Insurance company representatives at an Assembly committee Thursday acknowledged widespread confusion among consumers over what their insurance plans do or do not cover.
Homeowner’s insurance does not cover damage from flooding – for that, consumers need to buy separate flood insurance through the federal government. And, especially in the wake of superstorm Sandy, consumers often do not realize the difference, legislators and industry representatives said.
“Consumer understanding of the differences between flood insurance and homeowner’s insurance needs to be increased,” said Deana Lykins, president of the Insurance Council of New Jersey. “Insurance is so complicated. I work with the industry; I don’t understand my policy.”
The legislators were quick to point out that confusion at today’s Financial Institutions and Insurance Committee hearing, and they said built-in “loopholes” in what kind of damage insurance covers need to be fixed, but they largely refrained from criticizing the insurance companies.
“There’s something broken in the system that we have to address,” said Assembly Majority Leader Lou Greenwald, D-Camden. For example, he said, flood insurance will cover a boiler stored in a basement and ruined by flood, but it will not cover personal possessions that were in that same basement.Despite the problems, about 452,000 insurance claims have been filed so far in New Jersey, according to the state Department of Banking and Insurance.
New Jersey Manufacturers Insurance Company has resolved about half of the 52,000 Sandy claims it received, NJM President Bernie Flynn told the committee.
Out of that total, about 43,000 were homeowner claims. In a typical year, with no major disasters, the company will receive a total of 32,000 such claims, Flynn said.
“At times, we were receiving 1,000 claims calls an hour” the week after Sandy, he said.
It will take the company until the end of the year to resolve 80 or 90 percent of the claims, according to Flynn. It tries to “triage” the claims, he said, so a tree falling into a house gets faster attention than a tree falling into a fence.
Allstate New Jersey has also been deluged with insurance claims, the company’s corporate counsel told the committee.
It has received more than 41,000 Sandy-related claims – significantly more than the 12,000 claims it saw after Hurricane Irene last year.
By the end of this year, about 90 percent of the claims will be resolved, said Paul Tracy, director of the company’s property division.
“The claims that remain pending are typically the more complex claims that take longer to resolve,” he said.