Florida Cautiously Welcomes a New Insurance Company
Polarization is quick and common in the trades and news of a new insurance carrier announcing its entry into the tumultuous Florida market is not spared on responses or immune to perspective.
As derived from a Norwegian inflection, Vyrda, for highly esteemed, Vyrd Insurance has received a lukewarm response and high skepticism from insurance carriers, public adjusters, claims attorneys and trades contractors alike. The newly formed and funded insurance entity with backing from reinsurance firm SiriusPoint plans on mitigating the insurance coverage and loss problem in Florida by using technologies provided, in part, by Bolt Inc., which the new carrier states will speed up claims processing and response times through the dispatch of preferred contractors and emergency services providers.
However, not everyone is convinced or onboard that Vyrd Insurance will be able to answer the deeper and more salient problem that rests at the core of the Florida insurance and reconstruction "fix." First, and more specifically, the assumption that homeowners, almost as by default, trust their insurance company. And second, that the problem is simply a part of "...excessive litigation, a surging public adjuster industry, and alleged fraud by contractors" as stated by the recent Insurance Journal article, New Kid on Block Will Use Tech, Rapid Repair Networks to Survive Florida Market, when referring to Vyrd Insurance's entry into the Florida market.
Of course, there are arguments on both sides of the isle. And at the precipice of all this appears to be the problem of trust and confirmation bias.
The Problem of Trust Within Confirmation Bias
A conversation on trust may reveal that if in fact some homeowners do not trust their insurance company; then there may also be a reciprocity in that insurance companies use field adjusters to verify claims as they may not trust the claim until it is verified.
A homeowner may at times be of the opinion that they are asked to provide a part of their post-tax income in exchange for insurance coverage. Then, when the homeowner is later informed that in the course of filing a claim, they must wait for the insurance carrier to first verify the damage to then return a decision on whether or not, in the insurance company's opinion; the claim is deemed a repair, a replacement, or a denial. Is this a possible source of homeowner distrust?
Collectively, and if this may be an inherent issue of trust; an insurance company may further use Desk adjusters to verify the documentation validity and field assessments of the assigned Field adjusters. And it may not end there, when say cross-validation of documentation may be subjected to possible confirmation bias when insurance carrier hires say, a Third-party Administration (TPA) firm to supervise, manage, and process their claims.
In conversations with homeowners like Jolana Ramsey, she states plainly, "I feel like I give them my money every year without questions asked, so I don't doubt them; and then I feel cheated when they later tell me there is no damage or that my claim is 'under deductible." How do they get to decide that?"
Conversely, and in conversations with both public adjusters and in-house adjusters working directly for insurance carriers; all, under the Florida laws that govern insurance and claims, state that they must take part in the claim verification process as part of compliance. Thus, are the decisions on claims in process a statutory condition to be met or a subsequently influenced result, at times, by confirmation bias?
"We fully document the entire roof and property. Because we don't know what other damage there may be; and because we don't want to miss something that later becomes an expense not covered during reconstruction that we then have to explain somehow to our customer", say Jesse Fennell and Mike Rivera, owners of Storm Recovery Experts in Longwood, Florida. As they state it, "Every time something doesn't line up, it erodes trust in our roofing service. And we have zero incentive to destroy the hard-earned trust we receive with every satisfied customer." If it's as the Insurance Journal article states that part of the problem is "…alleged fraud by contractors" then is that a source of distrust in contractors when reconstruction figures on estimates change in the course of reconstruction?
Speedy Claims Processing – A Solution or Recipe for Disaster?
From the perspective of David Howard, CEO of Vyrd Insurance, the solution offered is one of education of both agent and the insured. Presumably, to get ahead of the trust and bias problem. That, followed by speed in processing the claims in order to head off public adjuster solicitations that can, and consequently, "calculate additional losses" as the Insurance Journal article states.
However, claims attorneys like John Houghtaling of Gauthier, Murphy, & Houghtaling disagree that speeding up claims processing by insurance carriers is the answer and liens on the need for proper documentation and more than only the insurance carriers' perspectives.
"When you investigate a damaged business or a damaged home or anything; you find the more you look, the more careful you are in the examination; the more you find it. It's similar to when you go to a doctor; the more scans he does on you, the closer he can see things that may not be visible with the naked eye... the problem we are having is that in a mass disaster ... they are going fast... ...they are doing them quickly... you have a problem... you have a recipe for disaster."
Drew Calloway of Calloway Roofing LLC in Orlando says,
"We replace hundreds of roofs every year; and sometimes we are told 'this set amount is how much the roof will 'cost' to replace' by an adjuster or the insurance carrier—while we don't yet know what other damage there may be until we tear off the current roofing system. And we won't know until we have a permit issued to then start a tear off. We agree speed is necessary, but you can't make cuts in process critical steps."
