Last year was a tough one for storms, as the U.S. saw more than $200 billion worth of damage from 17 named storms. This record blew past the previous one, $159 billion in 2005, in part because people have continued to move to coastal areas and property values have increased.
Over the years insurance companies have introduced “named storm” deductibles to help balance the risk between policyholders and insurers, but they bring their own issues, such as collecting evidence for coverage and other details. “Catastrophe management can make or break a carrier’s reputation, and having dedicated and knowledgeable staff is key,” says Stacey Giulianti, co-founder and chief legal officer of Florida Peninsula Insurance and Edison Insurance.
Here’s what you need to know about “named storm” deductibles.
A Variety of Deductible Options
The biggest challenge carriers face, especially when explaining named-storm coverage to customers, revolves around the deductible, Giulianti says. “Hurricane” or “named storm” deductibles are separate from standard deductibles and may consist of either a fixed dollar amount or a percentage of the property’s value, usually 2 percent of the swelling coverage limit.
Hurricane deductibles apply to damage from storms categorized by the National Weather Service or U.S. National Hurricane Center. A named storm is defined as a hurricane event that has a number or name. “Crucial to understanding its application is that a named storm begins the moment a warning or watch is issued for the state, and continues until 72 hours after the last watch or warning is discontinued,” Giulianti says. “Regardless of where the strongest winds occur in the state, the larger named-storm deductible will apply to any wind- or rainstorm-related damage anywhere in the state.”
Confusion Over Definitions
While the options themselves can be different, definitions within each named-storm coverage item can vary as well, muddying the waters even further. “Named-storm deductibles are typically higher than traditional fixed-dollar deductibles, but are only triggered under specific circumstances and can vary based on location,” says Thomas Santamorena, principal at Abe, a commercial insurance brokerage. For example, was a wall knocked down by storm surge or wind?
As a result, property owners may not fully understand how their properties are insured. And confusion may arise as neighbors compare losses and coverage after an event, making it even more important for field adjusters to understand the requirements for collecting evidence.
A Need to Document Extensively
As weather patterns evolve and storms become more frequent and intense, it’s vital that carriers fully understand the policies they offer and the definitions they use for what’s subjected to the deductible. Collecting evidence after named storms is bound to be stressful and confusing, so adjusters must be able to provide guidance while working with policyholders on their claims and communicating clearly with the home office.
“Our mantra to field adjusters has always been to document every contact, every phone call and every task in our computerized claims management system,” Giulianti says. “This allows other employees, including customer service professionals and claims managers, to instantly see which tasks have been completed and to answer client questions accurately.”