Insurance Companies are Sitting on Billions 8 Months After María
Insurance commissioner Javier Rivera Ríos confirmed that insurance companies operating in Puerto Rico have yet to work on the numerous claims pending since hurricane María struck almost eight months ago. Moreover in only two of the categories, the claims amount to $4 billion.
Last week, the insurance industry, through the Asociación de Compañías de Seguros de Puerto Rico (ACODESE), and under pressure from public opinion, sent out a press release where they assured that only 15% of claims remained to be tended, without many details.
'That percent could represent close to 4 billion dollars, basically because it is concentrated in government and commercial claims, and it's the area where most money is needed, in that condo and commercial area,' the Commissioner revealed to NotiCel.
'That said, we are in a reviewing process because the 84% (of settled claims) contemplates the claims without pay as well, which were closed and there are many claims which we are studying and we will be making a strategic model of audits, we are going to verify the insurance claims without payment because there is margin for us to reopen them again, and that could change the expectation of that 84% and of the expected disbursement,' he pointed out.
To illustrate the economic impact of those $4 billion which could potentially be in the hands of property owners and still aren't, the budget approved by the Fiscal Control Board for the Government of Puerto Rico this year was $6.9 billion.
In fact, even though it is an entirely private activity, the Fiscal Plan certified by the Board on the 30th of May, 2018 assumed that the economy of Puerto Rico would receive an income of $8 billion on disbursements from the insurance companies to their clients.
Apart from that $4 billion statement, there's not much more known about the insurance disbursement cycle since there's been little transparency from the insurance industry about it.
In their press release, ACODESE said they have disbursed around $1 billion which stems from the settlement of 84% of insurance claims.
Added to the $4 billion estimated by the Commissioner, the potential total of payouts would be $5 billion which stands in contrast with the $8 billion injection from insurance payouts that Fiscal Plan counts on and with the $7 to $10 billion in insurance claims that Rivera Ríos initially projected.
The necessity of using approximates and consulting sources and declarations outside the industry is brought on by the fact that the insurance industry has not made an effort of clarifying the data.
For example, ACODESE has not provided the following information that NotiCel requested after their press release last week:
Amount of money that the 15% of insurance claims still awaiting to be awarded represents. Original dollar value of the 87% of claims that, after processing, were completed with payouts of $1,951,775,350.
Original dollar value of the 33% of residential property claims which were closed without payments and of the 54% of claims that, after processing, were closed with a payment of $563 million.
Original dollar value of the 26% of commercial property claims that were closed without payment and of the 38% of claims that, after processing, were closed with total payout of $1.3 billion.
Rivera Ríos provided some of the information.
For example in the case of residential properties, the Commissioner said that 33% of claims were closed without payment, which translates to 54,000 cases, 'and a payment of 691 million dollars was expected for those,' which means insurance companies ended up paying $128 million less of what was expected.
On the case commercial claims side, the Commissioner pointed out that around $1.4 million, which amounted to 63% of the cases, had been paid. 'We are very focused in the commercial and governmental topic in this stage of the game, so that those four billion or more can go out,' he stated.
While more initiatives aimed at providing means of prosecuting insurance companies or even making it easier for people to sue for bad treatment or mismanagement of a claim are presented in the Legislature, Rivera Ríos pointed out that his office is elaborating a plan incorporating lessons learned in this process,
He explained that they have chosen 'the best practices, those that have worked best in this experience', to facilitate the process.
At the moment he is working on easing the incorporation of claim adjusters that might come from outside the island after a natural disaster.
As part of their new plan, they are also working on an educational campaign related to the insurance companies and the way they operate.