Tag Archives: tornado

You Get What You Pay For

tornado

One year ago this month, my hometown of Portland, Michigan was struck by a tornado.  The storm damaged several homes, businesses, and churches.  Thankfully, no one was seriously injured, and one year later the town has largely recovered.  I know of several good friends who have recently moved back into repaired and rebuilt homes and offices, thanks to the benefits provided by their insurance providers.  However, it has not been an easy road back for everyone.  I blogged about the storm and some of the recovery struggles last fall.

Some of my friends who are ecstatic to be back in their home or office have mixed feelings about the sometimes long and arduous claims process they endured to get there.  There are also a few situations where people are still not back in their damaged homes primarily because the insurance coverage they purchased was insufficient.  Two such situations involve older, shall we say “vintage,” homes whose owners understandably want the repairs done with like-kind and quality materials rather than similar or functionally equivalent materials.  The trouble is that like-kind and quality materials in vintage homes are much more expensive and not typically covered by traditional homeowners insurance policies.  Therein lies the source of conflict and the delay in getting these policyholders back in their homes.

I can certainly empathize with these policyholders who understandably assume that the insurance they bought would indemnify them by restoring them back to their pre-loss state regardless of their purchased limits and the loss settlement technicalities of the insurance contract.  Most insurance consumers fail to understand that there is no direct correlation between their home’s market value and the true cost to rebuild it.  Furthermore, the typical insurance policy provides for similar or functionally equivalent materials because that is perfectly acceptable to the vast majority of homeowners and makes the cost of the insurance policy more affordable.  For those consumers with vintage homes that they want to have restored with like-kind, quality, and workmanship, the simple truth is that it costs more to do so.  It likely requires that the consumer purchase higher limits and also loss settlement provisions that reflect this desire.  That means paying a higher premium – something most consumers resist even when all of this is explained to them.  My late father was a smart man, and he often used the phrase, “Son, you get what you pay for.”

I feel bad for my Portland brethren who are still embroiled in disputes with their insurance companies almost a year after the storm.  It’s no fun for the insurers either, as they take a black-eye in public relations even though they are abiding by the contract that was sold.  Nevertheless, the industry, and especially the agents who sold these policies, must shoulder some of the blame for not being more careful at the time of sale.  I am not going to name names here, but agents who become “order-takers” rather than personal risk advisers to their clients are doing their clients and themselves no favors.  I would much rather see an agent take the time to understand the nature of a client’s home, and if it’s vintage or has vintage elements, the implications for insurance coverage must be fully explained and proper coverage for the client’s expectations must be recommended.  Perhaps the customer is fine with losing some of the vintage charm of his/her home by replacing ornate doors and trim with contractor-grade materials because they don’t want to pay more in premiums.  The point is, that discussion must occur and the agent/personal risk adviser needs to have the client “sign-off” on such decisions.  If they want to fully restore their damaged home to its vintage charm, then they must invest the time with their agent and underwriter to obtain that level of coverage and pay for it.  “You get what you pay for,” or another apropos phrase my father often used, “There’s no such thing as a free lunch.”

 

Hometown Heartbreak

tornado

On June 22, 2015 my hometown of Portland, Michigan was struck by an EF-1 tornado.  The damage was significant but by the grace of God there was no loss of life or major injuries.  The town is still recovering, and the recovery story is told by WZZM here.  Please take a moment to read that link so that the rest of my post will have proper context.

Portland, Michigan is where my wife and I both grew up.  After living elsewhere early in our marriage, we returned to Portland to raise our daughters in 1994 and lived there until moving to Comstock Park, Michigan in 2014.  I personally know many of the people quoted in the WZZM article.  I attended church at and married my wife in the United Methodist Church that was damaged by the tornado and mentioned in the WZZM article.  The Kleins are among the dearest and most humble people I know.  My heart aches for the community and its struggles, but I know the citizens to be a strong, determined, and resilient lot.

The WZZM article describes a mixture of both frustrations and appreciation for the insurance companies and claims processes involved in Portland’s recovery.  I’ve talked with a few of my Portland brethren, and the experiences span the spectrum from delight and gratitude to disgust and despair.  Naturally, there are many different insurance agents and carriers involved given the large number of people and properties affected.  Consequently, there are agents and insurers who are fulfilling their mission of rebuilding lives and there are some who are falling short.

Just last week I wrote about the ten year anniversary of Hurricane Katrina.  I concluded that post with a charge to my professional colleagues in the insurance business to make sure that we are providing the professional expertise, advice, and assistance that is expected from us both before and after disasters strike.  I didn’t intend to double-down on that charge with consecutive blog posts, but the WZZM story about my hometown raised the specter of insurance service shortfalls once again.  It’s evident in Sue Burns’ quote, “I wish somebody would just honestly write a list: ‘This what you need to  do’ but nobody told us.”  And Terry Frewen: “We’re not contractors, adjusters, or attorneys.  They expect us to interpret the language in their policies as if we were.”

To be fair, there are Portland residents who have had better experiences with their insurance service providers.  Like most emotionally charged situations, there are two sides to every story, and a variety of experiences and perceptions.  Perhaps I am particularly troubled by the negative experiences in this case because this is my hometown, and these people are my friends and former neighbors.  Nevertheless, it is my professional mission as a risk management and insurance educator to prepare the next generation of risk and insurance professionals.  If I succeed at teaching them nothing else, they will understand that we are a professional services industry with the primary purpose of safeguarding and rebuilding lives.  We must do better to prepare and properly insure people, and stand by them when tragedy strikes.  No more ‘order-taking’ insurance sales.  No more ‘technical legalese’ claim adjusting.  We exist as an industry for no other reason.  No customer of my students should ever say “nobody told us.”