One year later: Gulf Coast agents & Katrina recovery

Last October, Insurance Journal spent two days in Mississippi visiting with three independent insurance agents who experienced the devastation left by Katrina. Late last month, on Hurricane Katrina’s first anniversary, Insurance Journal checked back with these agents to see how their efforts to rebuild their lives, businesses and communities were progressing.

‘One of the lucky ones’
Scott Naugle, executive vice president of Stewart Sneed Hewes, Gulfport, Miss.

Scott Naugle and a staff of about 20 employees of the Stewart Sneed Hewes insurance agency in Gulfport were working out of a tent right after Katrina leveled their office, helping policyholders and fellow victims put their lives back together.

While helping others, Naugle and more than a dozen of his employees also faced the reality that their own homes had been destroyed.

“I was one of the lucky ones,” claims Naugle. By lucky he means there was enough left of his family’s home to make rebuilding a possibility. While the house is not finished, the Naugles moved back in when the electricity was restored in September. He estimates there are only three dozen homes in his entire neighborhood that are in similar shape. The rest remain empty lots or lots with trailers.

Business recovery
As for the business, his agency’s disaster recovery service worked to the extent that the agency lost no files. The firm has updated the plan since Katrina. “We’ve assumed nothing,” is how he describes enhancing the plan to account for situations where basics are missing, where there is no communication, water, or even food.

Naugle is proud that his agency’s six-story corporate office building was the first major structure on the Gulf Coast that was repaired and re-opened. Many of his employees are still in temporary housing. He’s lost a few of them also but the agency is looking to hire to replace them.

The agency workload has increased, not lessened. There are record numbers of claims, of course, but the real challenge as been renewals. It has required a “huge amount” of work to complete renewals, given difficulty contacting clients, more negotiating over coverage, and a lot more work trying to convince insurers to sign on. Availability of coverage is a problem along with affordability.

“We have to market renewals more now and negotiate more now,” Naugle notes.

But he understands. “The major carriers have done all they can. We understand their position. We’re mutually working through it.” He added that the state’s wind pool has done a “heroic” job and made a big difference.

From a population of close to 8,000, Gulfport is now down to about 1,300 residents. So with fewer homes and business around, the agency has lost accounts. However, Naugle says this has been more than offset by revenues from the influx of contractors and other new businesses combined with the fact that premiums on just about everything have skyrocketed.

“So the net is up on the whole,” he says.

Buying habits
Insureds’ buying habits have changed somewhat. His agency had always made it a practice to quote on flood and excess flood coverage for most risks and always had insureds who declined sign a statement to that effect. “Those who said no before are saying yes now,” Naugle reports.

There are many reasons people and businesses have not yet rebuilt in Gulfport. In some areas, it’s not prudent to rebuild. Many lack the resources to rebuild. Some haven’t been able to line up reliable contractors. Others just ran out of patience and time. “Some folks just said, ‘I’m too old to go through this again,'” Naugle recalls.

But Naugle perseveres. “There are two ways to look at this. This is terrible and progress is too slow and there’s too much to do. Or we’ve made progress and we need to work hard to continue it. Each individual has to make that choice. I made mine.”

Test of metal
Aulton Vann, owner of Aulton Vann Insurance Agency, Pascagoula, Miss.

Aulton Vann figures things are “75 percent better, not 100 percent, but 75 percent better” than they were when Insurance Journal visited him in Pascagoula last October.

Last August, Vann found his Pascagoula office on Market Street under about four feet of water after Katrina roared through town. Today the firm is operating out of a new metal building, which serves his business purposes even as it displeases some of the town officials, including the mayor, who are pressuring him to brick the outside.

Brick exemption
“I tell them, ‘Give me a 10-year tax exemption and I’ll put on brick. I’ve spent a lot on awnings and flowerbeds and asphalt. People who come in say, ‘Why is everybody coming down on you for this? It’s beautiful.'”

Independent agent associations were “very instrumental” in his staying afloat. He also credits his company partners for coming through so he could quickly retrieve customer information.

The home front
His home on the beach on the Gulf Coast was even worse off than his agency. Katrina left little more than memories. He and his wife bought a mobile home to live in during reconstruction. Since then, he says they have been battling to meet Federal Emergency Management Agency rules and stricter building codes in order to rebuild. His new home will be able to withstand 165 mph winds.

“Some of their (FEMA’s) rules and regulations are, and I don’t like using this word and never let my children use it, but they are just stupid,” he says.

He says he was able to move quickly on rebuilding his office in part because he acted before stricter building codes went into effect June 1 but he worries other other citizens will have difficulty with the new building codes. “A lot of people have moved into trailers and inland,” he says. “It costs too much to meet the new codes.”

Premiums way up
He estimates he has lost between 10 and 15 percent of his business but that loss has been more than covered by new business and rising premiums on all accounts. He said trailer premiums are up 40 percent; the wind pool premiums are up 90 percent; and commercial premiums are up more than 250 percent.

Can his insureds afford the price increases? “It sounds harsh but they’ll have to bite the bullet,” he says. Some property owners are talking about purchasing wind policies for only the months of July, August and September to save money, he adds.

New and renewals
As for new business, he’s tried to be selective about writing contractors. “Some agents will write whoever comes through the door,” he says. “But some are fly-by-nights and you have to be careful.” Renewals haven’t been too much of a problem because, he contends, he’s emphasized good customer service over the years. “They call us. They let us know even now how close they are to getting back.”

They call even though he says most did not have flood insurance. “A lot didn’t have flood insurance. I’d say 99.9 percent understood that and were not mad at me because they knew they didn’t have it.”

