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Before people who lost their homes in the Los Angeles wildfires can rebuild, they need money. But how does an insurance company figure out what a house is worth when there's nothing left standing? Nick Fountain from Planet Money's podcast has been looking into that.
NICK FOUNTAIN, BYLINE: Yeah, there's a job for that. Insurance adjusters who work for insurance companies trying to do the seemingly impossible task of figuring out how much it's going to cost to rebuild a destroyed house and replace everything in it. It's a job that requires some pretty weird travel.
FOUNTAIN: What disasters have you worked?
LELAND COONTZ: Hurricane Katrina, Hurricane Ike, Hurricane Sandy, Hurricane Irma, Hurricane Odile. I'm trying to remember all the hurricanes. There's a lot of them.
FOUNTAIN: Yeah.
COONTZ: I always forget some.
FOUNTAIN: This is Leland Coontz. He has 20 years of adjusting experience. I met him in southern California while covering the fires.
So I just met this guy. He lost his house. He lost his business. Say you walk into his house.
COONTZ: As an insurance adjuster?
FOUNTAIN: As an insurance adjuster.
COONTZ: Working for the insurance company?
FOUNTAIN: Working for the insurance company. If it's totally destroyed, what do you do?
COONTZ: OK, you need to try to create an estimate most of the time. So how do you write an estimate when it's burned to the ground? Well, for one thing, the concrete foundation is still there.
FOUNTAIN: Like a detective, he's piecing together what used to be.
COONTZ: There's always clues in the debris. Like, I've looked at debris and ashes for so long, I can look at some little wires and say, well, that's a hair dryer.
FOUNTAIN: But that only goes so far, so adjusters ask homeowners for a list of everything they had. Extra helpful? Receipts and photos.
COONTZ: From birthdays and parties. When grandma came from Kansas City for Thanksgiving, she took some pictures of the kids. And, yeah, it's a picture of the kid, but the sink is in the background.
FOUNTAIN: Then, photo by photo, receipt by receipt, adjusters will add up everything - every tile, every toilet, every TV that was in the house - and come up with a number. At least that's how it works in theory. Coontz says that insurers are not all that interested in the nitty-gritty details, the little line items. He says, when he worked for them, the system incentivized him to clear cases fast.
COONTZ: Imagine if you're an executive insurance company. Do you have a big financial incentive to train the adjusters on how to do a sliding glass door correctly and add all of the line items? A little bit, maybe. They want to be professional sometimes, but it's not like a main driver of their business.
FOUNTAIN: If you are sensing a little skepticism towards the insurance industry from Coontz, here's why - he doesn't work for an insurer anymore. He used to, but now he's what's called a public adjuster. If a homeowner feels the insurer's estimate is low, they can hire someone like Coontz to give a second opinion.
COONTZ: There's a lot of money in the details.
FOUNTAIN: Now, in a statement, the National Association of Mutual Insurance Companies rejected the idea that insurers prioritize speed over accuracy, saying, quote, "California requires insurers to handle claims timely, as well as diligently. Public adjusters have no greater motivation for accuracy than anyone else." But public adjusters do have a pretty big motivation - money. They're paid a percentage of the new settlement, usually 10%, though it can be higher, which means sometimes they're a bad deal. California officials are warning fire victims about public adjusters who push their services, even in cases where they won't actually increase payouts after you account for their commission. Coontz, for his part, says he really sweats the details and regularly gets his clients big payouts that more than pay for his fee. And, yeah, if this dueling adjuster system seems like an inefficient way for people to get what they're owed from insurance companies, Coontz doesn't disagree.
Is it a good system?
COONTZ: No. Very dysfunctional system. The things I'm describing to you - the neurotic level of detail, the mistrust on both sides - the average person can't figure it out. And they get taken advantage of. I can come in, and I'll be honest, I can make really good money by doing my part in this very dysfunctional system. I make my money off the dysfunctionality.
FOUNTAIN: Coontz says, yeah, these next few years might be pretty lucrative for him.
Nick Fountain, NPR News, Los Angeles. Transcript provided by NPR, Copyright NPR.
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