Have You Noticed More Scrutiny on Insurance Claims Lately?

Question

I was reading a Wall Street Journal article this weekend about how a growing percentage of homeowners insurance claims are being closed without payment. One of the themes was that carriers appear to be taking a harder look at claims than they did years ago, whether that's because of higher deductibles, stricter policy interpretations, or more detailed investigations.

It got me thinking about the STR world.

For those of you who have filed claims recently, have you noticed any changes in the process? More documentation requests? More scrutiny? More disagreements over what is and isn't covered?

On the prevention side, what are you doing to put yourself in the best position if a claim occurs?

A few things that come to mind are keeping maintenance records, documenting repairs, taking photos of major updates, reviewing policies annually, and making sure amenities like hot tubs, pools, docks, or fireplaces are properly disclosed and maintained.

I'm wondering what other hosts are seeing and what practices have helped claims go more smoothly when something does go wrong.

Michael Koeplin

Tyler Nash · Answer

While not STR related I had a fairly large fire claim on an apartment building last July that went smoothly. Was a fairly quick process from start to finish, took just a couple weeks for the adjuster to come out to receiving payment. I think it largely depends on the company you're using at the end of the day.

Owen Rosen · Answer

A lot of it depends on the type of claim and whether or not your policy was written correctly.  Also which coverage options are elected or declined.

Gray Whitten, · Answer

I am aware of increased scrutiny and rising deductibles as a pair of results of some of the fraudulent behavior that's been mentioned above in this thread.

One thing I could suggest is to consider parametric insurance offerings for any slices of risk that can be carved out like that. We do wind and hail at Sola, for example, where claims validation is driven by the weather data from that location--that's it.

So, options exist for removing adjuster scrutiny and opinionated claims decisions, if you seek them out.

Ben Guttman · Answer

When .30 of every dollar, if not more, goes to "cover" fraud(ulent claims) shouldn't you be happy they're pushing back? Long-term, it will make insurance more affordable for operators that aren't using it as a piggy bank.

Michael Norris · Answer

As a quick follow up on the denied claims article you posted - I saw that and it seemed poorly researched and even more poorly reported on. Once it's been published TV news people are just running with it as if it's fact.

There may be some validity to it but the article was written on some very junky info.

What is wrong with the article?

Lots of people try to claim flood damage on their homeowners policy - no home policy sold in the USA covers a "flood". Only a flood insurance policy covers flood and unless the lender forces people to buy flood insurance most folks seem to opt out.

Also a whole lot of people file claims where the damage is less than their deductible - we try and tell them to get a quote or two from contractors on relatively small damage before they file but they don't always listen to us.

Trees are weird - when they fall in your yard and don't damage anything or block the driveway to the home that is not covered on most home policies. But people file claims for that often which get denied.

If you call the 800# for your insurance company and want to ask a "what if" question on some damage to your house to see if it "could" be covered... that counts as a claim on your record. You may not have fully intended to file a claim but the insurance company sees it as intent so right or wrong it's counted as a $0 pay out claim.

So are there a rising amount of denied claims?

Personally I am not seeing that in NE Ohio in my agency but that could just be my experience. What I do see is the adjusters pushing back more and more on what some roofers are trying to get away with.

Adam Tafel · Answer

oo many homeowners got a new roof for $1000 over the past decade, combined with storms in the southeast, rising construction costs, and reinsurance rates spiking. I now use my homeowner’s policy like a catastrophic health policy - it exists in case my house gets “hit by a bus”.

I’ve been hosting since 2015 and have only had 1 STR related claim to an insurer, which was Airbnb’s “million dollar” liability coverage. Unsure if Airbnb still markets this feature or not, but my experience was a nightmare. This was also probably back around 2018 or so before homeowner’s insurance spiked, but man they were working full time to find any reason not to pay me.

My previous guest had smoked in the apartment for a week, resulting in cancelling the next few week of guests. Incredibly hard to prove, they actually asked me to “test the CO2 levels” in the apartment to “prove” the smell. I told them this made no logical sense and sent them a ton of photos of butts and ashes all over the place, but this wasn’t good enough to prove the smell.

I eventually just kept asking for the supervisor’s supervisor’s supervisor etc etc until they got sick of me and paid me, that’s usually what it takes!

Michael Norris · Answer

The entire insurance industry is coming off back to back years of significant losses and they are trying to make up for it now. The cost of doing roofs (and everything else) has exploded.

The insurance situation for roofs is getting so bad we are probably 5 to 10 years away from not being able to get replacement cost coverage at all.

Example - as an investor I haven't bought a roof in about 24 months but the last one cost about $180 per square (10 foot by 10 foot area of roof) doing a tear off and replacing with duration shingles in NE Ohio. Investor pricing right now is probably $250 to $275 per square I believe. (see the massive jump in my cost in just a few years?!?!)

Now let's look at what is happening on the street.

I saw a roof claim recently where the contractor was beefing with our insurance adjuster over his quoted amount. The contractor was asking for $1100 per square (same type of roof/shingle as the ones I buy) and nothing unusual about the roof or house. The insurance company had approved $650 per square and the insured (my insurance client) was aggressively hostile that the insurance adjuster was trying to rip him off.

I get how rates can change from one trade to another but this roofer - and most that go after storm damage do the same - try to juice the insurance companies as much as they can. Next time you ask for a roof quote have them give you two versions - one if you pay them direct (not cash but direct with a check or credit card) and one if insurance pays for it. The fact that most will say "no problem" and give you two quotes is the nature of the overall problem with the cost of insurance rates. I'll bet you see a difference of 20% to 40% in most cases between the quote with you paying directly and what they would charge the insurance company.

The price for the roof should be the price for the roof regardless of who pays!

Back to my story... I called the contractor and related what my pricing for roofs typically runs, then related that the carrier had approved $650 per square (which I think is ridiculously high) and asked if he wanted to review his quote giving him every opportunity to justify his original quote. He said he'd call me back and about 5 minutes later he called back saying they were good to go at the approved amount of $650 per square.

The contractor was looking for a huge payday and on a one off situation... whatever. But the roofing industry making this an almost standard practice of over charging insurance companies 100% affects every single one of us with higher prices because that is how insurance works. We all get to chip in for forest fires, floods, hurricanes, etc.

Ok boo hoo poor insurance companies - yes they lost gazillions of dollars for the last 3-4 years in a row and are trying to make up for it now but I think we're past that part and we're now getting gouged.

Have You Noticed More Scrutiny on Insurance Claims Lately?

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