It's All About Money

Insurance companies keep two sets of accounting records. No the second set is not the set that details all the money flowing into their accounts from policyholders, rather it’s the set that tells regulators how solvent the company is. While insurance companies use Generally Accepted Accounting Principals (GAAP) accounting to track money, they also use Statutory (Stat) accounting as a litmus test of their solvency. What’s the difference? Broadly speaking the two accounting methods address what can be called an asset and how the company handles liabilities. The following caveat applies for all you accountants reading this. This is a broad simplification and is not meant to be a treatise on insurance accounting.

With GAAP Accounting almost anything of value is called an asset. However when statutorily accounting for assets only those assets of high quality are counted. Liabilities in GAAP Accounting can be amortized over the expected lifetime of the liability. However with statutory accounting liabilities must be fully funded upon their recognition. This is where your claim begins to go astray.

You see insurance companies set aside money to pay claims. This money is collectively referred to as reserves and reserves are accounted for on a file by file basis, so reserves allocated to one file can not be transferred or reallocated to another file. Now you may be saying to yourself … blah, blah, blah… what does this have to do with me?

If the insurance adjuster assigned to your claim does not recognize the severity of your loss and as a consequence does not accurately report that severity back to the insurance company, not enough money gets set aside to fully reimburse you for that loss. Or to put it another way, if the insurance company under reserves your claim, chances are they are also going to under pay your loss.

Think about this. The insurance adjuster is the eyes and ears of the company. What that adjuster sees is what the company sees. What that adjuster hears is what the company hears. Now add to that a propensity towards minimizing the claim payments so as to maximize shareholder profits and you have the makings of a perfect storm. Unfortunately, you’re the one being tossed about in your time of greatest need. If you have the financial resources to repair your home and fight it out with the company great, but if you’re like most of us and need the insurance money to make repairs, this can be very intimidating.

Nothing is so difficult as to get someone the see damage when their job depends upon their not seeing damage. There are some things you can do. First and foremost, like the scouts, Be Prepared! Do your pre-loss homework: take pictures of your property, collect and save receipts for major purchases, make a home inventory. When a casualty loss occurs photo document the post loss condition of your property. As you are taking photographs try to take pictures from the same angles as your pre-loss photographs. This gives you the ability to compare and contrast the two sets of photographs. Take close ups as well to document the nature of the damage. Put together a list of everything damaged by the event and then make a copy of that list to give to the adjuster. Get the adjuster to review the list with you and document any disagreements. Get repair estimates that respond to the list you developed rather than the damages the adjuster develops. If you feel you are being ignored, don’t take it personally, get professional help. Call a Public Insurance Adjuster to assist you in the claims process. You can find on by going to your states public adjuster association. In Florida it’s the Florida Association of Public Insurance Adjusters www.fapia.net . If your state doesn’t have a public adjuster’s association go to the National Association of Public Insurance Adjusters www.napia.com

The object is to get the company to set aside sufficient money to pay your claim fully. If they don’t, chances are you’re going to need help. If you make the decision to seek assistance seek it sooner rather than later.