One of the top issues facing the insurance industry in the southeast right now is rebuilding Mississippi and Louisiana after Hurricane Katrina. Hurricane experts at the Society of Insurance Research conference in October pointed out rebuilding means a lot more than reconstructing area homes and businesses.
The experts pointed out that a lot of independent agents in hurricane-ravaged states face a dismal future, many of their customers fled the area after the hurricane hit and are now scattered over ALL 50 states and many can’t even be contacted to collect payments they are owed for their demolished homes.
Agents in Mississippi and Louisiana who enjoyed a profitable business before Hurricane Katrina now face an uncertain future due to at least two uncertainties:
They have lost a large percentage of their customer base, in many instances built up over decades; and if Attorney General Jim Hood’s lawsuit is successful the result could be much more traumatic than any hurricane.
Under the best circumstances, as evidenced in Port Charlotte, Fla., after Hurricane Charley, most of the repairs have been completed within 14 months.
Experts guess the rejuvenation in Mississippi and Louisiana could take from two to three years to complete both the cleanup and rebuilding. In the meantime, agents and even carriers will be detrimentally affected by the loss of business.
Even if area homeowners and businesses move back to rebuild, ane even if most of the agencies in the area have a lot of renewals that will soon become due-there isn’t any property on which to write a policy. The result is going to be a downturn in business and in the bottom line for agents and carriers, a loss under which the fallout could be extreme.
As if that isn’t enough, if Hood’s lawsuit is successful, it will mark the beginning of the end of insurance in Mississippi and could even cause an economic downturn that would be widely felt.
If the court decides in favor of the attorney general, carriers now writing property and casualty coverage in Mississippi will leave the state en-masse. Agents will lose a large percentage of their business and it will be impossible for anyone interested in buying homes or vehicles to buy insurance. The aftermath will be a dramatic drop in home and auto sales, since banks won’t be able to write mortgages on uninsured homes; and car sales will plunge because auto owners will be unable to obtain a car loan without insurance.
Also, due to the suit, carriers will have no alternative but to increase premiums in order to balance their books. These across-the-board increases will be felt in other, non-hurricane-prone states. Such defensive action will be to make up for business losses in Mississippi and Louisiana and the threat that the Mississippi court case decision will set a precedent to be followed by other states. This domino-effect will have far-reaching implications for the insurance industry and the entire U.S. economy.
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