Anyone who doubts how big a risk Long Island and New York City might face should a major hurricane hit the vulnerable region need only examine the extensive damage done when the relatively mild Ernesto hit this past weekend.
There were trees and tree limbs down everywhere. Shingles were torn from homes and windows were shattered across the island. Power lines were down—with some 40,000 people estimated to have lost their electricity. There was serious beach erosion in spots.
And Ernesto was “just” a tropical storm, with winds in this neck of the woods topping out at 55 miles-per-hour. Imagine if it had been 100! Or 125!
Yet is doesn’t appear that folks in the New York area are taking the exposure very seriously. Many still reportedly lack federal flood insurance, when they are living on an island! And as for risk management, I can’t imagine how an evacuation would be pulled off, given the routine traffic congestions paralyzing the area.
Of course, New York City isn’t alone in this regard. In fact, much of the country’s homeowners remain inexplicably oblivious about this looming exposure, despite all the publicity following Hurricane Katrina. (Click here to check out our Web story, “One-In-Four Homeowners Clueless About Flood Coverage.”)
Why is it that after all this time, so many homeowners are in the dark about flood exposures? Are they in denial? Are their carriers and agents failing to keep them properly informed? What else can the government and industry do to alleviate this problem?
I’m eager to hear your thoughts.
Comments (4)
Since all flood insurance claims are, regardless of whether the policy was written with NFIP, Travelers, Hartford or whomever, paid for by FEMA, why not just add flood insurance to all homeowners and dwelling fire insurance policies and charge the premium for it? Should that premium for the waterfront mansion be subsidized is a different question and one that must be answered in the negative.
Posted by David Lande | September 7, 2006 12:23 PM
Posted on September 7, 2006 12:23
I suspect this is one of those cases where the right questions are not getting asked at renewal time. Many renewals are just automatic, and so no new data is really gathered.
When companies upgrade their concern about somethiing they often lack automated ways to inject that concern into the renewal process.
If you properly automate the renewal process (like Auto Club Group discussed here http://www.edmblog.com/weblog/2006/09/you_too_can_imp.html ) then you control the rules and could change them to flag anyone who is renewing but in a risk zone (by integrating with location information as discussed here http://www.edmblog.com/weblog/2006/04/location_locati.html ) as not being eligible for automatic renewal.
Without that control you can't inject new rules easily into your renewal process.
JT
http://www.edmblog.com/weblog/insurance/index.html
Posted by James Taylor | September 7, 2006 1:00 PM
Posted on September 7, 2006 13:00
If the country really wants to promote flood insurance, then perhaps a better way of doing it would be to backstop private carriers who agree to provide that coverage by endorsement, sort of the way terrorism insurance is provided at the current time.
Some companies are now offering this coverage even without federal involvement.
One of the difficulties now is that there are gaps even if a policyholder has a standard HO policy with a stand alone separate NFP policy (for example, neither will cover damages to contents in a basement destroyed in a flood), and I understand this makes some agents wary about selling a flood policy that suggests more than what is delivered.
Posted by Josh Fitzhugh | September 7, 2006 2:59 PM
Posted on September 7, 2006 14:59
As with California wildfires, high-rises on earthquake faults, etc., etc., people will always absolve themselves of properly addressing their risks as long as they:
1) Feel the cost of insurance outweighs the probability of the event (it-will-never-happen-to-me-ism), and
2) Believe that the federal government will always be there to backstop them in our entitlement society. (The villification of FEMA following Katrina has been replaced by demands that the government pick up the full tab of cleaning up the mess).
Posted by Bill Wienhoff | September 8, 2006 2:07 PM
Posted on September 8, 2006 14:07