A shining moment, or another shiner? The industry needn't fall victim to another hurricane-related PR disaster.
Most school children can recite the line, "In 1492 Columbus sailed the ocean blue," a verse that conjures up images of a pleasure cruise on gentle seas.
In fact, the journey to the New World was a harrowing one that involved passage through no less than two hurricanes. Wishing never to experience another hurricane, Columbus concluded in his journal: "Nothing but the service of God and the extension of the monarchy would expose me to such danger."
More than 500 years after Columbus' voyages, we sit in August 2010 wondering what history will make of the current hurricane season. Forecasts call for a "hyperactive" season. And, tragically, there is the added question of how a severe tropical storm might carry the Gulf oil spill onshore.
This raises an important question for the insurance industry: If a major hurricane strikes in the area of the oil spill, will we see a repeat of the public relations disaster the industry suffered in the Hurricane Katrina "wind vs. flood" debate--or worse, a new wind vs. flood-and-oil debate?
Part of the answer can be found in flood coverage that's available through the National Flood Insurance Program. Though excess coverage is expensive, basic coverage of up to $250,000 is very affordable. More importantly, it covers what many people do not realize is totally excluded in a standard homeowners policy.
As Insurance Information Institute President Bob Hartwig has relayed, questions regarding the oil/ water vs. flood issue have become common. However, he confirmed that property damage caused by oil-contaminated flood waters is covered under the NFIP.
"There's an urgent plea out there right now to get people to buy flood insurance. Those who aren't covered are playing Russian roulette with their properties," Hartwig said. He added that the wisest thing property insurers can do pre-storm is to step up efforts to encourage property owners to buy flood insurance and to shore up their properties against storm damage.
But that's easier said than done. For example, in hurricane-battered Louisiana, while uptake of NFIP policies increased following the hurricanes of 2004 and 2005, currently only 29% of households have flood insurance, according to the Louisiana Department of Insurance.
Louisiana Insurance Commissioner Jim Donelon told me that the phenomenon of people refusing to buy flood insurance will always be a reality of the market. However, he strongly believes lessons from Katrina and subsequent storms have been learned by property owners and insurers alike.
"We are cautiously optimistic, though the predictions are truly scary," Donelon said.
In today's political climate, rife with reputational risk, insurers must make every effort to provide swift claims-handling processes and to ensure and encourage policyholders to buy flood insurance and to protect their properties.
The eyes of the nation are, once again, on the Gulf in a time of crisis.
Columnist Howard Mills is director and chief adviser for the Insurance Industry Group at Deloitte LLP in New York. He can be reached at firstname.lastname@example.org.
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|Title Annotation:||Regulatory/Law: Legal Insight|
|Comment:||A shining moment, or another shiner? The industry needn't fall victim to another hurricane-related PR disaster.(Regulatory/Law: Legal Insight)|
|Date:||Aug 1, 2010|
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