Insureds Allege Settlements are Insufficient to Cover Rebuilding Expenses; Consumer Advocates Blame Inexperienced Adjusters

One year after Superstorm Sandy hit the Jersey shore, many insureds are finding their insurance settlements insufficient to cover the actual costs of rebuilding their homes. Insureds primarily complain of small ticket items being left off estimates, such as replacing phone jacks, painting ceilings, replacing rusted pipes. Other complaints concern inaccuracies in the estimates; for example, if an insured previously had porcelain tile, but ceramic is included on the estimate. Despite most individual mistakes having a negligible impact on the estimate, over the entirety of a house, the costs add up.

Many consumer advocates are blaming the shortcomings on inexperienced adjusters and their overreliance on computers programs in developing estimates. A lack of knowledge in the world of contracting or building can lead to an adjuster relying too heavily on the program rather than using it as a tool to double check their estimates. This practice can also lead to an adjuster accidentally excluding important aspects of the rebuilding process. The programs include thousands of variables, down to items as simple as the labor cost of taping off electrical outlets before painting a room, and if an adjuster fails to include any of these variables, it will result in less money for the insured.

Insurance companies dispute large numbers of insureds are being paid less than what they are owed. The companies also argue most claims adjusters do a professional and methodical job of estimating rebuilding costs, thanks, in part, to the computer programs which provide detailed prices by ZIP code for many aspects of a home, including carpet, cabinets, and light fixtures. Furthermore, mistakes can easily be corrected by providing the insurer with proof that a covered expense was overlooked.

Research has shown some of the delays in rebuilding have also been caused by uncertainty as to what types of flood-proofing will be required in the homes in the future, as well as strict limitations on what the flood program covers, rather than miscalculations by adjusters. To date, insurers have approved $7.8B in flood program payments to policyholders, with an average of $54,754 per claimant. However, estimates show as many as 30 percent of insureds are still seeking a settlement, or a larger settlement, one year after the storm.