Katrina & Rita Opened a “Pandora’s Box” for P/C Industry, Says S&P

December 15, 2005

  • December 15, 2005 at 10:58 am
    Randy says:
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    Insurance lady,

    They is we. Write a check yourself if you are feeling generous. America and the government has and continues to shell out hundreds of millions of dollars. It is not the governments responsibility to rebuild homes. More importantly what type of precedent would that action set for further potential disasters? Why would anyone buy insurance if they know the government would be there anyway to bail them out?

  • December 15, 2005 at 12:50 pm
    Katrina Sufferrer says:
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    First, most of the damage was flooding from levee breaches in New orleans – not wind as you are lead to believe.

    Second, the last MAJOR storm to hit Louisiana was in 1969, Hurricane Camile.

    Third, After Camile, the Louisiana Insurance Rating Commission granted a surcharge to the EC portion of the rate to be used for the next catastrophe. Where is the money from the last 36 years?

    I have been told that competition has reduced this surcharge. So, since prudent business practises were abandoned in favor of greed, the industry wants to double the rates which doubled after 9/11 and continued to rise?

    With so many people out of work and so many business closing on a daily basais, where is the money supposed to come from?

    How do I know this? I live it every day. After working insurance all week, I help friends and family gut houses on weekends and wave good-bye to my clients as they close their businesses for the last time.

    GET REAL, almost nobody can afford a 100% increase in premiums!

    Oh Yeah – Louisiana is not the only area in danger for this. California has earthquakes, mud/land slides and forest fires on a regular basis; Mid-West – \”Tornado Alley\” – that about sums it up; Massachuettes flooded while Louisiana dried out; blizzards across the north…

    All natural disasters that affect each and every one of us. They can only be dealt with, not escaped.

    Your repies to this should be very interresting!

  • December 15, 2005 at 1:06 am
    Compman says:
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    And we all know there have been no other major disasters since 1969, so I guess we need to really put the screws to these insurance companies. Why should we let them past on their costs to the consumers!, How horrible. Next we can go after the grocery stores when the orange crops freeze and demand they give us free oranges since they should have been saving money for this to happen one day.

  • December 15, 2005 at 1:15 am
    Ron says:
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    By reading your e-mail, I understand that you are in the insurance industry, so you must know that the price of insurance goes up based off of a companies past claim history. Since this is costing the insurance companies money, they have no choice to raise rates. I live in Oklahoma and after our May 3rd 1999 tornado, our rates shot through the roof. It\’s the nature of the business.

  • December 15, 2005 at 1:33 am
    ED says:
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    They had to raise rates because most of the Insurance companys lied to the people in Florida. Example: I was told as long as I had Hurricane Insurance I was covered. Wrong ,when hurricane Ivan came thru in July of 2004 I had storm surge and much damage. Since i did not have Flood Insurance I was told to bad. But I was not the only one that was told if we had Hurricane Ins. we were covered. Shame on the Insurance companys. They gambled and lost and then stuck it to the people they insure.
    ED

  • December 15, 2005 at 1:34 am
    Trae says:
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    Most of the damage was from flooding in New Orleans? Have you noticed the Mississippi Gulf Coast? New Orleans looks great compared to Biloxi, Gulfport, etc… Also, have you noticed that every carrier in the region is being sued because they\’re denying flood claims which are specifically excluded on property policies? I don\’t guess that has anything to do with rate increases! Get real. Without rate increases carriers are going to leave the Gulf region so fast it\’ll make your head spin… where would we be then?

  • December 15, 2005 at 1:36 am
    ??? says:
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    So it\’s your insurance company\’s fault your agent doesn\’t understand whats covered?

  • December 15, 2005 at 1:44 am
    Ron says:
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    You weren\’t lied to, you are covered for hurricane\’s, not storm surge. I do understand the frustration insureds feel, but you are paying for hurricane coverage. Coverage from storm surge would require flood insurance.

  • December 15, 2005 at 1:44 am
    ???? says:
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    We all pay for disasters… get a grip! insurance works just like taxes

  • December 15, 2005 at 1:47 am
    Dawn says:
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    There has to be a middle ground. People that have owned homes for a decade can\’t afford for their insurance to double or triple in some cases. Myself included. I bought a home I could afford- not a big one that had me mortgaged to the nose. Now between the hike in gas prices, groceries, utilities, and insurance due to hurricanes, I am barely hanging on paycheck to paycheck. If my insurance doubles next year, I will lose my home. Plus my mother on social security can\’t get a raise or a second job to cover every hand that\’s being held out to her to pay for hurricanes. So I have to cover that as well.

