Hurricane fatigue

One decried a system in which wealthy waterfront property owners are being subsidized by less affluent property owners and taxpayers: “If the state is going to continue to attract new residents, it will have to make them pay for the view. You can’t ask those living in low risk areas to subsidize West Palm Beach.” (1)

He said that the rich aren’t paying their fair share: “People are willing to pay high prices for homes in coastal areas, but are not willing to pay the real cost of insuring them.” (2)

Another warned that some insurance companies are writing in hurricane-prone areas with quick money rather than peoples’ best interests in mind: “Into this supply breach have stepped under-capitalized start-up companies, many of which could become insolvent in the event of a mega disaster. Meanwhile, the cheap rates they offer drive responsible, established carriers out of the market. … Undercapitalized companies will fill the gap. The question is, will they have enough cash when needed to pay claims?” (3)

Finally, a third insisted, the government needs to get involved: “The solution is a private program sponsored by the government under which rates for homeowners would be actuarially sound. States would create pools funded by all entities that benefit from a robust local economy such as the banking and real estate sectors. The key is to pre-fund the cost of reconstruction after a catastrophe.” (4)

Who are these fiery radicals? Speaking at the Insurance Information Institute’s annual Property/Casualty Insurance Joint Industry Forum on how the industry weathered Katrina and the storms of 2005, they were:

1., 2. W.G. Jurgensen, chief executive officer, Nationwide Insurance.

3. Frederick H. Eppinger, president and chief executive officer, Hanover Insurance

4. Edward M. Liddy, chairman, president and chief executive officer, Allstate.

The CEOs spoke about the emotional impact that the 2005 catastrophes have had on their agents and employees and on themselves. They told stories of “real heroes,” claims adjusters who lost everything yet still went to work to help others. They related how employees have pulled together and continue to work under extremely trying circumstances.

Hanover’s Eppinger worried about the fatigue of employees working on the recovery. “How do we care for them?” he asked, adding at one point, “It’s about more than dollars.”

Edward B. Rust, Jr., chairman and chief executive officer, State Farm, lamented how in the wake of Katrina and storms yet to come there are “so many people in harm’s way.”

As CEOs, they had to deliver a bottom line and they did: The nation must change the way it deals with catastrophes.

The storms of 2005 have “changed the dialogue over the problem we have of uninsured and underinsured on our coasts,” Eppinger said.

Changed the dialogue indeed.

With the 2006 hurricane season fast approaching–predicted to be another active and destructive year–one wonders how much more the southern coasts of the U.S. can stand, not to mention the insurance industry and the people who work to help affected areas recover as best they can. Let’s hope the predictions are overstated and we can avoid hurricane fatigue for this year, as we haven’t fully recovered from last year–or the year before, for that matter.

Topics Catastrophe Natural Disasters Hurricane