Insurers Paid $40 Billion in Katrina Storm Claims
The Insurance Information Institute disputes claims that homeowner insurers have reneged on policy obligations in the wake of Hurricane Katrina, saying the industry has settled, without dispute, "nearly all" of the 1.7 million claims, totaling $40.6 billion, from Hurricane Katrina. The institute claims that fewer than 2% of claims from Louisiana and Mississippi following the hurricane were in litigation or mediation.
That accounted for the bulk of 2005's total $57.1 billion in hurricane-related claims from 3.3 million policies. The institute notes that seven of the 10 most expensive hurricanes ever to strike the U.S. occurred during a 14-month interval between August 2004 and October 2005.
Robert Hartwig, president and chief economist at the III, said in testimony before a congressional panel that with the frequency and severity of hurricanes expected to rise, the insurance industry has strengthened its catastrophe response capabilities to more quickly reach customers in the wake of mega-catastrophes. He noted that Hurricane Katrina disrupted the infrastructure of an entire region.
Mr. Hartwig also disputed allegations that insurers have been frequently in dispute with policyholders about coverage.
"Insurance companies strive to settle claims without any disputes with their customers. And the record is clear that in the overwhelming number of cases, that is exactly what happens. They are routinely settled by adjusters with policyholders at the scene without the involvement of attorneys or engineers in a courtroom."
Insurers have increased their use of technology, such as global positioning system devices, to identify damaged property, increased electronic commerce to reduce reliance on hard-copy exchanges, and are working with public officials to gain quicker access to the most badly damaged areas after a storm or other catastrophe.
He also testified that the insurance industry supports strong building codes, prudent land use management, and the development of technology to mitigate future property damage and save lives in the event of a storm.
However, Mr. Hartwig took aim at some of the industry's critics and foes, especially trial attorneys.
"States such as Florida have abandoned the fundamental concept of risk-based pricing, while in Mississippi the tort system has been used to require insurers to pay potentially hundreds of millions of dollars in flood losses, a type of loss for which they have never received a penny in premium," he said.
The institute says homeowner policies are clear in stating that they do not cover damage from storm surges.
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