Federal flood program statistics show Mississippi with the biggest gains in sales of flood policies in the past year. Sales jumped 41.4 percent, from 42,730 to 60,435 policies.

Flood policies
Vann experienced a surge in flood policy sales right after Katrina, followed by a slow period, followed by a slight uptick again upon news of Ernesto becoming a hurricane. But he doesn’t see any dramatic surge in flood policies. “They are going under the same mindset that Katrina floods came 6 and one-half miles inland and was a once-in-100 years occurrence. They figure it’s not going to happen again.”

One of those new flood policyholders is Vann himself. He did not carry flood insurance on either his home or his business before Katrina. But he’s got it on his new office and he’ll have it on his new home, groundbreaking for which is scheduled for close to Labor Day, raising hopes he and his wife might be able to have Christmas in their new home.

Closer together
Vann thinks that as much tragedy as Katrina brought, she also brought the diverse community of Pascagoula closer together for the better. “Everybody was on an equal plain. Nobody had anything. It opened everybody’s eyes.”

Losing everything has led him– and he suspects others — to rethink what is really important. “When you sleep on a floor for 9 months, you appreciate a bed. When you can take only cold showers, you appreciate when you can get a hot shower.”

As if being displaced was not enough, Vann has endured two heart attacks since Katrina. “My doctor said it was from trying to do too much for too many people.”

He now operates with a defibrillator and his heart, obviously, is fine.

Strength and patience
Dave Treutel, owner of Treutel Insurance Agency, Bay St. Louis, Miss.

The Treutel family’s spirits were buoyed in January when a builder started transforming the shell of their former house into their new home. But halfway through the reconstruction, they lost their contractor, a not uncommon experience for Mississippians fighting to recover from the storm.

So the Treutels are still living in a 500 square foot apartment as they try to find a replacement contractor to finish rebuilding their home that Katrina took from them.

The Treutels and their extended family also lost 15 autos, 8 homes and 3 businesses to Katrina. Yet, they consider themselves fortunate that they survived, unlike the five neighbors who drowned.

In addition to being an insurance agency owner, David Treutel is a community leader. He serves on the board of the Mississippi Windstorm Underwriting Association (the wind pool) and is president of the Gulf Coast Community Federation, where he helps disperse funds to needy local organizations.

He has become a spokesman on Katrina-related insurance issues. In June, he recounted his Katrina experiences before a U.S. House Subcommittee. He has spoken before numerous other groups. On the eve of Katrina’s Aug, 29 anniversary, he was preparing to speak to a delegation of Congressmen and women.

Slow process
Before Katrina, Bay St. Louis had a population of about 10,000 and was part of an 11-town regional population of about 400,000. The residents of this region felt the brunt of Katrina. Close to 70,000 homes were destroyed and another 60,000 were damaged. More than 100,000 families are still living in FEMA trailers. While there are spots of recovery, Bay St Louis faces major challenges. Some reports indicate less than five percent of people are returning to rebuild.

“We know without a doubt that we will rebuild,” Treutel asserts, then adds, “but it’s a slow process.”

From affordable housing and small business assistance to mental health assistance for Katrina’s victims to a federal disaster plan, Treutel has definite views as to what should be done to improve the process. “You’re only as strong as your weakest link,” he says of his belief that the lack of affordable housing is the biggest obstacle to the recovery of the Gulf Coast.

As Treutel explains it, the tax base needed to rebuild is hurt by businesses that aren’t reopening because they can’t find employees, who haven’t returned because there are no places they can afford to live.

Treutel’s independent insurance agency was located on a high bluff a block from the bay. Katrina severely damaged the two-story building with “car-sized holes on the roof and flood water that reached 7 feet.” Not in 300-years had tidal water reached the bluff.

Treutel told Congressional representatives how his agency coped. Within a week of the hurricane, he and his staff set up operations in a tent in a parking lot, where they worked in 110-degree heat to help hundreds of insureds who had lost their homes and more. All the while, the town was without power, phones and water.

After Hurricane Rita blew down the makeshift office tent, the agency moved into a trailer. Six agency employees had suffered severe damage or total loss of homes, yet they still returned to work each day. The agency had more than 10,000 policyholders, and ultimately handled close to 8,000 claims.

This Best Practices agency is still working out of temporary quarters while awaiting the building of a new office.

Even with rising premiums, his agency’s premium volume is down about 20 percent. The situation is aggravated by the fact that certain carriers have cut commissions.

Market problems
The main insurance challenge for Treutel is finding markets for his customers. “The business market has gotten extremely tight. What was an affordability problem is now an availability problem too,” he said.

Markets for homeowners are a bit easier. But costs are rising fast. A typical wind pool premium alone on a $150,000 home that was $1,500 is now $2,800. That’s on top of premiums for flood and homeowners policies.

He has updated his disaster plan since Katrina even though, he jokes, he’s “got a lot less to lose” now than he did a year ago. The plan now includes a temporary office 100 miles way. But he said he’s “not cocky about any disaster plan because even the best-made plans are not perfect.”

There is some positive news. A major employer that generates 20 percent of the town’s tax revenues– Casino Magic — is reopening. Yet for every win, it seems he could name multiple losses. His agency just lost its most senior and beloved insured, a 101-year old woman who regularly dropped by the agency. “Our newspapers are littered with obituaries of people who made it through Katrina only to die waiting to get back into their own homes,” he observes.

In the face of the challenges, Treutel takes strength from the “can-do attitude” of those who are working on the rebuilding.

“You’ve got to be patient,” he advises.