It’s Thursday, 2:15 in the afternoon. A Tallahassee plumber, who arrived at 9:00AM, has just left my home.
The result of a call from the utility company warning of a potential water leak. My previous months water bill was $191.22 for 24,339 gallons of water (I had the sprinklers on every day).
But…since paying that bill I began hemorrhaging nearly 128,610 gallons in three weeks at a cost of nearly $400. And, I was told “… it’s still leaking!”
After checking the irrigation system (sprinklers) I discovered my worst water leak nightmare. A pipe beneath the garage slab was leaking. Water was pouring outside and into the neighbors yard. Drywall was wet up to 18″ high. Outside the brick wall was wet to the same height. The fifteen year old indoor/outdoor garage carpet was soaked.
For those new to this issue–after my own sting operation, using testimony of field experts, statistics from carriers and water extraction companies and public records from Citizens and the ICA’s claim workshop, I’ve revealed why I think that emergency remediation fraud is Florida’s biggest cost driver.
The combination of public adjuster fee’s, plumbing referral fees, “Assignment of Benefits” (AOB) and bad faith litigation is what makes Florida’s property rates the “highest in the USA”.
Not hurricanes and reinsurance.
Using special sonar equipment my plumber precisely located the leak which was three feet beneath the slab. He “Jack hammered” and dug his way down to the precise location of a pin-hole sized opening in the copper pipe. He removed a section and soldered in a replacement. Ran tests. Filled the hole back up. And repaired the concrete. (See my facebook page for pictures).
Total cost $828.85. My deductible…$1,000.
This is not typical.
In some parts of Florida, particularly in the southeast and Tampa Bay area, plumbers are paid referral fees from water extraction companies. I know this because, posing as a plumber, I called several extraction companies and got quotes up to $1500. Heck, some even advertised their referral fees on their trucks. Better yet, some own their own water extraction company, contracting and public adjusting firm. OMG!
Once referred, the water extractors arrive but will not start work, (unlike my plumber), until the proceeds of the insurance policy are assigned to them. Once that’s done all manner of emergency remediation, needed and unneeded, begins.
In other parts of Florida, according to a Citizens report titled “Water Loss Update”, my non-claim event would’ve been closer to a statewide average…$10,390.
That’s not for all types of water damage.
The highest average water claim is “Back up of Sewer or Drains” at $16,776. The third highest water claim, “Accidental Discharge”, averaged $10,098 per claim. The lowest is roof leaks at $5,439. Again, using Citizens as the guidepost.
Obviously the problem is systemic. It’s also unique to Florida.
Lawmakers must understand that water damage claims here are number one across all insurers–approaching 50% of the total annual payout. For Citizens the total forecasted payout just for bursting pipes (not weather related roof leaks, or back up of sewers, etc) was in excess of $142,000,000. And, that was two years ago!
A well managed carrier with, say, 180,000 policies might have only 3% (5400) claims each year. About half, or 2700, are for water damage. If half of those are from leaking pipes you have 1350 claims with a high likelihood that a plumber and a water extraction company will be called in.
Stay with me.
Assuming the claim is inflated by only the amount of the referral fee ($1500) and a deductible of $1000, the insurer starts out $2500 in the hole on 1,350 claims every year for a total annual loss due to fraudulent claim inflation of $3,375,000. And, that assumes there was no public adjuster requiring another 20% worth of claim inflation.
Hang in there!
If there are six (6) million property policies in Florida (4 million insured dwellings, 800,000 condo units, 600,000 mobile homes and, some renters policies); assuming a claims frequency of 4% annually you get 240,000 claims–half (120,000) are water claims and if half of those are from leaks or bursting of pipes you have an annual payout, somewhere in the neighborhood of $150 million.
JUST FOR REFERRAL FEES AND DEDUCTIBLES!
Listen to testimony from one fed-up water extractor explaining that its quite routine for his competitors to rely on fraudulent “claim inflation” to recoup deductibles and plumbing referral fees and to pad emergency remediation bills. Heck, he even says his competitors “manipulate” detection equipment and damage photo’s to cheat insurers. You can hear his frustration and Robin Westcott laud his candor in a YouTube video here.
Don’t forget, the exorbitant price tag for post catastrophe water damage contributes to carrier reinsurance retentions and, to some indirect degree, to a reinsurer’s overall rate on line.
Reinsurance can be 50% or more of a typical policyholders annual premium!
That’s why I say maybe reinsurance isn’t Florida’s biggest cost driver after all. Maybe it’s sporty price is also a symptom of deeper problems.
Problems like: emergency remediation, water extraction, assignment of benefits, exorbitant attorney and public adjuster fees and bad faith litigation. All of which are worse here than other states.
Instead of spending time blaming the price of reinsurance, which they cannot control, lawmakers should focus on something they can control–fraudulent claim inflation.
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