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View Full Version : Insurance Companies May Go Weasel Soon


gblowfish
09-09-2005, 02:51 PM
From my pal Mr. Doggity:
Insurance Companies' Line: Katrina Wasn't a Hurricane

Leave it to insurance companies to waste no time finding a way to let themselves off the hook. At ConsumerWatchdog.org we are already hearing from Katrina survivors who are being told that their insurance won't cover them because "it was a flood not a hurricane" that caused the damage and they (along with about 60% of folks in New Orleans and the Gulf region) don't have flood insurance.

Saying that it wasn't Hurricane Katrina but the flood that destroyed folks' homes is like saying the murderer didn't kill anyone...the bullet did.

Would there have been a storm surge in Biloxi if
there was no hurricane? Would the levees have broken if a category three rather than a four or five stormed through New Orleans? Everybody knows that HURRICANE Katrina did the damage.

There is precedent out there that says that if the predominating or initiating cause of the loss is covered by an insurance policy, then the insurer is responisble for the damage. And most storm survivors did carry hurricane insurance and they ought to be covered. Unfortunately, it already looks like these insurers are going to make policyholders battle it out in court rather than come to the table and help put people's lives back together by honoring the insurance that they've paid for.

StcChief
09-09-2005, 02:52 PM
Same weasels as the World trade center incident.

Radar Chief
09-09-2005, 02:56 PM
Surprised they didn’t try to pull, “act of god” :BS:.

memyselfI
09-09-2005, 03:42 PM
From my pal Mr. Doggity:
Insurance Companies' Line: Katrina Wasn't a Hurricane

Leave it to insurance companies to waste no time finding a way to let themselves off the hook. At ConsumerWatchdog.org we are already hearing from Katrina survivors who are being told that their insurance won't cover them because "it was a flood not a hurricane" that caused the damage and they (along with about 60% of folks in New Orleans and the Gulf region) don't have flood insurance.

Saying that it wasn't Hurricane Katrina but the flood that destroyed folks' homes is like saying the murderer didn't kill anyone...the bullet did.

Would there have been a storm surge in Biloxi if
there was no hurricane? Would the levees have broken if a category three rather than a four or five stormed through New Orleans? Everybody knows that HURRICANE Katrina did the damage.

There is precedent out there that says that if the predominating or initiating cause of the loss is covered by an insurance policy, then the insurer is responisble for the damage. And most storm survivors did carry hurricane insurance and they ought to be covered. Unfortunately, it already looks like these insurers are going to make policyholders battle it out in court rather than come to the table and help put people's lives back together by honoring the insurance that they've paid for.

Oh man, did I predict this on another thread or what???? :shake: :banghead: :cuss:

Road Hog
09-09-2005, 04:00 PM
So, who in the Bush administration are you going blame this on?

penchief
09-09-2005, 04:01 PM
Oh man, did I predict this on another thread or what???? :shake: :banghead: :cuss:

Duh......not like you had any real insight there. We are talking about the insurance industry. You know..... insurance, oil, pharmeceutical, tobacco, energy, banks, etc.

I hope you aren't thinking about a career in rocket science.

alnorth
09-09-2005, 04:27 PM
I work in the Actuarial department for a major national insurance company, helping to set prices for home and auto products. So, I think I can lend some insight here.

The Federal government offers home flood insurance. If you live in an area threatened by flooding, you probably wont get a home loan unless you carry flood insurance. We generally do not earn profits for home flood insurance, nor do we save money in reserve to pay for possible flood losses.

If you want us to offer flood insurance, thats fine. We'd be happy to price it and offer it to the public, just get the government the hell out of the insurance business and let us collect the premiums for flood insurance, but we'll be damned if your going to force us to accept risk for flooding if you wont let us make a profit and set aside cash reserves for it.

If the levees didnt break, there wouldnt be a problem, we planned for a possible loss in Florida and the gulf states, and we have reserves saved up ready to pay out when and if that happens. We will be paying out a lot of money for Alabama, Mississippi, etc. We are not prepared to pay for flood damage in New Orleans. If the courts rule that flood damage in New Orleans falls under traditional wind losses and not flood losses covered by the feds, and if they rebuild New Orleans, you had better be ready for us to jack up the rates sky-high in Louisiana. That, or decide not to write coverage in the state altogether.

