… and this is where sometimes the process starts to break down – unbeknownst to the insured – …some adjusters have no experience. Other adjusters are experienced and will write a very fair estimate, but that estimate can then go to a desk adjuster who cuts the estimate down. So even a good estimate sometimes becomes a bad estimate.
And then thirdly, sometimes there are very experienced adjusters, ones who have been working in insurance for so long, that rather than writing for the damage that exists – that was caused by a casualty, storm, etc – they don’t write for things they see because they say, “Well, this carrier will never pay for that. That’s against their internal policy.” Not their insurance policy, their internal policy. So because, in their experience, a carrier doesn’t pay for a type of damage, they just don’t write it.
That’s really frustrating, because I will depose them later and to me, they admit that they saw the damage. They admit that they thought it was real damage. They admit that it needed to be fixed… but they didn’t even record it.
What To Do If You Disagree with an Insurance Adjuster
So if an insured disagrees with what an adjuster writes, they can hire their own adjuster?
You can and you should. I recommend that to pretty much any insured out there, unless they’re in a situation where they’re amazed at how much money is paid to them. I think every insured should get a public adjuster, a very qualified contractor or get an attorney that does this type of work.
A massive caveat that comes with finding a qualified contractor is that you have to remember: contractors are there to bid the jobs. The way contracting works is foreign to a lot of people. For example, if I’m going to build a building, I might hire three contractors to provide bids. All three of those contractors are going to give me competitive bids, trying to underbid each other. I’m ultimately going to go with the lowest bid from a contractor I trust. Right? So let’s take a pause right there.
That means if you’re going to submit contractor bids, you better only get bids from contractors you trust, first of all.
There’s also something called change orders. Change orders are really frustrating, but anyone that’s been through a build knows about them. It’s what happens when contractors turn around and say, “It’s going to cost more.” Or, “there was this additional damage.” Or, “we didn’t anticipate this.” In those instances, you’re going to have to pay more.
Insurance companies don’t like that, and you have to explain to them why it’s happening, which can be difficult. So keep in mind that your lowest bid may not actually be the lowest bid. The contractor may have underbid the job to get it, and planned on telling you they need more money to continue the work. This happens all the time.
When you say that insurance companies don’t like change orders, do you mean they will deny it, or it’s just frowned upon?
A lot of times they won’t pay the change order, just the original adjustment. They’ll say, “We don’t know what the extra $70,000 is all about. Maybe you’re asking for upgrades. Maybe it’s taking longer because of you. So we’re not paying for it. It’s not our problem.” So now you have a contractor who’s halfway through repairing your house, but demanding $70,000 more than you have, and the insurance company won’t pay it. That happens all the time.
If the insurance company pays sufficient funds, then you get the contractor to do the work. There will be something called recoverable depreciation in a lot of policies, which requires you to show the carrier that the work was done. They’ll submit, little by little, the money you were short. By nature, you should be short, because most policies pay something called replacement cost value, and they hold back some of that money until the work is done. Once the insured gets that money, they give it to the contractor and they can finally move on with their life.
The problem is, a lot of people have trouble getting to that part. That’s really the pressure point.
How the Insurance Claims Process Has Changed
What’s changed within the claims process over the years? Have there been any big changes?
In some ways technology has made positive change, in some ways it’s hurt the industry. For example, some carriers are trying to do virtual inspections. Maybe I’m old fashioned, but I don’t think that works. If I hold up my iPhone to a wall, how can you figure out how wet it is? I think you need to touch it. You need to smell in the air. So I think virtual inspections have been bad for consumers.
But there’s been some really cool technological advances, which are mainly being used by consumer advocates like me, and less by insurance companies. For instance, drones. There are drones that are outfitted with infrared cameras, which you can fly over a roof and see if moisture is coming through it. That’s really cool.
We can also do 3D modeling of homes and damaged buildings, which can freeze in time the damage that occurred. So even if we start to build, even if we have to do emergency mitigation, we could show a jury down the road exactly what that home looked like right after, say, a storm.
Wow, that’s really cool. Have you ever come across a case where an insurance contract outlines coverage for something specific, but the insurance company denies responsibility? Or the opposite, and an insured is given coverage for something not outlined in their policy? And, what happens if an insured wants some type of coverage but it’s not outlined in their actual contract?
Contract Interpretation and Insurance Broker Liability Issues
There’s a lot to unpack there. So, contract interpretation is the type of law that we’re dealing with when we’re talking about an insurance policy. There’s a lot of rules, and those rules vary state to state. One of the things we have to consider is what the intent of the parties is, what the contract says and who has negotiation power.
By and large, the language in the contract is going to govern, with some small exceptions. However, sometimes language is not clear as far as what’s excluded, what’s covered, etc. That’s where a lot of lawyers get involved.
A lot of the claims that get brought to me aren’t as simple as, “There was a fire, and it says on the face of my insurance policy, ‘This does not cover fire losses.'” Right? It’s more so something like, “A pressure cooker blew up. Explosions are excluded, but not necessarily damage caused by appliances.” So what happens from there? I help figure out what that means within the language of that policy.
But to your point, sometimes a policy is issued that is actually contrary to the party’s agreements. If that happens, we have to look at what we call broker/agent liability. Likely what happened is someone did not communicate with the insurance company appropriately, and we have to see if that person fits whatever that state’s definition is for negligence or errors and omissions claim. Most brokers/agents actually have their own insurance to cover that.
