Former FEMA director promotes state, federal disaster mediation

Federal and state governments need to work with insurance companies to sponsor disaster mediation programs before something happens — before people who have worked all their lives for everything they have, all of a sudden, within minutes, lose all their hopes and dreams, James Lee Whitt, president of James Lee Whitt Associates, recently said in Orlando, Fla.

The first FEMA head to be elevated to a Cabinet position, Whitt was a keynote speaker at the June Florida Association of Insurance Agents Conference and Exposition.

“It’s more important that local communities recover much faster than ever before, simply because if you cannot get that community back up and running right away, it is devastating,” Whitt, said. “We did a survey during the years that I was with FEMA and found that 25 to 30 percent of the businesses that are affected by a hurricane or similar catastrophe never reopen.

“That’s the heart and soul of the community, that’s the largest employer,” he said. “We are not only losing jobs, we are losing tax revenues.”

Whitt used Louisiana as an example:

“FEMA’s program for local and state governments will only refund reimbursable costs, particularly for police, fire, paramedics and city workers — but only overtime, not straight time,” he said. “In a lot of parishes, they do not have any revenue. Their tax base is gone. In St. Bernard Parish, with a 70,000 population, there is only one drug store and one grocery store open.

“The parish president has zero tax revenue coming in. How are they going to pay for their police, fire and teachers?” Whitt asked.

The Stafford Act needs to be rewritten because there was a scale that for $85 per capita costs, the federal government would share 75 percent, and local and state would share 25 percent. The Northridge earthquake had a $110 per capita cost; 9/11 in New York had a $400 per capita cost, and President Bush gave them 100 percent, Whitt said.

With “Hurricanes Katrina and Rita in Louisiana, the per capita cost is $6,000 and [there was] a 90/10 cost share,” Whitt said. “Can you imagine Louisiana matching 10 percent of $100 billion? They lost $1.5 billion in taxable revenue.”

Consequently, “What you do is important, the insurance you sell is important,” Whitt told attendees.

“We have to make insurance more available, more affordable, with a lower deductible, so we can get more people insured,” he said.

Whitt and Admiral James M. Loy are national co-chairs of www.protecting america.org, a coalition whose goal is to establishing catastrophe funds in each state and a federal fund as a backstop.

CAT funds inadequate
Whitt pointed out that Florida’s CAT fund was almost wiped out after four hurricanes. In California, the Earthquake Authority has a $6 billion fund.

In 1906, 6,000 people lost their lives and 225,000 became homeless, with a total population of 250,000. The cost in 1906 of that earthquake was $6 billion, Whitt indicated.

“If the same earthquake occurred today with the same intensity, the damages would cost $400 billion,” Whitt said. “Only one out of seven people in California has earthquake insurance because although it is available, it is not affordable, with a deductible of $25,000 to $30,000. The average damage to a home during an average earthquake is $25,000, he said.

Whitt said his goal is to open a CAT fund for each state, managed by the state, that would be a backstop for what cannot be reinsured.

“We need reinsurance, and we need insurance,” Whitt said. “But take 10 to 20 percent of that fund as it grows each year and make grants to communities for mitigation prevention, public awareness and public education,” he suggested.

Devastating events
Whitt pointed out that as he looks across Florida, the Gulf coast states and America, he has recently seen more devastating events than ever witnessed in the history of the nation. He said that in today’s world and with the risks, it’s even more critical to have viable and strong insurance companies.

“We are facing another hurricane season this year that potentially could be as devastating as last year with Katrina and Wilma,” he said. “The storms forecast could be another $100 billion event. How are we going to survive and recover? How are we going to keep your industry strong and make it viable so people are able to have insurance on their homes and belongings?” he asked the audience.

Whitt said in the eight years he spent at FEMA, he lived through the 1993 Mississippi flood, the 1994 earthquake in California, the Oklahoma City bombing in 1995, and numerous hurricanes, tornadoes and floods.

“In eight years. I went to all 50 states and three territories for a disaster declaration,” Whitt said. “One of the things that we believe in and started at FEMA was to put in a division of mitigation prevention with a strong base and foundation to work with governments and individuals to identify the risks they faced and start to mitigate that risk.

“Our goal was to eliminate the risk, cut the cost to the federal budget and taxpayers, and support the insurance industry in a way that would give them an opportunity to do better” he continued. “Because if the industry does better, insurance will be more affordable, with a lower deductible.”

Flood insurance changes
Whitt said in Washington legislators now are thinking about cutting the commission agents make from flood insurance from 33 to 25 percent.

“I told them if they do that, they had better hire more federal employees, because they aren’t going to have anyone to [under]write for them,” he said.

The National Flood Insurance Program spends $200 million per year on repetitive flood claims, Whitt said. “Let’s go back and look at how many claims have been filed on individual properties over the last 10 years.”

Whitt said when he was at FEMA, there were 10,000 properties that had three or more claims filed during a 10-year period.

“I put together a proposal for Congress, went up to meet with the chairman of the committee and proposed that over a four-year period, we either buy out or elevate that property on a voluntary basis to eliminate that $200 million annually,” Whitt explained. “We can do it for $400 million.

“One congressman who represents a state on the Gulf coast told me, ‘James Lee, if you go mucking with my fishing camps I’ll have you mounted on a wall.'”

Previously, FEMA also was guilty of subsidizing secondary and vacation homes. Whitt suggested eliminating those properties from FEMA’s program. Whitt said it was the right thing to do, but he was turned down every time he went to Capitol Hill.

Whitt said he saw a lot of people that did not have flood insurance affected by Katrina and Rita.

“They were even in areas that FEMA told them they didn’t need flood insurance,” Whitt said. “Here you are sitting 6 feet below sea level and FEMA says you don’t need flood insurance. That really makes sense.”

“So in today’s world how do we get people to change? How can we put in better practices?” Whitt asked.

Project Impact
Whitt described a plan called Project Impact. It involves a public and private partnership of businesses and corporations in local communities to minimize their risks during a catastrophe. There are 250 communities participating.

“We had communities join just because they thought it was a good idea,” Whitt explained. “They didn’t want any money, they just liked the concept of building a partnership and doing it themselves.

“I’ll never forget after we left office, Seattle was celebrating its third year anniversary in Project Impact,” Whitt said. “They took it seriously, retrofitting everything — schools, hospitals, nursing homes, low rent housing and bridges.”

Whitt said on the evening of the Project Impact anniversary, there was 7.0 earthquake.

“The next morning, the mayor of Seattle was interviewed on CNN. The station asked him how Seattle could have a major earthquake, little damage and only one death, which was due to a heart attack.

“Guess what,” Whitt said. “That very same day, the government cut that program.”

Despite those results, Whitt said FEMA tried to use disaster costs to increase mitigation funding to state and local governments after a disaster.

“We used HUD, CDC dollars and FEMA mitigation dollars, and were able in Missouri alone to buy up 4,000 pieces of property, take that land, put deed restrictions on it and give it back to cities and counties for open green space.

Because of those efforts, in 1995, there was another flood, and not one dollar was spent on response, Whitt said.

Today, Whitt said the federal government needs to focus its energy and money to help people help themselves.The government needs to take the lead in building a partnership to build better, safer communities, he said.

“I don’t want to continue to see people lose their hopes and dreams that they have worked for all their lives,” he concluded.

Topics California Florida Catastrophe Louisiana Flood Hurricane