    To hear about profits for the quarter and CEO\’s making $$$$$$$$$$$$$ while I\’m about to lose what little I have is fair???????

    The utilily companies surcharge, the insurance company surcharges, everybody surcharges and the people who have the least are paying the most.

  • December 15, 2005 at 1:54 am
    Katrina SuffererALSO says:
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    I normally don\’t respond to these forums; but after reading the post by Katrina Sufferer and the replies; I felt a need to respond as well. In response to his first item; –
    Flood not wind; yes it was flood that breached the levy; but now you have insured\’s that did not carry flood insurance and carriers that are trying to avoid getting sucked into the flood or wind breached the levy issue. Such ground is very dangerous and sensitive to P&C insurers that commonly don\’t get involved in flood insurance; as it is common treaty exclusion. But aside from this; we still have wind damage; and much of it stems from the poor building codes and conditions of properties at the time of the storm. Insurance companies need to charge rate adequate for the potential loss; and many of these buildings could not withstand hurricane forces.
    Second; yes last major storm was Camile and Besty; almost 40 years ago; but let\’s be honest; this is nothing but \”LUCK\”; yes; we would all rather be lucky that smart; even the carriers say this; but this day was coming eventually.
    Third; there is no need to even comment; you are talking about a political entity in Louisiana; an entity for many years was denying smaller rate increases in mid 1990\’s and 2000\’s for many of the carriers down here? Rate has not been adequate in the state for quite some time; these denials are a very big part of the problem and the issues between Insurance Companies and the LDI/LIRC.

    This leads me to the real issue with our great state; it is a \”poor\” state; that is the real problem; our political arena was soo screwed up for so long; and with this comes a reputation that will take 25 to 50 years to overcome and only \”actions\” to overcome its reputation. Our politics has cost this state soo much in terms of Potential employers, jobs, tax revenue, etc, needed to boost the economy. I see it everyday; {in general terms}, you either \”have money\” or you are \”broke\” in Louisiana; and much of the money is \”old money\”. Where are the opportunities for our kids; our teachers, smaller businesses that want to move to this great state and start a small business in their local community. Here is the real problem in louisiana; and it was far before Hurricane Katrina. You know very well; if you are an agent and going after a piece of business; you are 99% sure that you are taking it from another business; -WHERE IS THE NEW BUSINESS {EVEN PRE KATRINA}.

    Insurance companies, brokers, agents; etc; they are businesses; they need to make money in our area or at least feel like they can make money. I saw property rates at $.40 to $.60 for commercial businesses in Orleans, Jefferson, etc; competition complaining that $5,000 wind deductibles were too much? How can carriers [at least carriers we want here] that are going to be here long term make a profit at these levels; especially with the building conditions we have in this state. You are right; almost nobody can afford 100% increases; but at $.50; I would disagree; it is just cost of doing business here and it is what states like FL have been paying for quite some time. If we want long term insurance carriers; good businesses to come, reopen; whatever the case is; we need to change our entire political structure. Some decisions that could be made are always not in the best interest of consumers short term; but if we look at the long term picture; the \”right decisions are not always the most accepted\”.

    You are correct there are natural disasters all over the US and world; but this one hit us; it is well over $100B in terms of insured, economic, uninsured losses; but it happended to us; and we need to find a way to make something good out of what has happended and ensure that our kids and their kids have something to stay in La for.

    I want to keep my business in La; but to do that we need business to write and insurance carriers to write the business; we can only do this if we have a long term approach. I received a check from our insurance carrier [homeowners] and they were very fair to us; regardless of my check [even if we had no damage] if my carrier sent me notice advising they were going up 50%; I say thank goodness you are still willing to write me. Do I want to pay 50% more; no; I have been a good client; this is my first ever HO claim and never had an auto claim; but the check they sent me would take them 10 years to break even back on; and I was an insured with \”minimal\” damage. So to say some carriers need 100% increase is not out of line; if they can\’t get 100% increase; some carriers will leave; when the leave the competition is less and this new 100% increase could go to 200% one day.