DanT
09-09-2005, 04:44 PM
Although I only spent a few minutes searching, I haven't seen a single example of a credible webpage that carries the implication that flood insurance is automatically covered by policies that protect against wind damage. There are lots of webpages that specifically point out that flood insurance is needed to protect against losses from rising water caused by the storm surge created by the hurricane.

Insurance companies shouldn't be attacked unfairly. Putting them out of business would hurt their customers, employees and owners unjustly.

Here's one example of the sort of news coverage that "hurricane insurance" received in the Gulf region before Hurricane Katrina hit:

http://www.wpmi.com/news/local/story.aspx?content_id=A972A697-8DC1-406C-BB33-4118C686C535

Weeks later, Hurricane Ivan brings insurance woes
Last Update: 11/9/2004 12:10:29 AM


(MOBILE, Ala.) November 8 -- Hurricane Ivan came barreling through showing little mercy to northwest Florida and south Baldwin County. The near Category 4 storm ripped homes from their foundations, pushed a wall of water in others, and reduced some to a pile of bricks.

Harold Jackson of grand lagoon has a slab left and a few belongings: “Here in this neighborhood, devastation.”

Early estimates show Ivan’s damage at $ 5.5 billion. And as residents began to rebuild many found out their "hurricane insurance policy" doesn't cover everything.

Cherri Sellers\Gulf Breeze: “I added up what was in the yard that got carted away. I had at least 40 thousand dollars worth of stuff out there.”

Cherri Sellers lives in Gulf Breeze, about 3 blocks away from the water. She's not in a flood zone, so flood insurance was not required. Hurricane Ivan’s unprecedented storm surge pushed 3 feet of water into her home. Sellers lost her floor, walls, furniture, appliances, and clothes.

A storm surge, according to the insurance industry, is a "flood". The hurricane package does not apply here. It only covers wind damage.

Sellers: “It wasn't like we live on a river and it rised (rose) up and flooded my house. This was a hurricane damage situation.”

Marsha Robinson is in the same boat. She lives on Garcon Point and was originally going to build a block away from Escambia Bay, but decided to get out of the flood zone. So, she built nearly a mile away from the water. Hurricane Ivan’s storm surge made it that far. Now, she too, is not covered.

Marsha Robinson\Garcon Point: “They finally called back and said, well, we're not going to do anything inside your home anyway. I asked why? And they said its flood. I said, but it's a storm surge. If there hadn't been a hurricane, I would not have this problem.”

Karen Mason\FL Dept. of Financial Services: “It's one of those things that's kind of hard to wrap your mind around it. But basically, when we're talking about a flood, it isn't really the cause of the flood. It's the flood. And flood is rising water.”

FEMA is proving some help for residents in these situations. In fact, Alabama residents not covered have already seen around $ 17 million in financial relief.

The legal community is also providing some relief. Lawyers, flooded with questions and complaints, set up a free hotline called "The Helping Hands Legal Center".

Attorney Matt Schultz says pro-ration between wind and flood is a common complaint they're hearing: “The adjusters come in. People feel like they've suffered probably more damage from wind than the adjusters for the wind storm companies are giving them credit for.”

Another one: Valuation. Schultz: “People hire contractors. They get estimates. They're told they have 50 thousand or 100 thousand dollars in damage. The insurance companies come back and say they have 8 to 12 thousand dollars in damage.”

Schultz says don't sign off on something you don't agree with. Talk to your insurance company, negotiate with them. Some homeowners have opted to hire a professional representative to deal with the insurance companies. Ralph Gaither is one of them: “The whole world is a big tornado and I’m suppose to understand that? It's frustrating.”

Alabama Insurance Commissioner Walter Bell is giving Ivan victims a 60-day grace period on insurance premiums extending to November 15th. Bell and Governor Bob Riley say the grace period is intended to let residents focus their attention on rebuilding.

In Florida, for people who lost their entire home, regardless of whether or not they have flood insurance, a state law should protect them.

