I don’t want to pretend that I know what the right decision should have been in the Katrina insurance case decided yesterday. But I found this quote from insurance-industry flack Joseph Annotti, reported by the Associated Press, to be astonishing:
From our perspective, it lifts a very large cloud of uncertainty that has been hanging over the insurance market of the Gulf Coast. A healthy insurance market is absolutely key to a rejuvenated economy down there.
Except that, to Annotti, a healthy insurance market requires not paying people for the losses they suffered. How is that going to rejuvenate the economy?
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RichC
An insurance company doesn’t have to pay out for hazards that its policies didn’t cover, that it didn’t bill for, and that it didn’t receive premiums for.Pardon me if I don’t go all “No justice, no peace!” on this news.
Anonymous
Dan, on the other hand, if you want the insurance company to pay out more than they are legally entitled to pay under the terms of a standard homeowners policy, please don’t complain when you either can’t get home insurance or you find your premium raised through the roof next year.I’m assuming that these folks didn’t have flood insurance, probably with the assumption (and not unwarranted) that the “government” would pick up the tab anyway. That may prove out in the end (unfortunately for the rest of us), but I don’t think Nationwide is the vile character you try to portray them as with your comment.One of my friends is a pretty well known economist who earlier on in his career was out in California. He couldn’t understand why so many people went without earthquake insurance “because it was too expensive”. In his logical mind, the fact that the premium was expensive argued strongly for the fact that if you’re going to live in the area, that you HAD to have the coverage. Ditto for flood insurance.Mike WyattNorwell, MA
Rick in Duxbury
Insurance companies, like banks, aren’t warm and fuzzy. However, try to live without them; they serve a purpose. They deserve to be regulated and scrutinized to make sure they operate within the public interest. That said, why should the government have the right to change contracts for lawful goods or services between parties? Those folks suing for coverage they had not purchased took a shot; America is litigious. Be careful what you wish for. Some folks in New London, CT have recently discovered the deeds to their homes were less than they thought because of similar “help” from the government in the form of eminent domain takings.
John Galt
Ponzi, you had it nailed. There’s never been a phonier pyramid scheme than insurance all dressed up and playing at big biz. FDR knew it.
MeTheSheeple
That screams for a follow-up question and explanation by the reporter.I’ll wager a guess, though:– An adverse ruling would have made insurance in the area less profitable, and possibly costly– That would have reduced the number and willingness of insurers to operate in the Gulf– Banks won’t give loans on homes without insurance, because they’d be at risk of losing their collateral in the next storm– Without signficant amounts of money (such as that from bank loans, or insurance payouts! =) ), renovation, repair and reconstruction aren’t going to happen– Without a rebuilding, the area will lose workers and the previous way of life– With a rebuilding, more money will circulate, temporary jobs in construction will be created, more workers will return, …This guess might even be vaguely close to the truth. Now maybe I’m seeing why the reporter didn’t try to explain it. =)
Dan Kennedy
I’m not going to pretend that I’m the World’s Greatest Writer, but there’s a major reading-comprehension problem here. Did you see my first sentence? It reads: “I don’t want to pretend that I know what the right decision should have been in the Katrina insurance case decided yesterday.” I think I made it pretty clear that my comment pertained strictly to Joseph Annotti’s grotesquely insensitive statement, not to the merits of the case.
Rick in Duxbury
DK,With due respect to your prodigious writing and communication talents, they aren’t the point. Feel-good rhetoric about how much people are suffering, (as from politicians)doesn’t do much either. The real point is basic economic literacy. When people don’t understand the basics of what they sign, either they are being cheated or they are stupid. One calls for enforcement, the other for education. Sensitivity instead of productive education is how we came to this sorry situation in the first place.