    I truly understand what you are going thru; and I have friends and family that have moved or are moving and going thru the same thing; even workers; but these premium increases are a very small worry to what we are going thru here in this area. I wish you the best and I hope we can all work together to make it happen again here in this great state of Louisiana.

  • December 15, 2005 at 1:54 am
    Ron says:
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    I can feel the pain. I\’m taking care of my wife and child because her working would cost us too much for daycare. Finding a middle ground is much more complex than it sounds. The best an insurance company can do is to spread the risk throughout the state. Although the 100% increase in this article was reinsurance, the insurance and insurance company buys. There is no way an insurance department would approve a 100% rate increase on property and casualty policies. There will no doubt be an increase on home and most likely auto policies, but it will not be as severe as the reinsurance increases.

  • December 15, 2005 at 2:02 am
    southern agent says:
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    I feel for you, Sufferer.
    I too lost alot in Katrina. Below New Orleans, the storm surge brought alot of water, Sufferer, from Jesuit Bend all the way to Venice is just destroyed, I\’ve seen it personally. I think the storm surge affected Gentilly, Ninth Ward and other vast areas around the city of N.O. too, I was there Dec. 13 (Tuesday). Levees and flood walls were overtopped and knocked down in some cases. Wind damaged alot as well. But you are right the worse damage was from the flood. (Let\’s blame all the Levee Board members, the true thiefs who are all still laughing and STILL enriching themselves at our expense AS WE SPEAK!)
    It made me sick to see the four black women on TV recently on C-Span argueing with congressman about genocide, their being detainees, the bombings of the levees, etc and etc. Interrupting the senators and showing NO CLASS AT ALL. It was a spectacle putting all of Louisiana back twenty years, at least. The product of the \”Great Society\” splitting at the seams and demanding more and more like fat ticks on a slim hound. I tell you, the rest of the country is just going to let Louisiana stew in it\’s own rancid juices following spectacles like that because if you do the math, the 60 billion Blanco is asking for is obscene and an insult to the rest of the country\’s intelligence as were these women ranting on and on. \”Mama D\” and her cronies stuck a dagger in the heart of New Orleans. Just how they were allowed to speak defies reason. Some enemy of Louisiana certainly had to be responsible for getting them to testify , and, I\’m afraid, the plan is working. Which is to make New Orleans and Louisiana people look like stupid, greedy bumpkins who think everyone else is as stupid as they are.
    Unfortunately, Sufferer, like Jimmy Buffet says, \”It just ain\’t that simple\”.
    Further, our land (South Louisiana) has been sinking since the 1800\’s and is clearly documented for all to see in history books but clearly evident to all who live, work or play there in their own brief life times. The world in South Louisiana is changing and we better adapt or we\’ll get left behind. Rebuild now and lose it again next year ?, doesn\’t make sense.
    I too feel terribly sorry for the people of the entire Gulf coast and hope that another storm doesn\’t hit us again next year and then the year after that again. But it WILL happen again. To ignore that fact is absurd.
    Like Sam Kennison used to say to the desert dwellers:\”MOVE\”!!!!

  • December 15, 2005 at 2:02 am
    elmo says:
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    Sufferer, I feel for your predicament, both in terms of your experience and any premium increase you must bear. However, what does it matter whether insurers collected surcharges in which they were entitled, consumers simply benefitted during that time period. The issue remains if insurers are unable to pay losses into the future and retain a fair profit, then they will choose to not do business in certain areas.

    While a premium increase may be difficult to swallow, most would agree it is still better than having no access to insurance.

  • December 15, 2005 at 2:07 am
    Dawn says:
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    If I am forced to go to Citizen\’s next year in Fl with their desired rate increase, my premium doubles. My electric bill has gone up 60% in the last 3 months \”Surcharges\” due to hurricane damage- and this was from Jeanne and Francis. I\’m afraid to know what they\’ll want for Wilma.

    Since Katrina hit, my bills have gone up almost $800 a month with no raise in pay. Add another $300 for my mother since her social security isn\’t going up either, and I\’m going to have to take up a cardboard sign \’Will work for food\” on the weekends.