If property damage and a subsequent claim are indeed a fact through documentation. And if property claims payments are a process of possible opinion and thus subject to confirmation bias; then the problem may be made greater by the increased polarization from all sides. Claims attorneys like Cohen Law Group CEO, Harvey Cohen and Louis Gonzalez of Vargas, Gonzalez, Baldwin, Delombard state that Florida insurance carriers collect Hurricane insurance premiums every year in addition to the regular annual dwelling coverage premiums and often ask, where does the money go when there are no hurricanes?
On the other side of the isle, however, an article written in the Insurance Journal, Citizens' Board Requests Larger Than Expected Rate Hike For Florida Homeowners, references, "...allegedly unscrupulous contractors" as teaming up with public adjusters and attorneys, "...to bill insurers for unnecessary work on homes, then file suit when insurance companies won’t pay the claims."
Polarization is a form of active confirmation bias, and there is no shortage of it in Florida's market, but it may be hedged with some weighted perspectives. In example, if say, the policyholder is wrong in their assumption of claim worthy damage, and if the field and desk adjusters are wrong in their evidentiary assessment of said damage, and if the contractors are wrong in their estimation of reconstruction costs related to said damage; is everyone subsequently in agreement that the insurance carrier is the one that is correct in the final claim decision?
Jacksonville Florida general and roofing contractor, Ed Callaway (no relation to Drew Calloway), states, "We are adamant about proper reconstruction-related documentation from start to finish because if a roof leaks or fails it will fall on our shoulders to fix it. And we don't understand how the claim reserve is set so low at times when we have not yet removed the old roof to know what else is damaged, and when there is more documentation and paperwork required for insurance work when compared to a straight retail cash-in-hand job."
Looking at things as a trust problem laden with confirmation bias, can the solution then come through technology?
Smart Contracts OR The Internet of Things. A Solution to the Trust Problem?
Vyrd Insurance CEO, states that the use of technologies like the Internet of Things will enable them to get ahead of a problem by knowing where the problem begins and to catch it before it becomes a calculation of greater losses. And while this is a perspective on a potential solution to the damage source, technology companies like Hailios have indeed developed technology devices that can report back on hail damage at the first sign of it. Therefore, is this something homeowners can install on their homes that would provide them with premium discounts or a quicker resolution to their claim? Or is it something to not be endorsed by insurance carriers because of the potential to bring about even more claims? Moreover, can leak detection devices as mentioned by David Howard, or the hail detection device of Hailios be trusted as an authentic data source?
One of the blockchain technology components showing promise is that of smart contracts, or simply put, "programs stored on a blockchain that run when predetermined conditions are met." Smart contract technology, when used by insurance carriers, public adjusters, and contractors per se, may help with the trust problem when say, the photographs of damage are determined to be genuine, one-of-a-kind, unaltered, and authentic. Likewise, contracts and agreements and even work change orders and critical documents like completion certificates, permits, and more can be a part of blockchain immutable efficiencies to ensure all parties: homeowners, insurers, contractors, public adjusters and attorneys that the claim and its related data and documentation—including storm damage data—is original and authenticated.
The Internet of Things may be the devices installed at the property as David Howard envisions it; however, devices tied to blockchain technologies and smart contracts may be the existential solution to the trust problem.
And from the perspective of contractors and the related trades industry, there are steps being taken, also in the right direction with education companies like Roofing Insights as led by Dimitry Lipinskiy that are taking a different approach to the reconstruction as a service question and its processes and communicating directly with homeowners and contractors in the realm of social media. In their way, they are getting ahead of the trust problem and confirmation bias often hurdled at contractors.
Reconstruction Paid by Insurance. Reconstruction Performed by Contractors.
The facts are that the reconstruction work still needs to get done, and even in David Howard's model; contractors are still the ones doing the work—even when labeled preferred contractors. And it is in everyone's interest: policyholders, insurance carriers, insurance agents, public adjusters, contractors, subcontractors and attorneys to get it done as efficiently and as cost-effectively as possible—in materials and labor—and authenticated at every possible level. From the source of the damage using Internet of Things devices as envisioned by David Howard. To the use of blockchain authentication technologies like smart contracts and their transactional documentation benefits.
Technology is already playing a role; or as Chip Merlin of Merlin Law Group states, "Technology and innovation will undoubtedly impact the insurance landscape." However as not everyone agrees speed is the answer and, as polarization is well entrenched; there are obstacles to a solution but even that, with an understanding of the trust problem, may move others to try again but from a different perspective. As David Howard is attempting to do.
When asked by the Insurance Journal, "Is there anything else you'd like to say to the nay-sayers out there who doubt Vyrd can make it in Florida?" David Howard's response was, "We do not take entering the state lightly."
Everyone should wish David Howard and Vyrd Insurance a successful and lasting endeavor. Because homeowners need insurance. Because insurance companies need policyholders. And because contractors need reconstruction work. And the storms are getting stronger.
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