Fraud Is Not the Driving Force Behind Sinkhole Claims

Nov 22, 2010

The following article was published by Sunshine State News on November 22, 2010:

Fraud is not the Driving Force Behind Sinkhole Claims

By David Beasley

There has been a lot of talk of late about sinkholes and their impact on Florida’s property insurance industry.

There is no question that sinkhole claims have risen in recent years, and this has an impact on property insurers who must pay for the damage sinkholes cause.

It’s unfortunate, however, that some are blaming public insurance adjusters – licensed professionals who serve as consumer advocates in the filing and adjustment of claims – for this increase.

As president of the Florida Association of Public Insurance Adjusters (FAPIA), I was glad to see that a review of sinkhole activity released Nov. 8 by the Florida Office of Insurance Regulation (OIR) makes no such claim.

Indeed, the report that was based on information provided to OIR by Florida’s property insurers makes very little mention of public insurance adjusters at all.

There are many factors that could influence the growing number of claims. Heavy residential development in the last five years in sinkhole-prone areas, periods of extended drought and excessive rains that often lead to sinkhole formation, and yes, an increased focus on sinkhole claims among some homeowners and public insurance adjusters.

The report offers no explanation for what factors might be more important than others, but what it does offer is a clear message that, despite statements by some in the industry that increased activity is tied to fraudulent claims, fraud is not a driving force.

As claims have increased, the number reported by insurance companies to the state Department of Financial Services for fraud investigation has decreased, to 0.67 percent of claims in 2009, and 0.12 percent of claims so far this year.

The report further showed that only a small percentage of insurer-claim payments have been the subject of dispute, which is generally when a public adjuster might be hired to represent the policyholder.

Overall, this tells a much more reasoned story about public adjusters in Florida than some of the hyperbolic claims that have been made through the press in recent months.

It’s hard to back up a claim that public adjusters are “fraudulently” driving up sinkhole reports when hardly any claims are reported for investigation and the large majority of claims are closed with no dispute. This is especially true when only a small percentage of public adjusters even specialize in complicated sinkhole claims.

The truth is that public adjusters have only one goal: When a policyholder has property damage, we work to ensure that they receive full and fair compensation for their claim. That’s true whether the damage comes from wind, water, fire, theft or sinkhole.

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