Man who thinks new orleaners are idiots for staying there
I dunno, Dan…I think a little grotesque insensitivity might be called for here.Yes, it can be said that these are people’s lives we’re talking about here. And it is a tragedy.But at the same time, people have be screaming for years that New Orleans was not safe. That the levees would fail someday, it was only a matter of time. That people were building houses where they shouldn’t be building and were building them too weak to survive hurricanes.And yet despite the high costs of insurance, despite all the warnings, despite all the frickin’ close calls, even…people insisted on living there. And now that nature has put the collective smackdown on them for their hubris, they don’t want to pay the price for it? Obviously not given all the idiots I see on TV declaring defiantly how they’re going to rebuild (sometimes for the fourth time) and stay. Ummm…yeah, time to add a little chlorine to that gene pool, methinks.Annotti’s essentially right; the insurance payouts (even in legitimate cases) have been stalled badly by the courts trying to decide if insurance has to cover only water damage or include wind-driven water damage, too. A subtle difference that could result in billions of $$$ of difference. Right or wrong, with this issue now etched in courtroom precedent, a whole ton of other insurance claims can now be processed. Equally important, a whole ton of other people seeking new insurance policies can now get them because the insurance companies have been waiting to learn the results of these cases before deciding how much to charge for ongoing rates.And if Annotti has to deliver this reality as a cold slap across the face of people who should’ve known better…I don’t really feel much sympathy to those people.When I start being able to collect nice insurance payments and federal assistance for every goddamn blizzard that rips through New England every winter…then I’ll start feeling sympathy.
Dan Kennedy
Uh, Man Who Thinks — The case did not involve New Orleans. It involved a couple who lived near the beach on the Mississippi Gulf Coast — reportedly 500 feet away from the Gulf of Mexico. So we’re not talking about living below the levees.Also, the couple testified that their insurance agent told them they didn’t need flood insurance — that they would be protected by their regular homeowner’s policy. The judge said perhaps that was true, but the couple should have asked better questions.Perhaps the judge ruled correctly, but let’s at least get the facts of the case straight.
Anonymous
Even better then Dan. Their house was 500 feet away from the Gulf and they didn’t bother to get flood insurance? I guess my sympathy meter is drifting even farther down the scale at this point…Mike Wyatt
Rick in Duxbury
Mike W,You nailed it. Any agent who didn’t have a near-ocean client SIGN a release that he had been offered flood coverage and declined it is begging for a professional liability claim,(“malpractice” if you will). Sounds like selective memory by someone to me. Presuming these poor folks thought that being within 500 ft. of the Gulf didn’t put them at risk, who the hell did they think was actually buying flood insurance? (I know a bit about this not only due to where I live but also from 30+ years experience in the industry).
Man who thinks new orleaners are idiots for staying there
I stand corrected on it not being New Orleans, but in this case (and no doubt thousands of others) the mindset is near-identical even if the details are different.I agree with Mr. Wyatt…it’s not like the Gulf Coast hasn’t gotten hammered with major hurricanes at least a half-dozen times in the past two or three years. Hell, just ONE major hurricane ought to tell you to check that insurance policy mighty closely if you live THAT close to the ocean! Wyatt’s earlier post is also equally true – insurance is expensive and there’s a reason why; it’s frickin’ dangerous to live there!And IIRC there have been numerous warnings for years that the dredging and “management” of the Mississippi has caused the coastal marshlands to seriously erode for several reasons…and that has endangered 100’s of miles of coastland along and near New Orleans. Not sure quite how far that “100’s of miles” really stretches, but I’d wager it’s quite a ways.(if you’ve got time for a Lexis-Nexis search, actually I’d like to know if I’m right or wrong on how far that effect reaches, and how much/if it was widely reported before/after Katrina)And even if I’m wrong, the entire Gulf Coast gets hurricanes, period. And these hurricanes always carry the well-known and well-reported risk of doing significant damage. And it’s the price you pay for such nice weather and other benefits. Anyone who moves there and doesn’t understand it and plan for it is, in my mind, in the same category as the idiots who move near an airport and then bitch about the noise. I got no sympathy for them, either.