The media is in a frenzy over the looters in Louisiana and Mississippi, many of whom were merely searching out basic supplies after being stranded for 36+ hours. The commercial insurance industry, which has tens of billions of dollars at stake in the Katrina recovery, isn’t receiving the same attention. It should.
Standard hurricane insurance coverage protects against damage from wind and rain — but not against flood damage. (Less than half of Louisianans have separate flood insurance.) And yet, today’s New York Times reports…
…Proving wind damage versus flood damage can be tricky, said Donald F. Thorpe, a senior insurance analyst at the credit rating agency Fitch Ratings. He offered a hypothetical case: A hurricane blows off the roof of a home and then 15 inches of rain falls in the living room.
That loss typically should be covered by hurricane protection, he said. But some insurers may refuse to attribute that flooded living room to the absent roof.
And unlike the victims of Katrina, the major insurance companies know how to play the PR game:
“What the insurance companies have learned is that it’s good to pay out money at the beginning, particularly when the TV cameras are rolling,” J. Robert Hunter, insurance director for the Consumer Federation of America, said. “The haggling will probably come a few months from now when you’re trying to get an offer that you think is fair for what you think you’ve lost.”
With any luck, an insurance executive will be be caught pilfering some bread and soda from a convenience store and draw some serious media attention to this issue.