How large property loss claims can become larger — and how to avoid it

A large property loss claim can be worsened by theft or adverse weather events during the initial logistics stage if insurers don’t act quickly, a contractor expert warned during the Ontario Insurance Adjusters Association’s claims conference in Toronto Wednesday. 

Insurers need to be especially prudent about handling claims right now, because, as an industry, “we’re just stretched max capacity,” says Tom Streek, owner and founder of Rebuild Response, an Ontario-based contracting service. 

Insurers can mitigate worsening claims costs by completing a thorough initial logistics stage to mitigate and manage further risks — such as theft, heat or rain — and sourcing and comparing rebuild estimates.  

“This [initial logistics] stage can go horribly wrong, and a claim can continue to get even worse and more expensive,” says Streek. “[This process] has liability written all over it.” 

Theft of large property loss sites is an issue, particularly in rural areas, says Streek. “I’ve seen the worst cases in rural [areas], especially where there are outbuildings and garages that haven’t been damaged and neighbours are picking through stuff, stealing whatever they can.” 

Weather can also cause a claim to become more costly if insurers and other site purveyors don’t get to the property quickly enough.

“[In Canada] we do see a lot of cold weather shifts; we see a lot of rain, snow, ice at times,” says Streek. “And so, when a large loss occurs, [the total loss] is not necessarily named. Maybe it’s a partial loss or it’s undetermined what can be saved yet.” 

The claims process can get backed up quickly when adjusters are responding to major NatCats like Atlantic Canada’s devastating Hurricane Fiona.

“It’s very important that there’s an awareness of weather protection,” Streek says. “Really great emergency restoration companies, they’re quick to the scene, they’re there to secure it, they board it up, they offer tarps, they know what they need to do…that’s good mitigation.” 

Replacement or rebuild cost estimates are another spot where adjusters, builders and insurers alike can affect the claims process and costs if they aren’t judicious. 

“Sadly, if [an adjuster] puts in a really good estimate and you happen to be the lowest because a bunch of high ones went in, how would you feel if yours got thrown out?” asks Streek. “Where adjusters don’t have the background to compare apples to apples, they use a quantifying company or engineer.” 

Builders can also affect the estimate process. “Maybe they’ve maybe included their own custom specs, and a whole bunch of nice upgrades because they want it to look pretty and they want to impress the insured, and they’re $100,000 over,” says Streek. “It doesn’t mean they’re bad at what they do, but someone has to look and make sure what is included.”  

Building code upgrades is another potential issue, he says. “Sometimes someone’s already put in a new septic system, all the upgraded insulation values, but it wasn’t determined early on what the adjuster wanted.” However, policy reads aren’t for the contractor to do, which is why insurers need to be on the ball to avoid potential hang ups. 

“Large loss has a lot of potential for large problems, equalling large money,” he says. “A lot of times [during estimates], you’ll find big, different numbers and you can calibrate and then get some equilibrium.”  

Feature image by iStock.com/udra