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With multiple hurricanes rocking Florida and other parts of the Southeast this year, claims professionals have said they are seeing a trend toward “soft fraud,” with more policyholders attempting to include older or unrelated damage in recent storm claims, and failing to report previous losses on a property.

New insurers in the Florida market, several of which have taken out policies from Florida’s Citizens Property Insurance Corp. this year, are especially vulnerable to acquiring unexpected risks from previous wind or water damage, said Jose “Bill” Bridges, president of risk services at Davies North America, part of the international claims, auditing and underwriting services company. Davies has operations across the United States but has a heavy concentration in Florida and the Southeast.

Bridges has been in the industry for more than 20 years, on the claims side and in special investigation units for insurers. Insurance Journal recently sat down with him to examine trends in property insurance after the repeated claims events of Hurricanes Debby, Helene and Milton.

His comments have been lightly edited for clarity and brevity.

IJ: I know it has been a concern in Florida for some carriers – that older damage should not be included in recent storm claims. How do carriers defend against that?

JB: They should take a step back. This is what we refer to as “soft fraud.” You have “hard fraud,” done with intent, then you have the soft fraud piece. With consumers’ attitudes toward insurance in general, combined with higher deductibles and higher premium, it has led to this mindset of, “Hey, when it’s my turn to file a claim, I’m going to get everything I can.”

We’re seeing quite a bit of unrepaired or pre-existing damage. When we go out to complete our loss-control surveys, whether it is at policy inception – when a home has transferred from one owner or from one carrier to the next – or at renewal. We also have some clients we work for post-event. A lot of our clients work with predictive analytics, so they have an idea of, when a storm comes through, where they were expecting to see claims activity.

A lot of times clients will engage us on claims that were reported, to go in and verify if repairs were completed. Or they will engage us in areas where they were expecting claims but didn’t get them – to see if there’s actual damage there that ended up not being reported.

Do you have some numbers on that?

The challenge with soft fraud is it is harder to identify. If one slope of a roof was damaged (previously), maybe now it’s the whole roof. That’s hard to find sometimes. In a catastrophe event, with the focus on turning claims quickly, a lot of times just not enough diligence is done to check against prior claims history or to go back to underwriting report. A lot of it will pass through undetected. (Later, a Davies representative reported that in about 20% to 30% of the loss-control inspections made, pre-existing property damage is significant enough to trigger a recommendation to the carrier).

We work for carriers, MGAs, brokers and startups coming into Florida. Florida Citizens has seen a big buildup of its book of business, and now a lot of new clients are coming in and doing takeouts of Citizens policies. There’s a chance for fraud there. Maybe there was some prior damage under Citizens that never got repaired. Now a new entity comes in and picks up that risk. So, it’s incumbent on them to get some good underwriting info up front and make sure there’s not any damage that was unrepaired or not reported previously.

For startups in Florida, this is something they really need to be cognizant of. They need to collect accurate data at inception and make sure they are not picking up somebody else’s risk at the outset of the policy.

We’re also seeing it in non-catastrophe claims. A small water loss, for a home with a high deductible, the homeowner may wait for another one to make a combined claim. That’s fairly common.

Insurance carriers will send adjusters out to examine a claim. Where does Davies come in?

Davies does field adjusting services. We will be the persons looking at claims, in many cases. But my group is underwriting support, on the back end to verify information, or when a policy renews and shifts to another provider, we look at the risk and see if there’s carry-over damage that was not repaired. Some clients might engage us to examine a segment of their book of business, or randomly pick some risks to look at.

What are the trends in the industry in this area?

One trend in the industry is that many carriers are going to a self-survey model. It’s similar to claims where you take photos of damage and turn it in. Some carriers are giving customers the ability to collect photos and turn them in (on claims, new policies and renewals). The insurer just needs to really be aware that there’s a growing ability for people to manipulate the data themselves. So, it’s imperative that whatever technology the carrier uses, there has to be some fraud protection built in.

And how do you build that in?

You have to be able to read the metadata behind the picture. Our product will identify if there’s any manipulation of the metadata: if it’s a picture of a picture, for example. And it will verify the orientation of the photograph and the location of the photograph. So, in other words, we make sure that it’s actually your property and not your neighbor’s.

More and more carriers now allow self-surveys on claims and policies, right?

It is a growing segment of the market. A couple of top five carriers have initiated self-survey this year. That’s certainly a way to manage costs a way to get info back faster, and it’s less intrusive on the policyholder. But it comes with additional risk.

In auto insurance, this is well understood. But with property, it’s a little more nuanced. They’re asking people to take pictures of things they may not be so proud of. A photo could show preexisting damage, or may show that you do not have handrails on the back steps, for instance. If trees are overgrown over the roof, that may not be a picture you are inclined to show us. You may want to go in and edit the trees out, which is very easy to do these days.

The recent hurricanes in Florida produced widespread flood damage. That’s always an issue, where people try to claim flood damage as wind damage. Are you seeing that?

Yes, that’s fairly common in these types of events. There may be some minor flood damage, and with deductibles being what they are, you may have a homeowner who decides to do minimal repair or incomplete repair or not do anything and wait for something that is more of a covered loss to come in and take care of those damages.

If I’m a new carrier in Florida, and I see some damage that looks old, what should I do? Just not write the property?

They need to communicate with the policyholder. It depends on the extent and what the underwriting thresholds are. Ask the homeowner to do remediation work. At inception, there are a limited number of days for insurers to decide if they are going to accept that risk. If the homeowner sends in photos, make sure of the integrity of the photos – that they are accurate.

Topics Trends Fraud