THE TOPIC

MARCH 2008

Each month we will pose a new question either from industry experts, governmental experts or the National Insurance Reform Day web staff.  This months is below and one answer is presented.  However, you must do your own research and consider the possiblities.  We agree with the below answer at National Insurance Reform Day but know that you have to form your own opinion.   Good luck and please email us your answer.  We'd love to hear it and will post some on this site in the future.

"How do we, as a society, financially plan for the event which will eventually occur?" 

Sample opinion

National Insurance Reform Day-

Topic---Catastrophe insurance for wind and water damage

The term “catastrophe” AKA (CAT) in the property insurance industry denotes a natural or man-made disaster that is unusually severe and that impacts tax payers, insurers and consumers.  An event is designated a catastrophe when claims are expected to reach a certain dollar threshold, currently set at $25 million.

Catastrophe losses in 2005 totaled $61.2 billion from 24 disasters.  The 2006 hurricane season was much less active than predicted earlier in the year, due in part to changes in weather patterns. This unexpected lull is giving the federal government an opportunity to conduct indepth analysis of the CAT insurance model.  We invite you to explore the issues of CAT insurance legislation at the National Insurance Reform Day web site.

Insurance industry research indicates disaster losses along the coast are likely to escalate in the coming years because of huge increases in the magnitude of hurricane events.  One catastrophe modeling company predicts that catastrophe losses will double every decade or so due to growing numbers of mega hurricanes such as Katrina and more expensive buildings cost.  Data from the Census Bureau, collected by USA Today, show that in 2006 34.9 million people were seriously threatened by Atlantic hurricanes, compared with 10.2 million in 1950.

Over the 20-year period, 1986 to 2005, hurricanes and tropical storms made up 47.5 percent of total catastrophe losses, followed by tornado losses (24.5 percent), winter storms (7.8 percent), terrorism (7.7 percent), earthquakes and other geologic events (6.7 percent), wind/hail/flood (2.8 percent) and fire (2.3 percent).  Civil disorders, water damage and utility services disruption combined represented less than 1 percent.  Each year about 7 percent of homeowners file a homeowners insurance claim, according to ISO.

The typical homeowners wind policy does not afford wind coverage when water damage is present. No insurance product exist which provides this wind/water protection which occurs in every tropical storm and hurricane.  This puts the majority of our nations infrastructure at risk of total loss without private sector insurance participation in the rebuilding efforts.  The current insurance model makes no provisions for responsible consumers to prepare in advance for over 50 percent of the total catastrophe losses which occur each year.

Congress is currently debating the passage of HR 3121: The Flood Insurance Modernization Act which for the first time affords responsible consumers the insurance vehicle to pre-pay for wind/water loses. The private insurance industry does not provide coverage for such wind loses, yet some courts have required them to provide payments to consumers despite having never collected premiums for such damage.  Industry cannot afford to become the insurer of last resort for the nations catastrophic loses as they do not collect premiums for such damages.  If allowd to continue this problem could result in the total failure of the entire insurance industry.

HR 3121 removes the burden for CAT damage remediation from the tax payers, banks and private insurance carriers.  HR 3121 shifts the burden from tax payers, banks and private insurance carriers to the consumer.  It ends the federal governments role as unpaid insurer of wind/water damage.  It allows the federal government and banks to require irresponsible homeowners to pre-pay for CAT loses in advance  I support this measure because as a tax payer I believe it the responsibility of each homeowner to assume the risk for their own home.

Web links related to above opinion.  Please let us know if you find other links which may help the
site users.


http://www.iii.org/media/updates/archive/press.748575/

Reforms Needed to Prepare for Major Catastrophes,
Insurance CEOs Tell Forum


http://www.clarionledger.com/apps/pbcs.dll/article?AID=/20070805/NEWS/70805006

Nationwide and other insurers defend their homeowners policies non-coverage of
wind/water damage.  Judges ruling requires company to pay for damage not paid for
in the policy assert insurers.

http://www.businessinsurance.com/cgi-bin/industryFocus.pl?articleId=18364&issueDate=2006-02-19

"how do we, as a society, financially plan for the event which will eventually occur?"  CEOs share lessions and concerns from 2005 catastrophe season. 
___________________________________________________________________________________________________
Proposed line of questions for September---

Homeland Securities Mission Statement has as its stated goal of protection---

Protection---  Safeguard our people and their freedoms, critical infastructures, property and the economy of our Nation from acts of terrorism, natural disasters, or other emergencies.

We in the xyz field have worked with soldiers returning from Iraq and Afghanistan who have returned to slabs.  Their insurance policy provided absolutely NO protection for their homes wind damage.  This caused them great concern and distrubed their mission focus on fighting terrorism.  How will HR 3121 better protect our troops homes while they are out risking our lives protecting our homeland?


http://www.dhs.gov/xabout/strategicplan/index.shtm