Insurers Without Money to Burn in B.C.
14/09/2017 | By: Kevin Wedick
Our clients are ramping up their resources and getting ready to respond – reaching out to their customers, ensuring that they are safe and that their immediate needs are met. In the coming weeks and months, adjusters will begin the process of assessing damages and indemnifying policy holders, which presents its own set of difficulties. But the big challenge isn’t the house that burned down – from an indemnification standpoint, those are the easy ones. The trouble lies with the smaller claims, because of the sheer number of them, and because they are not so straightforward to quantify and settle.
In the aftermath of a CAT, insurers can be overwhelmed by the volume of claims. However, in terms of variety, they can typically be placed into just a few categories, specific to the type of event.
Following a wildfire, insurers can expect to see:
- Ember damage (roofs)
- Radiant heat damage (siding)
- Water damage (related to fire suppression)
- Smoke damage (attic insulation)
However, while claims of that nature can be the result of a wildfire, many of our investigations have revealed that damages claimed were actually pre-existing (wear-and-tear or sun damage), and falsely attributed to the wildfire due to improper inspections and what we have termed, “neighbour envy.”
The Fox Guarding the Henhouse
One of the biggest obstacles insurance companies faced in Fort McMurray, and are facing in B.C., is resource scarcity. They just don’t have the adjusting staff to handle all of the claims, so they end up having to rely on the judgement of contractors and tradespeople to assess damages and determine if they are pre-existing or CAT related. Such assessments have been known to cause problems for insurers, which Origin and Cause has been called in to resolve, and it boils down to two simple facts:
- Insufficient technical expertise to determine the cause of damage post-loss
- An inherent bias in their involvement in assessing damage
A siding installer, for example, may have experience judging sun damage, but it’s unlikely you’ll find one who has seen and studied wildfire damage. Often, they don’t know what radiant heat damage looks like and are therefore unable to assess it properly. The second issue – biased inspections – is even more distressing and it’s something we’ve been seeing a lot of in Fort McMurray. While there are many contractors and tradespeople doing incredible work in the wake of the Alberta wildfire, there are also those who we have been operating unscrupulously, trying to capitalize on the trust afforded to them by their insurer clients: Roofing companies identifying holes from a satellite dish as ember burn marks, or declaring that a roof need to be redone after it has already been replaced.
In Fort McMurray, insurers were issuing cheques as quickly as possible to get their policyholders indemnified and back on their feet. It wasn’t long before those impacted by the CAT started comparing their insurance company’s responses, boasting about the repairs they had done to their homes, and how everything was “good as new.”
People who once felt lucky to have escaped the wildfire unscathed were suddenly jealous of their neighbours’ new roof or windows. Now, more than a year after the fact, they’ve started submitting claims, hoping to have their homes renovated as well! Insureds are climbing onto roofs and inspecting windows, actually looking for damage, and inventing claims by either misinterpreting or misrepresenting what they find.
We have been brought in to do investigations into vinyl siding, only to discover that the damage being claimed is on the wrong side of the house. We’ve investigated countless cases of ember damage to shingles that have turned out to be wear and tear. One woman in Fort McMurray wanted her insurance company to replace her deck, and while it was in serious need of repair, it hadn’t sustained any damage from the fire, it was simply old and neglected. Nevertheless, her position was, “both of my next-door neighbours had their decks replaced; I want mine replaced too.”
There are a lot of expenses in a CAT, and no room for liberal spending. Insurers sometimes hesitate to hire a forensic expert because of the price, but our own experience with recent wildfires shows that having a qualified expert do the right type of analysis, and separate the legitimate losses from the illegitimate ones, actually saves insurers money in the end.
Do it Right
We have learned a great deal about the various phases of claims that come in following a wildfire. We operate impartially, and provide a technical opinion based solely on scientific fact to ensure that claims are paid out to those who warrant them. Meaning, that while we have provided information to insurers that has allowed them to deny claims, we have also validated damage that was missed.
The ability to evaluate damage at the onset and combat biased inspections can help insurers save hundreds of thousands of dollars and get claims processed faster. We are now starting to see insurers taking a harder stance against claims that don’t have a technical justification. Unfortunately, in the interim, the amount spent on unwarranted claims has been astronomical. It is critical that we learn from the situation in Fort McMurray and do things right in B.C. – for insurers and for the affected communities.
Kevin Wedick, CFEI, CVFI, CFII
Kevin has conducted over 750 fire and explosion investigations through the course of his career, involving government agencies, the oil and gas industry, and the insurance industry throughout Western Canada. His investigative skills encompass fatal fires and explosions, residential structural fires, commercial structural fires, and vehicle and equipment fires. Kevin has managed complex special investigations while working for a national insurer, providing support and guidance to 125 adjusters, examiners and managers on fire losses throughout Western Canada and the Arctic Region. Kevin also oversaw investigations for Accident Benefits claims, Bodily Injury claims, Auto claims and Property claims.