Tag: Arizona Homeowners Insurance

State Farm’s $1.4 Billion in Claim “Savings”: Why Homeowners Should Pay Attention

A case out of Oklahoma should get the attention of homeowners everywhere, including here in Arizona.

Recently unsealed court documents show that State Farm calculated approximately $1.4 billion in claim-payment savings during the first full year of a program involving wind and hail claims.

The documents are part of lawsuits accusing State Farm of changing its claim-handling process to reduce payouts. State Farm disputes those claims, and the case is still being litigated. The court has not determined that the $1.4 billion represents money that should have been paid to policyholders.

But the documents raise a question every homeowner should be asking:

When an insurance company “saves” money on claims, how are those savings being achieved?

According to the court documents, reducing the roof replacement approval rate by just one percentage point represented approximately $78.8 million in annual savings.

One percentage point.

That number shows how much money can be affected by decisions made during the claim process. A repair-versus-replace decision, an omitted item, or a coverage determination can change an individual claim by thousands of dollars.

When those decisions are applied across thousands of claims, the financial impact adds up quickly.

Your Premium Is Only Part of the Story

For Arizona homeowners already facing higher premiums, deductibles, and changes in coverage, this case is another reminder to look beyond what you’re paying and understand what your policy actually covers. Don’t judge your insurance by the premium alone.

You can pay a higher premium this year while having a higher deductible or less coverage than you had last year.

Changes can include:

• Higher deductibles
• Separate wind or hail deductibles
• Changes to roof coverage
• New exclusions or limitations
• Changes to replacement cost coverage
• More restrictive policy language

Price matters when choosing insurance, but it shouldn’t be the only factor.

A lower premium isn’t necessarily a better deal if a difference in coverage leaves you responsible for thousands of dollars after a loss.

The Insurance Company’s Estimate Is Not Automatically What Your Claim Is Worth

An insurance estimate is based on the scope of work included.

Change the scope, and you change the claim amount.

If damaged materials or necessary repairs are left out, the estimate is lower. If damaged property is considered repairable instead of replaceable, the estimate is lower. If the insurance company determines the damage is wear and tear rather than covered storm damage, it may not pay for it at all.

An estimate can be mathematically correct and still be too low if the scope of work is incomplete.

What Should Homeowners Do?

When your renewal arrives, keep last year’s policy nearby and compare the declarations page, deductibles, and endorsements. Don’t assume the coverage stayed the same because you stayed with the same insurance company.

If something changed and you don’t understand it, ask your insurance agent to explain it in writing.

If you have a significant property loss, understand who represents whom.

The insurance company’s adjuster represents the insurance company. A licensed public adjuster represents you, the policyholder.

At AJR Public Adjusters, we prefer to become involved at the beginning of a claim. This lets us review your policy, document the full extent of the damage, and develop and present the scope of loss before key claim decisions are made.

The Bottom Line

The State Farm case gives homeowners a look at something they rarely see: the financial impact that claim-handling decisions can have when applied across thousands of claims.

The $1.4 billion figure is what made headlines. For homeowners, the bigger lesson is what happens one claim at a time.

Know what your policy covers. Know what changed at renewal. And when you have a loss, make sure the full scope of your damage is being considered.

Because what you pay for insurance matters. What happens when you need to use it matters more.

AJR Public Adjusters
We represent the policyholder, not the insurance company.
602-795-5227
publicadjusteraz.com

About the Author

Stacy K. Horowitz is co-owner and manager of AJR Public Adjusters, an Arizona public adjusting firm serving homeowners and business owners with property insurance claims. Stacy writes about insurance claims to help policyholders better understand the process, their coverage, and the importance of having someone representing their interests when dealing with an insurance company.

Image Disclosure: The image used in this article was AI-generated for illustrative purposes and does not depict a specific State Farm office or location involved in the matters discussed.