So we do have to file claims against brokers and agents. It’s not uncommon.
What is Insurance Fraud? 2 Types of Insurance Fraud
Do you come across a lot of fraud cases? And can you talk about what insurance fraud is?
In its simplest form, insurance fraud is making a misrepresentation to garner proceeds during an insurance claim. But it’s not that simple.
When you hear of insurance fraud, you probably think of an insured lying about damages in order to get more money from the insurance company. That does happen. There’s a study that says 24% of consumers are willing to pad a claim because they don’t feel bad that the insurance company is paying. That’s wrong. In many states, that’s a felony. I do not advocate lying on your claim, ever.
One of the things I get attacked for, professionally and personally, is I talk about both types of insurance fraud. The reality is, carriers commit fraud, too. Or sometimes, carriers hire people to commit fraud for them.
A lot of carriers don’t like to talk about this, but for instance, after Hurricane Sandy, there were a lot of engineers that assessed damaged homes and wrote reports saying, “This home was damaged by the wind.” But someone was editing the reports to say, “This home was not damaged by the wind.” This strategy was used to deny claims.
It became a huge deal, so much so that The New York Attorney General and Congress got involved. After all was said and done, hundreds of millions of dollars were released to people that had previously not been. And that was not extra money or penalties, that was money that people weren’t previously paid as a direct result of fraud.
Hurricane Sandy is a glaring example, but the reality is, this stuff is criminal. It causes homelessness. It causes joblessness. It causes suicide. It causes divorce. When a carrier is lying to not pay you, that’s a very bad thing.
So all fraud is bad, but we don’t hear about fraud on the insurance companies’ side as much as on the insured.
Speaking of litigation, do a lot of the cases you work on go to trial?
Normally, if you have damage to your home and the carrier has not paid, we’re going to try to resolve it without the necessity of filing suit. We do this for a few reasons: our fees are lower, it’s easier for everyone and it’s less stressful. In those cases, we will try to resolve the issue before trial.
However, carriers are conditioned to be sued. Because they get sued all the time, they have their own litigation budgets. It doesn’t hurt their feelings. They’re not scared. So we do have to sue them a lot.
Depending on the specific disaster, where it is, what court it is, the process may look different. Generally speaking, the discovery process is not typically a pleasant process for the carrier, because they have to give us a lot of documents they don’t want to give us. They have to let us depose people they don’t want us to meet. They don’t want us to hear about their internal policies. There’s a lot of fighting during that process.
The discovery process itself is probably the reason that very few cases go to trial. Cases do go to trial, but I think carriers aren’t particularly willing to undergo the expense, the time and the risk of having a jury come back with a guilty verdict. If you Google “jury verdict insurance”, you’ll see that it’s pretty rare for an insurance company to get a win.
How Does an Insurance Claim Affect Your Relationship With Your Carrier
When a policyholder goes through that process, or any claims process, what can they expect the relationship with the insurance company to be like afterward? Should they expect their policy to go up? Do some insurance companies drop the insured?
In most states, their premium should not go up and they should not be dropped as a result of filing a lawsuit over a valid claim. There is an exception, in most states, which is when the loss was really their doing.
Fire is a very common one. For example, if you have a propensity for leaving candles by curtains, a carrier is not going to see you as a reasonable risk after a certain number of claims. They’ll just say, “We cannot afford to cover this person.”
But with floods, hurricanes, tornadoes and hail storms, there’s no way that your personality is contributing to that damage. Typically, that’s not held against you. But, your premiums may go up as a result of a geographic rate increase. For instance, areas that were just pummeled by hurricanes and tornadoes may see their rates go up next year – but they’ll probably experience that whether they filed a claim or not. That’s not uniform across all states, but that’s kind of the general process.
Going back to the candle/fire example… Is there a master claims database that insurance companies use, or are they relying on a customer to disclose prior claims history in an application?
Yes and yes. They can pull that information, but they are going to ask you questions about claims on an application. If you lie, that could be a felony. If you lie, even if they don’t charge you, they could use that to deny an existing, valid, meritorious claim. I’ve seen it happen. I’ve seen situations where lies people told – that had nothing to do with a specific claim – led the carrier to take zero responsibility for damage.
Wow. Are there any other mistakes you see people make during the claims process?
I think we’ve kind of hit on a lot of it, generally speaking. The overarching mistake people make is that carriers do this for a living and you don’t. Unless you are an insurance adjuster, I don’t think you should be handling your claim yourself. I really don’t. And sometimes that’s an unpopular opinion, but at the end of the day, this is your home. This is your business. This is your livelihood. The biggest investment most of us make is in our house or our business. I don’t think you leave your biggest investment up to people that aren’t professionals. It doesn’t make sense to me.
Thanks for that. Well, we’re just about out of time. Galen, I want to thank you for being on the show. You gave some great info on the insurance claim process. How can people find out more about you and what you do?
We’re on all social media channels as Insurance Claim HQ. You can also go to our website, insuranceclaimhq.com or call us 24 hours a day at (844) CLAIM-84.
Great, we’ll link to all of that in the show notes. Thank you again, Galen. And thank you to everyone who tuned into today’s episode. Don’t forget to follow The Agent of Wealth on the platform you listen from and leave us a review of the show. We are currently accepting new clients, if you’d like to schedule a 1-on-1 consultation with our advisors, please do so below.