Facts are stubborn, but statistics are more pliable.
—Mark Twain

Closed claim file statistics reported by various departments of insurance following hurricanes seem absurd to those in the impacted areas and those working in the insurance claim business. The root of the problem is that most departments of insurance put pressure on insurance companies to close claims fast and provide high percentages of closed claims. So, insurance companies “administratively close” files to meet regulatory requirements and the politicians look good in the press reporting what everybody knows are fabricated numbers. The files then are reopened to make more payments and then closed again.

Kevin McCarty became aware of this when he was the Insurance Commissioner in Florida. He issued a memo in 2005 which required the insurance companies to report various statistics which in part required the following information:

• Number of claims reported;

• Number of total loss claims (total loss is defined as a claim that requires settlement of the
maximum amount of insurance on the covered property);

• Total claim payments ($);

• Total policies in force as of the date of the report submission;

• Aging of claims, including but not limited to:

o Number of claims settled with policyholder;

o Number of claims closed with no expectation of future payments;

o Number of claims open less than thirty (30) days;

o Number of claims open thirty (30) to sixty (60) days;

o Number of claims open sixty-one (61) to ninety (90) days;

o Number of claims open greater than ninety (90) days.

• Average number of days to close a claim;

• Additional data elements, by line of business, for Fire and Allied Lines, Farmowners, Homeowners, Mobile Homeowners, and Commercial Residential claims only:

o Total claims payments ($) for Additional Living Expenses (ALE);

o Total claims payments ($) for contents coverage;

o Total claims payments ($) for structure coverage;

The statistic reporting of “claims closed with no expectation of future payments” is important and if honestly answered, far more telling about the true number of “closed claims.” Indeed, if departments of insurance would require that any file previously reported as “closed with no expectation of future payment” would have to reported with an explanation of why it was reopened, I bet the number of honest answers given by insurance companies would increase.

We have noted the inaccuracy of these statistics previously in posts:

Hurricane Irma Closed Claim Statistics Questioned

Hurricane Irma Claims Statistics Released by the Florida Department of Insurance

Misleading Insurance Statistics Regarding Hurricane Sandy

We noted that underpaid files and denied files are often counted as “closed” by the insurers reporting statistics to regulators:

I recently had an opportunity to attend a litigation conference where Kenneth E. Kobylowski, Commissioner of the New Jersey Department of Banking and Insurance, gave the keynote address. The Commissioner stated that the insurance industry had reported the 95% closure rate for Sandy claims. However, in response to a question from the audience, he stated that those closure rates included claims where the insurance carrier denied the claim and no lawsuit had yet been filed. An improper denial or underpayment would count as closed. Thus, while the 95% statistic may be accurate, it clearly demonstrates how word play can be used to hide the truth.

Florida CFO Jimmy Patronis should be applauded for his recent efforts to get insurers to pay Hurricane Michael victims. We would suggest his efforts could be improved by the current insurance commissioner gathering claims data with greater accuracy and aging of the claims process. Certainly, market conduct studies regarding the application of pre-existing catastrophe plans checked against actual claims handling should be a priority. The Florida legislature and executives in the Florida cabinet should have this information so that future hurricane claim handling laws and government response can be improved.