It is September 15, 2008. An assessment of Hurricane Ike's damage is just underway. The 2008 season has already lead to some estimates of covered property loss in excess of $20 billion caused by this year's named storms. As Galveston and Houston start the process of recovery, it is a time for the insurance industry to make a commitment to do better for policyholders than was done in 2004/2005. The hard lessons learned should enable and encourage prompt and fair claim payments. Let us hope that the policyholders are given the "Benefit of the Doubt" they are legally due if a debate exists over whether the damage is wind versus flood.
Hurricane Andrew made landfall in south Florida on August 24, 1992. Before it was done, it would be the then costliest storm in US history causing $26.5 billion in property damage, $38.1 billion dollars in 2007 dollars. The financial fallout from Andrew would lead to major insurance reforms, including the State of Florida's increased involvement in the operation of windstorm insurance through the Florida Residential Property and Casualty Joint Underwriting Association and the Florida Windstorm Underwriting Association. In 2002, these entities were combined to become Citizens Property Insurance Corporation, a state-run insurance company now the largest provider of wind coverage in the state.
From 1992 until the 2004/2005 seasons, the US was largely spared from devastating hurricanes. In 2007 dollars, there would be seven hurricanes in 2004/2005 that exceeded the $7.92 billion in damage done by Hurricane Georges in 1998. In 2004/2005, the storms caused over $175 billion in damages in 2007 USD. From 1992 through 2003, the property damage from large named storms approximated $28 billion in 2007 USD.
In this context, perhaps the lack of a prepared response from governmental emergency services and the insurance industry seen in 2004/2005 can be somewhat explained, although not forgiven. Today, our leadership in government and insurance have the harsh experience of the 2004/2005 storms to draw from. From all reports, government has performed much better in 2008. The City of New Orleans successfully implemented a pre-arranged $7 million contract to evacuate residents by bus. The largest enabled search and rescue, to be followed by assessment, is underway in Texas. FEMA is moving in to provide food and water to those in need before the tidal surge has receded.
Now, the challenge and opportunity is there for the insurance industry to deliver on its promises of financial security in a time of tragedy. The prompt adjustment of claims is essential if we are to avoid the mistakes of 2004/2005. Putting our businesses back to work and residential policyholders back in their home promptly will minimize the ripple effects of the property damage. Now is not the time to look for ways to avoid a claim payment. A fair and reasonable allocation between causes of loss and immediate payments of ALE, business interruption and undisputed repair costs is what the insurance industry is called upon to provide.
It is a reality that there will be good faith disputes over the scope and amount of covered losses from these storms. Our courts will see these disputes in the coming weeks and months. The Katrina-era case law and legislative reforms recently enacted should provide better guidance to all concerning the legal issues. Approaching claims with an open mind and with and intent to pay fairly should minimize the need for the courts to resolve the claims. By providing prompt and fair adjustments, insures will meet the challenge of the 2008 season and reduce the number of policyholders who look to the courts for claim resolution.
Regards,
Lee Gunn
My sister lives in the Houston area. Huricane Ike destroyed the coast and left over 4 million without power. Any help that can be given would be appreciated.
http://www.coveragepoint.com
Posted by: John | September 22, 2008 at 02:03 AM