Disasters prompt Puerto Rico to consider faster claims process

As Puerto Rican insurers continue to dig out from the onslaught of claims associated with Hurricane Maria, the US territory's senate is considering a reform to the insurance code to speed up claims processing.

Lawmaker Rossana López has forwarded draft legislation to the banking and commerce commission that would require insurers to address and resolve claims in only 30 days, instead of the 90-day limit currently encoded in law.

"This unprecedented atmospheric phenomenon left thousands of people deprived of essential services and property," reads the proposed measure, as reported in local daily El Nuevo Día. Nevertheless, it adds, several insurers have seen the timeframe for payment protracted with catastrophic losses.

The current law also only stipulates that claims must be resolved in a 90-day period, not specifying when a payment must actually go out from the insurer.

"This encourages insurers, in extraordinary situations such as the one we are currently experiencing, to opt to delay any payment associated with the claim," continues the measure.

El Nuevo Día reported that the commission has held hearings with key industry players, including the insurer association (Acodese), the insurance commissioner's office (OCS) and professional insurance agent association (PIA).

The PIA suggested the revised code should stipulate whether the claims in question were caused by a catastrophic event, such as a hurricane, or not in establishing payout time frames. The OCS has pushed for a five-day envelope for insurers to pay after the 30-day period of resolution.

The Acodese has expressed opposition to the measure, as it believes rushing insurers to act would be beneficial to neither the insurer nor the insured. Likewise, Acodese has shown that handling claims of the magnitude seen with Maria is likely to take years to complete.

A slow process

According to an Acodese survey, the total payout of claims associated with September's hurricanes rose to US$992mn as of January 31 from US$373mn on Oct. 31.

This only represents claimed paid by Acodese members (which includes Chubb, Mapfre and eight others), and the OCS said insurers had paid over US$1bn as of Dec. 31.

Regardless, the total is expected to rise. Acodese director Iraelia Pernas said in a column printed by local daily El Nuevo Día that its members had resolved only 59.8% of claims four months after Maria.

She added that the previous major hurricane disaster in Puerto Rico, Hurricane Georges, resulted in payouts totaling US$1.2bn over a two-year period. Likewise, it took insurers two years to pay out 99% of claims on personal lines for Hurricane Katrina in the US.

"We stress that insurers have taken measures to respond effectively and as quickly as possible to their insured, such as extending work days and hours for the personnel in charge of the adjustment and payment of cases, as well as recruiting new personnel, including emergency adjusters," added Pernas.

Despite the industry opposition, senator López expressed confidence in the El Nuevo Día report that the measure would seen receive committee approval to move on to a floor debate.