Saturday, February 10, 2007

Two Sides to Every Story

Sometimes there’s more.

From the Sun Herald, “State Farm tells its side”:
"You kind of step back from it and look over the last month or so and you see, at least I see, examples that sort of strike me as convenient amnesia or schizophrenia, whether we're looking at the political environment, whether we're looking at the legal environment or whether we're looking at the editorial environment," said Michael A. Fernandez, vice president of corporate communications and external relations at State Farm headquarters in Bloomington, Ill.
With all that “convenient amnesia or schizophrenia” going around, it’s a good thing that State Farm keeps records:
To date, State Farm says, it has paid an average of $25,030 for structural damage to 794 policyholders left with slabs or pilings. State Farm had been unwilling to release the figure before Friday.
This is the tough part. Was it the force of the wind which blew over the houses? Or was it a wall of water that knocked them over? Really, there should not be a difference. But we all signed a contract that says there is.

On the flood insurance side, the National Flood Insurance Program paid its claims, even though it didn’t have nearly enough money of its own to do so:
GAO placed the National Flood Insurance Program (NFIP) on its high-risk list in March 2006 because the NFIP will unlikely generate sufficient revenues to repay the billions borrowed from the Department of the Treasury to cover flood claims from the 2005 hurricanes.


From September 2005 to March 2006, Congress three times increased FEMA’s authority to borrow from Treasury—from $1.5 billion originally to $20.8 billion—to help pay for claims from the 2005 hurricane season. As of August 31, 2006, the NFIP has paid out $17.3 billion in claims for 2005 floods.
Perspective: the NFIP collects only $2 billion a year in premiums and had used up its meager reserves when the 2005 hurricanes hit. The NFIP will probably borrow all of that $20.8 billion to repay claims filed since 2005. But at least it pays claims.

And in the “wind or water” dispute, when the NFIP paid, State Farm didn’t:
Where wind damage covered by State Farm and water damage covered by federal flood insurance could not be separated, the company denied claims, infuriating policyholders on the waterfront from state line to state line.
Mississippi Representative Gene Taylor has a term for that:
He remains convinced insurers wrote off losses to the National Flood Insurance Program in "one of the biggest Katrina frauds of them all."
I guess that’s the other side.


Anonymous said...

The lessons here:
*People need to know what type of coverage they bought before a loss and make sure that they are adequately protected. Read your policy and ask questions.
*Don't blame your insurance company because you didn't do what you should have to protect yourself
*The NFIP program is in need of reform. Katrina proved that the money coming in is not adquate to cover the money needed to go out in the event of a catastrophe of Katrina's size.
*The private insurance industry and state and local governments need to address the potential catastrophic losses this country faces in a better manner. Katrina was a warning that everyone should heed.

Mark said...

On an almost completely different subject, congratulations on having all of your work finally summarized by the Times-Picayune on the $110 Billion.