One year after Hurricane Katrina, the insurance industry says that nearly 95 percent of homeowners insurance claims have been settled in Louisiana and Mississippi, insurance companies have paid billions in storm damage claims and the vast majority of homeowners in both states say they are satisfied with their insurance company.
The Insurance Information Institute (I.I.I.), an insurer-supported research and information orgranization, estimates that more than 993,000 homeowners insurance claims filed with non-goverment entities have been settled in the two states, totaling nearly $15.5 billion. Homeowners insurers ultimately will pay more than one million homeowners claims totaling $16.4 billion from Hurricane Katrina.
The I.I.I. estimate does not include claims filed with two government entities: Louisiana Citizens Property Insurance Corporation, the state-owned property insurance company of last resort, or claims for flood damage filed with FEMA’s National Flood Insurance Program.
The report also does not cover claims in Florida or other states.
In Louisiana, insurers have settled 658,700 homeowners claims or 94.8 percent of expected homeowners claims from Hurricane Katrina, totaling $10.3 billion, reported the I.I.I. In Mississippi, 334,800 or 94.3 percent of expected homeowners claims, totaling $5.2 billion, have been settled.
Some 99 percent of 305,000 claims from damaged vehicles totaling $2 billion have been settled in both states.
A settlement means that the policyholder and the insurance company have agreed on the extent of the covered damage and the likely cost of repair.
A separate analysis performed by the Property and Casualty Insurers Association of America shows that in spite of a range of obstacles to the rebuilding process, the influx of insurance claims payments is contributing significantly to the recovery in the region. While significant problems persist – including severe damage to public infrastructure and reduced population continue to present challenges – the billions of dollars in claims paid to date are helping fuel an increase in residential building. Permits have risen by 4% in Louisiana and 32% in Mississippi, compared to a 4% decline nationally in the same period. A new influx of federal aid – totaling $107 billion – should contribute to further progress.
A new poll conducted by IPSOS Public Affairs also found 89 percent of homeowners in Louisiana and 93 percent in Mississippi are satisfied with their insurance company. The survey reported that four in five people (82 percent in Louisiana and 80 percent in Mississippi) who filed a hurricane-related claim are satisfied with the way it was managed by their insurer. While satisfaction numbers are slightly higher inland, most residents in the hardest-hit coastal areas describe themselves satisfied with the way their claim was handled.
“As the first anniversary of Hurricane Katrina approaches, nearly all homeowners and vehicle claims have been settled in Louisiana and Mississippi and nine of ten policyholders have expressed a high level of satisfaction with their insurance company,” said Dr. Robert Hartwig, executive vice president and chief economist of the I.I.I. “The billions of dollars in claims settlements are playing a key role in the recovery of the Gulf Coast.”
The pace of settlements varies within regions of an individual state. The highest rates of settlement are in areas farther from the coast where adjusters were permitted to enter first, and the lowest settlement rates are in coastal areas which became accessible to adjusters much later.
The I.I.I. estimates that fewer than 2 percent of homeowners claims in both Mississippi and Louisiana are in dispute, either through mediation or litigation. More than 80 percent of mediation claims have been resolved successfully in Mississippi and 77 percent in Louisiana.
“Despite the attention focused on lawsuits seeking payments for flood damage under homeowners policies where no coverage exists, the number of claims in litigation accounts for a very small percentage of the total number of claims filed,” said Dr. Hartwig.
Standard homeowners insurance policies typically do not cover losses from flooding, such as storm surge generated by hurricanes. This exclusion was reaffirmed by the ruling of a federal court in Mississippi on August 15.
The property/casualty insurance industry will pay out an estimated $40.6 billion on some 1.7 million claims in six states for Hurricane Katrina alone. By contrast, Hurricane Andrew, the previous record-holder, resulted in $15.5 billion in losses in 1992 ($20.9 billion in today’s dollars) and 790,000 claims.
Overall insured losses for damage to homes, vehicles and businesses damaged in 2005 by Hurricanes Katrina, Rita, Wilma and Dennis are estimated at $57 billion. A total of 3.3 million claims are expected.
Key Data on the Insurance Industry and Hurricane Katrina Recovery
* Insurers have paid out nearly $15.5 billion in homeowners insurance claims to hurricane victims in Louisiana and Mississippi.
* Claims settlement rates are 94.8% in Louisiana and 94.3% in Mississippi.
* More than 80 percent of mediation claims have been resolved successfully in Mississippi and 77 percent in Louisiana.
* Estimates show that fewer than 2% of homeowners claims in Mississippi and Louisiana are in dispute either through mediation or litigation.
* One year after Katrina, nine in ten homeowners in Louisiana (89%) and Mississippi (93%) are satisfied with their homeowners insurance company.
* Four in five people (82% in Louisiana and 81% in Mississippi) who filed a hurricane-related claim are satisfied with the way it was managed by their insurer.
* Insurance company claims payments equal 11% of state income in Louisiana and 10% in Mississippi.
* Ongoing infrastructure problems and other challenges continue to impede recovery in the hardest hit areas of Louisiana, including an acute loss of population; 13,000 fewer construction workers; lagging gas, electric and public transportation services; and a significant drop in tourism.
* Another round of federal aid ($107 billion) has begun flowing into the region, which will augment the insurance industry’s payments to help support further reconstruction.