Harvey Insurance Claims Should Top $19 Billion
In August 2017, coastal and Houston area Texans suffered through the costliest storm in Texas and U.S. history as Hurricane Harvey destroyed homes with winds in the coastal bend area and then record-breaking flooding in the Houston and Beaumont areas. Now, Texans are being harmed by misinformation and half-truths about their recovery. The fact is that insurers have paid billions for over 700,000 claims since Harvey, with very few disputes and lawsuits.
In the last couple of weeks, one so-called consumer group has taken data from the Texas Department of Insurance (TDI) and either misunderstood it or used it to promote their own agenda. In the process, they ignored the huge number of flood claims caused by Harvey, and failed to take an opportunity to educate consumers about the need for flood insurance and the difference between flood coverage and a homeowners’ insurance policy.
In early April, TDI reported to the Texas Legislature that based on data as of October 31, 2017, just two months after Harvey, 40% of all claims had been closed with a loss payment, 35% of claims closed with no payment, and another 25% of the claims still open, with 11% reopened. Without a doubt, these totals have changed seven months later.
TDI noted that the area, Houston and Beaumont, with the highest number of claims closed without payment, also happens to be the area that experienced significant flooding from Harvey, and flood claims are not covered by homeowners’ insurance policies. TDI also noted that while most claims were for residential property, most of the losses were from flood and auto claims.
Again, this so-called consumer group failed to pay attention to the critical fact that Harvey was a flood event and unfortunately, many homeowners assumed they had to file a claim with their insurer in order to be eligible for FEMA assistance or simply did not understand that flood coverage was not included. TDI commented in their report that, “….the high percentage of homeowners claims closed without payment appear to be from the Houston and Southeast Texas region that experienced significant flooding, which typically is not covered by homeowners insurance. Some homeowners may have filed a claim under their homeowners’ insurance policy to get a denial to apply for FEMA assistance.”
For wind related claims, the Texas Windstorm Insurance Association (TWIA) and the private insurance market have paid and settled 90+ % of these claims. The overwhelming majority of wind related claims have been paid and resolved. As of October 31, 2017, TWIA and private market insurers had paid nearly $7.7 billion in claims but ultimately expect to pay $19.4 billion in claims.
At the same legislative hearing, TWIA reported 2% of their claims were in dispute and only 50 lawsuits out of the association’s 70,000+ claims. Are there some claims in dispute? Yes, but not nearly at the level or to the extent claimed by our consumer group.
For those claims that were not paid as of October 31, TDI’s own report notes that the reasons an insurer may close a claim without payment, include:
- The damage fell below the deductible;
- The damage resulted from a peril that was not covered under the policy. For example, homeowners policies typically do not cover flooding, or a homeowner may have called their homeowner insurer in situations where TWIA covers the wind damage;
- The policyholder did not have a policy in effect at the time the damage occurred. For example, the policy had expired; or
- The claim was a duplicate claim. For example, a homeowner may file a claim both through their agent and through a smartphone app and this may generate two different claim numbers within the company’s claims system.
Finally, the consumer group attempted to tie property damage litigation reform (House Bill 1774) in 2017 to any claims issues resulting from Harvey. The new law did nothing to lessen requirements for insurers to pay claims and to pay them in a timely matter and in compliance with the law. The Texas Department of Insurance still has authority to take enforcement action against any insurer who does not resolve claims promptly and fairly, and Texas consumers still have access to the courts to take legal action against an insurer when an issue cannot be otherwise resolved.
Contrary to misstatements about the data showing claims payment 9 months after the hurricane made landfall, we do not have updated data from TDI on claims payments other than the October 31 data, but any subsequent data would likely show that more claims have been paid and that flood related claims continue to be a significant reason for claims denied.
The insurance industry was among the first to set up consumer resource centers in the aftermath of Harvey in order to help consumers get claims filed and resolved as quickly as possible, and remains committed to resolving claims fairly and timely.
The Insurance Council of Texas is working with TDI and others to educate consumers to buy adequate coverage, including flood insurance, to help them manage their individual risks.
Insurance Council of Texas