  • December 15, 2005 at 3:15 am
    FL girl says:
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    Katrina sufferer, I feel your pain. Most of the replies here seem to be pretty unfeeling. Maybe they have never had anything bad happen to them and think nothing ever will.
    I live in Orlando and had damage from all 3 hurricanes in 2004 (Charley, Jeanne and Frances). Of course nothing like Katrina but after the third one, you realize that anything is possible. Everyone said after the first one, oh, we will never have another one. HA! Anyway, yes, rate increases are very hard to swallow but are sadly necessary to keep carriers from leaving the state. It happened in FL after Andrew. I was lucky in 05. Allstate renewed my homeowners at very little increase. Now Allstate wants to pull out of the state. Another problem is the state insurer of last resort, Citizens. The company had so many losses from 04 that it is assessing all policy holders in FL (not just the Citizen\’s customers) 18%. Next year will be worse. I used to think those of us who live inland were subsidizing the very rich people who live on the beach and this is true to some extent. But the point is, if you want to live in a hurricane-prone area, you will have to pay; whether it is Louisiana, Florida, Mississippi. Yes, there are tornadoes, earthquakes and floods in other parts of the country but now that we are in a bad weather cycle, hurricanes are going to hit us over and over again. Global warming, El Nino, whatever. I am here to tell you that just because you got hit once, you think it won\’t happen again, WRONG! I wish you all the best but you may want to consider moving. I am!

  • December 15, 2005 at 3:43 am
    insurance industry guy says:
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    I have read all the posted responses and have mix feelings. I certainly can appreciate the issues that face everyone effected by \”acts of nature\”. I have a brother who lives in Mobile on the river and he has not been spared by any of the storms that have hit that area.

    I remember reading an article in the Chicago Tribune several years back that was entitiled STATE FARM LOOSES $6B.
    In that article they also mentioned losses by Allstate and other carriers. The reasons for the losses were not caused by high loss ratios but by poor returns on investment portfolios. Well everyone took a hit by the market and as individual investors, we do not have the same type of recourse. What they failed to share in the article was the profit of over $120B that the roughly 3000 carriers made the previous year.

    If they try and take advantage of consumers by increasing rates to cover losses they may find themselves facing the same thing that oil companies are facing. Record profits and huge unjustified price increases at the pump do not mix.

    Read \”Crime of the Century— Insurance\” You will get a better handle on who they operate.

    Insuance compnaies are not risk dissaster managers, they are finance companies!!!!!!!!!!!!!

  • December 15, 2005 at 4:10 am
    katrina Sufferrer says:
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    Let\’s go for round two.

    There was wind damage all around the Gulf Coast from Katrina, no argument.

    I have been to many of these areas to see for myself, have you?

    The majority of the losses sustained are flood, not wind. Many of you have argued my point for me – this peril is not covered by the carriers seeking the increases.

    As for the poster who said move, all I have to say is where? Do you not understand?

    Natural disasters happen throught this country, there is no area safe from them. You tell me the safe place.

    After 9/11 there were massive rate increases nationwide. Most carriers I talked to blamed the attack. I only hope the rate increase for this disaster is spread out nationwide.

    There\’s an unpalitable thought for most of you. Can you say \”the law of large numbers\”?

    Sleep well all, I am done on this subject.

  • December 15, 2005 at 4:41 am
    insurance lady says:
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    As a New Yorker, although far removed from the catastrophe, I too have been following what has happened to the Gulf Coast post Katrina and my sympathies (description is probably not adequate enough) go to each of the displaced residents and businesses and to the many that lost their lives and loved ones.

    I have to admit I may seem to be biased towards the insurance industry but I do happen to know that most times, when businesses or persons have adequate and correct coverage, the peace of mind an individual receives when their covered losses are reimbursed is immeasurable.

    That said the reality is that many people do not purchase flood insurance or sometimes even refuse to increase coverage on their home or business believing that a catastrophe will never hit them and it\’s a waste of money.

    The many problems New Orleans and the other affected areas are having are enormous from alleged poor levee construction to inadequate planning to a perceived lack of government involvement from local to federal levels.

    Insurance companies are profit-making industries. Shareholders pull the strings and demand a return on their investment.

    Furthermore, they are the only industries that I know of that will pay you to rebuild your business or home for whatever limit you purchased for a fraction of the cost. With the banking industry, you can only take out what you put in.

    Where can you get $100,000 based on a $400 premium?

    Yes, many times you can pay years without having a claim but it only takes that one candle or cigarette or Katrina to realize the importance.

