As we approach CAT season once again, it is worthwhile reminding ourselves of the presence and practices of opportunistic operators, so-called “Storm Chasers”, who prey on vulnerable Insureds in a time of crisis. Understanding how they work will help protect Insureds from those who try to take advantage of someone who is already under stress from storm-related losses.
What is a Storm Chaser?
Storm Chasers are contractors looking to make exaggerated profits by piggy-backing off policyholders’ entitlements under their commercial property or policyholders insurance policies. These companies go door-to-door in hail or storm affected areas and cold call or distribute flyers offering future repair services with the assurance that the policyholder’s insurance will cover the costs.
These contractors actively seek out policyholders, sometimes mere hours after a natural disaster, and occasionally months after, targeting often vulnerable customers. Unfortunately, this tactic can often leave policyholders exposed to unnecessary fees or significantly inflated costs not necessarily covered by their insurance policies.
Storm Chasers may also try to persuade policyholders to sign contracts that grant them control over the insurance claims process, often cutting the Broker out of the claim altogether. This can lead to unauthorized repairs, for which the homeowner is left responsible to pay as well as increased costs for the insured in instances of cash settlement.
Storm chasers actively target areas where a natural disaster has occurred, with hail damage being the most commonly targeted damage. While they may approach policyholders mere hours after an event, it is also common practice for these operators to target an area several months after an event, searching for homeowners who are yet to lodge a claim. They may also target areas neighbouring those affected by hail, although there is no certainty corresponding damage occurred. They claim to guarantee repairs or more commonly roof replacement, guaranteeing that upgrades will be included. This tactic however, can often leave homeowners exposed to fees or significantly inflated costs not necessarily covered by their insurance policies.
These contracts often also contain clauses that award up to 20% of the claim settlement to the Storm Chaser as a fee for their services. The policyholder is left covering this portion of the bill out of any claims settlement paid.
How can they operate?
While we believe these companies are an unnecessary part of the claims process, it is not necessarily unlawful. Many of these companies hold a financial services licence or are associated with an entity that holds a licence.
What you need to know about hail damage claims
Here are some key things for brokers and policyholders to keep in mind:
- The Bureau of Meteorology has advised that it does not currently have a way to record hailstorms, which are visually observed and confirmed by way of reporting through sources like social media or reliable media outlets. Satellite imagery only has the ability to see clouds, storms, lightning, and to identify precipitation generally. Satellites cannot currently tell the difference between water, hail, or snow.
- A storm or rain event is made up of many clouds. Some of these may develop conditions cold enough to create hail, and others will not. This means that hail can fall in one suburb but not in the adjacent suburb. The presence and confirmation of hail in one suburb is not evidence of hail everywhere and this is critical information when dealing with Storm Chasers who rely on these generalised confirmations to push through a claim.
How should we handle these claims, and the Storm Chasers?
- In the first instance, we will contact the Broker and the Insured to advise that, if the claim is successful, we will be using a panel builder to complete repairs and paying them directly.
- We will recommend the Insured checks any contract it has signed for hidden fees or agreements to pay the Storm Chasers a percentage of the claim’s settlement.
- There is no need to engage a Storm Chaser to lodge any claim – including hail damage claims. If the insured has a legitimate claim under the policy its insurance broker can assist in gathering the information necessary to lodge a claim. One of the reasons insurers pay brokerage to a claim for the broker to assist its clients to prepare and lodge insurance claims.
- With regard to proving the claim, a report from a roofer or a builder will often assist in confirming the damage is hail related if it relates to one event or several. Different events have different sizes of hailstones, and a certified builder can help in differentiating these.
- By utilising the professional advice of your broker you have access to the full entitlements available under your insurance policy.
We encourage everyone to follow the key steps our team has adopted to ensure smooth handling of these claims. Namely:
- Obtain relevant external reports from roof and building consultants with experience in hail events, and have them work in conjunction with a Loss Adjuster to assure multiple eyes on the findings.
- Ensure a clear Date of Loss is established and proven before proceeding with the claim.
- Make direct contact with the Insured and Broker to ensure they understand the situation, and work with them to remove the Storm Chaser from the claim if possible.
- Seek to settle the claim via payment of a third party builder for works performed, rather than cash settlement or paying the Storm Chaser’s chosen/affiliated builder.
It seems unlikely that Storm Chasers are going to disappear soon, and so it falls on all of us to do our best to remedy their presence through consistent policy response and clear communication on claims. If you have any questions on how best to handle these claims, reach out to us at Proclaim. We will be happy to work with you, and steer you in the right direction.
Artist Credit: Rob McHaffie