Shultz: “Florida law is unique in that it provides in the event of a total loss, even if the total loss is caused primary because of flood damage. If there is any wind storm damage to the structure, then the wind storm carrier is obliged to pay the face value of the wind storm policy.”

It's called the Mierzwa case, a decision that came out of south Florida about 2 months before Ivan hit.

Steve Echsner\Attorney: “That's a benefit to consumers because it means that this game of your loss was caused by flood, or only 2 percent of the loss was caused by wind, goes away. Consumers in Florida can recover their full value of the wind storm coverage.”

Brenda Daughtery of Garcon Point can't take advantage of the Mierzwa case because she doesn't have a total loss situation. She, like so many others, had no flood insurance, and a wall of water came rushing in: “This was not normal. Nobody has heard of a title wave coming this far inland doing that kind of damage. So we'll be rebuilding. I'm not sure after this if we'll be forced to have flood insurance.”

Hurricane Ivan has definitely proved to be a learning experience for all homeowners in Florida and Alabama. Perhaps the biggest one: regarding flood insurance.

Karen Mason\FL Dept. of Financial Services: “I think the biggest lesson we've learned from this even though you may not have ever been in a traditional flood zone in the past… if you live anywhere near the water. You certainly might consider looking into flood insurance.”

MORE RIGHTS YOU NEED TO KNOW:

In Florida, Chief Financial Officer Tom Gallagher is opening a mediation center. If home-owners and insurance adjusters can not agree on a claim, they can get it worked out through mediation. Call 1-800-22-storm for more information.

In Alabama, the Department of Insurance does not have mediation per se, but it does have a "consumer specialist" that assumes a similar role as a mediator, and works on "behalf" of the consumer. That number: 800-433-3966.

memyselfI
09-09-2005, 04:49 PM
Duh......not like you had any real insight there. We are talking about the insurance industry. You know..... insurance, oil, pharmeceutical, tobacco, energy, banks, etc.

I hope you aren't thinking about a career in rocket science.

Agreed, they would try to weasel out is expected. I just cannot believe they have the audacity to claim it was flooding and not the hurricane that caused the damage. I used the example of the roof being covered by wind damage but the submerged house not being covered because it was a flood.

Well, it was not simple rain that caused that levee to fail. MOF, they said on NPR this morning that it was likely not even the breach itself that caused the flooding but rather a Tsunami type WAVE that flowed over the levee during the middle of the hurricane.

So, yes, technically it was flooding but that flooding was due to a high wave and high surf caused by a freakin HURRICANE.

alnorth
09-09-2005, 04:55 PM
Although I only spent a few minutes searching, I haven't seen a single example of a credible webpage that carries the implication that flood insurance is automatically covered by policies that protect against wind damage.

Thats because it isnt. I dont know of any insurance company that underwrites flood insurance. The Federal government began offering flood insurance I think back in the 1930's, and they have been pricing it way too low ever since. Part of your tax dollars goes to subsidize cheap insurance for those smart enough to get flood insurance from the US govt. We cant compete because if you priced flood insurance with Actuarial analysis, the price would be higher than the price the feds have set, so we dont bother trying, and specifically write exclusions into the policy.

Some of you may be confused by this, because you write a check to an insurance company for flood insurance. We pass the premiums on to the feds, and they give us a small portion of it to service claims. Its the feds who set the prices and are supposed to be setting aside reserves to pay for losses, we only get paid a little bit of it for providing customer service.

So, floods are the federal govt's responsibility. This may go to court because the govt could decide to pawn off the losses THEY agreed to accept onto the insurance companies. We would accept the risk if we were doing the pricing and reserving.

Insurance companies shouldn't be attacked unfairly. Putting them out of business would hurt their customers, employees and owners unjustly.

I have no problem with insurance companies getting hit hard by a risk they chose to accept. If one of our competitors foolishly charged too little, got hit with massive losses they couldnt cover, and went bankrupt, I wouldnt shed a tear. The insurance companies who know how to price their product will survive the risk.

However, we need to set the rules of the game here. The ground rules are, if your house gets hit by a storm surge, thats wind loss. OK, fine we will take that into account and price accordingly. However, storm surge didnt wipe out New Orleans. The levee broke, leading to a massive flood. We did not accept flood risk.

gblowfish
09-09-2005, 05:02 PM
Sad thing is, only folks who will get anything out of this will be lawyers.