    In part what\’s causing the grief to be even more pronounced is that the economy is not as good as the administration claims it\’s doing. With so many people living from paycheck to paycheck as one of the responders answered, it\’s difficult if not downright impossible to absorb any rate hike much less 100%, though I believe that is unlikely to happen.

    Deluge your legislators and keep on congress and President Bush to keep their promises to you. There is no reason you can\’t rebuilt. If they can find $223,000,000 to a bridge to no-where, they can surely find money to rebuild the Gulf Coast.

  • December 15, 2005 at 4:45 am
    compman says:
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    Its funny how you show that State Farm as ONE company lost 8 billion one year but in the next breath you talk about a 120 billion dollar gain. But that is a total of 3000 Companies, so if you do the math, that is only 40 million per company. Now when you put the 40 million gain next to the 8 billion dollar loss, it looks completely different.

  • December 15, 2005 at 5:03 am
    compman says:
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    It never fails that somebody had to interject their political ramblings into the insurance discussion. If you want to bash and blame President Bush for the Hurricane, try posting at DU or the Huffpo. You may get better responses that fit your perception of America.

  • December 16, 2005 at 8:02 am
    Question From VA says:
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    Lingering question….where did the money go that was appropriated to build/improve/strengthen the levees that were supposed to protect New Orleans from surges of water?

  • December 16, 2005 at 8:31 am
    Insurance lady says:
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    I agree the \”we\” is us and I did shell out to help the victims but the fact remains that the levees were dangerously inadequate and if they had been built or shored up like they were suppose to, this catastrophe may have not been as great. It\’s true that the government should not be in the position of rebuilding homes or businesses but this catastrope was unprecedented but not unforseen. And the other fact is the government is \”us\” whether we choose to realize it or not.

    We are spending billions ($300 billion and counting) across the world to build up infrastructure in another country, why not here for our own in need?

  • December 16, 2005 at 8:32 am
    Ron says:
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    That\’s a good question and one you will probably never get the answer to. One could assume it went to the corrupt politicians in LA.

  • December 16, 2005 at 9:00 am
    insurance lady says:
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    Political bashing? How absurd!!!

    I did not blame President Bush for the hurricane. If you read my comment, congress and legislators were included so no one is absolved be it Republican or Democrat, on the local or federal level.

    We are spending billions in another country across the world to build their infrastructure, why not here for our own in a time of dire need and disastrous circumstances?

    Hundreds of thousands of families are homeless,living like nomads and many still don\’t have closure. That infuriates me.

    But this is an insurance forum and I apologize if I\’ve upset you.

  • December 16, 2005 at 1:56 am
    Fl girl says:
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    Sorry but do you not understand? No place is perfect but some places are a lot less likely to suffer catastrophic damage than others. There ARE some places safer than others. Of course no place is ABSOLUTELY safe but there is a degree more or less of risk in each area. Have you ever been out of Louisiana? There is a reason that homeowners insurance rates are lower in some states than others. I repeat, think about moving!

  • December 17, 2005 at 4:49 am
    Pissed Off IA says:
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    You all are throwing around this term \”hurricane coverage\” or \”hurricane insurance\”. You do realize that there is no such thing as this, right? There is no policy that states \”we cover for damages from a hurricane\”. Your policy states perils, one of which is wind. Wind is part of a hurricane. Maybe this is why you all feel you have \”hurricane coverage\”. Storm surge is defined as flood which is specifically excluded on MOST HO policies. It sucks to know there\’s agents out there that don\’t know squat about what they\’re selling to their clients.

    As for the rate increase question, you have got to be kidding me. Of course your rates are going to go up, there\’s been over 1.6 Million claims reported which, on average, will probably cost over $50K to repair (my guestimate).

    I do feel sorry for the people that don\’t have flood insurance in MS and are getting their hopes up on the MS AG\’s wild and stupid law suit just to find out the courts are going to shoot it down.

    I am from FL and know plenty well what it\’s like to go through a hurricane. People, you have to help yourself. The Insurance Carriers aren\’t magicians, they can only handle so many at a time. They can\’t wave their wand and make everything better. If you haven\’t seen your adjuster, mitigate your damages dammit. You don\’t have to wait for an adjuster to get there to protect your home from further damage.

    SIncerely,
    Pissed Off IA



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