DanT
09-09-2005, 05:10 PM
...

However, we need to set the rules of the game here. The ground rules are, if your house gets hit by a storm surge, thats wind loss. OK, fine we will take that into account and price accordingly. However, storm surge didnt wipe out New Orleans. The levee broke, leading to a massive flood. We did not accept flood risk.

The websites I've seen that have addressed the issue have been clear that damage from storm surges is flood damage, not wind damage. I don't think it would be just to make insurance companies liable for damages they never contracted to cover.

Here's an example from the Chase Insurance Group website, in regards to storm surges:

http://www.chase.com/cm/cs?pagename=Chase/Href&urlname=chase/pf/insurance/hurricane

Tips for Hurricane Season
Before a hurricane comes knocking

Check your insurance. If you live in an area that could be affected by a hurricane's storm surge, make sure you have flood insurance. Damage done by floods is not covered by most homeowners policies. For more information on flood insurance, see Who needs flood insurance?

alnorth
09-09-2005, 05:21 PM
I just checked and your right, generally storm surge is a flood. Apparently some people who didnt have flood insurance sued their insurance company claiming storm surges are not a flood, and they got the court to agree. Thats what I was thinking about when I tossed in that last little paragraph, but most of the time we dont cover storm surge either.

DanT
09-09-2005, 05:30 PM
Thanks for the replies, alnorth. I hope your company and its customers thrive, even the Raider fans among them. ;)

alnorth
09-09-2005, 05:39 PM
My company is leaving Florida. We will not write any new business at all and will not renew some of our existing Florida Homeowner policies. I dont know if I like this, because professional pride makes me think we should be able to price any risk. However, I'm not familiar with Florida, and we could be leaving because of the Florida Dept of Insurance for all I know. Perhaps we decided we needed to raise rates sharply, Florida told us no, so we said "fine, we are leaving". *shrug*.

Louisiana is one of the few states we had not expanded into yet, we may decide to stay out depending on how this shakes out.

You know those people who run for secretary of insurance at the bottom of your ballot and you wonder what the hell those people do? Well, those people's jobs are to make my job more difficult because of their political concerns. Insurance is VERY highly regulated by state govts. After we come up with a new set of rates for a state, our company submits it to that state's Dept of Insurance for approval. They can (and often do) send it back with a list of questions and concerns, and its up to us to defend our new rates.

In general blue states are hell to deal with (the California dept of insurance is God-awful) while red states tend to be easier (Missouri asks a few questions, but not too bad, and Wyoming will approve anything), but there are some exceptions to the rule.

Pitt Gorilla
09-09-2005, 08:51 PM
So, who in the Bush administration are you going blame this on?
Interesting. Nobody mentioned Bush before you.

jiveturkey
09-09-2005, 09:15 PM
My company is leaving Florida. We will not write any new business at all and will not renew some of our existing Florida Homeowner policies. I dont know if I like this, because professional pride makes me think we should be able to price any risk. However, I'm not familiar with Florida, and we could be leaving because of the Florida Dept of Insurance for all I know. Perhaps we decided we needed to raise rates sharply, Florida told us no, so we said "fine, we are leaving". *shrug*.

Maybe it's because the long term forcasts call for larger and more intense hurricanes over the next 5-10 years.

Demonpenz
09-09-2005, 11:00 PM
i was kind of wondering what came first the hurricane damage or the flood. Oh well i will just stick to my traffic accidents

Demonpenz
09-09-2005, 11:01 PM
I think it's funny how many food spoilage claims we have had. Man I had a great pork butt in my freezer and it was worth 200 dollars!

Joe Seahawk
09-09-2005, 11:07 PM
Maybe it's because the long term forcasts call for larger and more intense hurricanes over the next 5-10 years.

You mean back to normal?

http://www.nhc.noaa.gov/pastdec.shtml

BCD
09-10-2005, 12:25 AM
****ing insurance companies! They are more filthy than the sludge at the bottom of the flood waters in NO...