Katrina homeowners discover that sometimes insurance is just an illusion

[Phoebe Loosinhouse]

http://www.nytimes.com/2007/09/03/us/nationalspecial/03orleans.html?_r=1&hp&oref=slogin

Insurers Bear Brunt of Anger in New Orleans
By LESLIE EATON and JOSEPH B. TREASTER
Published: September 3, 2007

NEW ORLEANS — Maxine Cassin, a prominent local poet, thought her homeowners insurance would be more than enough to cover the $100,000 of hurricane damage to her Uptown house here. But two years after Hurricane Katrina hit, Ms. Cassin and her husband, Joseph, are still stranded far from home; their insurer has offered them just $41,000.

Emile J. Labat III, a funeral home owner and real estate investor, thought his $300,000 homeowners policy, along with federal flood insurance, would repay him for repairing his house on Elysian Fields Avenue. But now Mr. Labat feels he was deceived. Many of his losses were not covered, and he was stunned that his deductible worked out to be $16,000.

June Rees, a retired nursing professor, gave up on living in New Orleans and reluctantly moved 75 miles away to avoid skyrocketing insurance costs. The price of her homeowners and flood insurance was going to quadruple, to $8,000 a year, and it still would not have covered wind or hail damage.

This really ticks me off. $8,000 a year for homeowners and flood?!!! This is one more way that basic housing is going to become unaffordable for many Americans. I read somewhere that almost half the country lives within 50 miles of the coast. Anyone in this half of the population knows that homeowners insurance is going through the roof. Yet, mortgages require homeowners and of course most people would elect to have it anyway. But these prices are just outrageous.

The only sector of the insurance industry that seems as though it runs the way it is supposed to is car insurance. Health insurance is a disaster and homeowners is following quickly. Who's gonna fix this? I would look up executive compensation of some insurers but I don't want to get any more worked up than I am.

[kdmorris]

1. Mine isn't that bad

But the ever increasing cost of homeowners insurance has made my husband and I start looking to move out of South Florida. When we bought our home in 2001, our property tax was $1102 and our homeowners insurance was $981. Now I realize that the property tax was based on the previous owners' homestead exemption, but in just 6 years, our property tax is now $2100 and our homeowners insurance is $3400 per year. Every year we've had a shortage in our escrow, so we've had to pay the shortage back and the the extra to try to keep it from being short the next year.

Our mortgage payment went from $1000 to $1300 a month. Granted it's not killing us, and it's not as bad as paying all of that and still not having a home, which has happened to a lot of people in the Gulf Coast. Another example of the poor getting screwed even worse than everyone else.

$16,000 on a $300,000 policy! Man, that blows my mind. In 2004 and 2005, the years of the worst hurricanes, the insurance company's showed a huge profit, rather than the more standard 3% that insurance companies used to make. Just one article about it:

http://www.latimes.com/news/nationworld/nation/la-na-insure5apr05,0,3061059.story?coll=la-home-headlines

[lonestarnot]

5. You never know until you need it.

[kdmorris]

6. Yeah

When we needed it, our insurance company folded up shop and went on vacation. The only reason we got our roof fixed after Wilma was because the Florida Insurance Guarantee Association took over and paid out the claims. Poe just folded up shop.

[AZBlue]

2. K&R

This shouldn't fall off the front page!

[frustrated_lefty]

3. It's hard talking with Katrina survivors anymore.

I'm a cynical bastard, and so always expected the worst. But there were a lot of people in the shelters saying "FEMA will fix it." That turned into, "at least I had insurance." Two years down the line, there's just a glassy eyed stare which turns to rage when the issue is raised.

The people (and, yes, I'm one of them) who survived Katrina and Rita lost all of their physical possessions. I think everyone could have dealt with that, though some heartaches never fully heal. You move on. On good days, you forget the panic and fear and really bad things you've seen, and it can just be a good day. In retrospect, something that simple becomes a treasure. If you're lucky, you might even remember the way people came together....gender, race, religion all went out the window, leaving nothing but people trying to help one another.

What hurts, I think, is the sense of betrayal. The government left us to die, the insurance companies just wish we'd go away, and, sadly, I do think the very generous people of this nation are tired of hearing about it. Katrina-fatigue is one term I've heard used repeatedly. It's hard to blame the people for being fatigued. Really, it is....people gave so much so freely, trying to help.

I guess I'm trying to say the people who went through that aren't really fixed yet. I don't think they/we need or even want money. Patience, lending an ear, trying to understand: those are the things we all need. To not feel like a refugee, but a fellow citizen. Not just someone you'd ship away in a toxic trailer.

[kdmorris]

7. I wish I could recommend a reply

All I can say is: I feel like such a whiner now. Boo-hoo, I have to pay a lot for insurance. Wilma blew my roof off. But you don't have anything left.

Your post made me cry. My biggest problem is that I don't know what to do. I want to help so much, but I don't know where to go to do that. I don't have enough money to help on an individual level, so that leaves me with no where to turn to really be able to help.

Do you know of a group/organization that I could join to help?

And, because it just makes me cry to think about it, here's a :hug: I know it doesn't help as much as getting a house rebuilt, but it's all I have right now.

[Jacobin]

4. Insurers have joined the kleptocracy

the year of Katrina and Rita, U.S. insurers had RECORD profits, even after reserving for those losses. I have assisted several hurricane victims in working out insurance claims and it is no different from dealing with the mafia. They lie, cheat, make up clearly false engineering reports, question good faith estimates, re-interpret insurance provisions until they are meaningless, and bully and bluff you into taking pennies on the dollar by threatening to litigate for years. When the defense lawyers get the file, they slow play everything, taking months and months to schedule depositions, months to answer routine discovery, filing every motion known to mankind to delay the trial, knowing that they will wear 90% of claimants down until they simply give up and take a pittance for their claims. And Louisiana's insurance commissioner did us proud right after Katrina by encouraging everyone to settle with their insurers and not to litigate. Bought off politician.

The entire system is utterly rigged against people who have policies. And now the policies are priced so that it is almost impossible to obtain insurance, which you have to have to get a mortgage.

[Feron]

8. Allstate's practices (and I'm sure the others follow suit):

"The basic concept, Berardinelli says, is that Allstate gives customers a choice: accept a settlement now for a fraction of the true cost of damage, or expect to spend several years in grueling litigation. McKinsey predicted that 90 percent of claimants would be forced to capitulate because they'd need the money in a prompt settlement, Berardinelli said.

"People are giving them money for something they will never receive," Berardinelli said. "What that really means is they're selling uncollectible insurance."

Allstate's strategy has paid off handsomely, Berardinelli says. In the years since it began implementing McKinsey's strategy, the company's profitability shot through the roof. In the ten years before the McKinsey strategy was implemented, Allstate was making an average of $82 million a year in pre-tax operating income. In the ten years after the McKinsey plan roll-out began in 1995, Allstate was making an average of $2.4 billion a year in pre-tax operating income."

http://www.nola.com/business/t-p/index.ssf?/base/money-1/118776405969200.xml&coll=1&thispage=2">Link

A bunch of thieves.

[Evoman]

9. Makes you sort of wonder what the fucking point of insurance is.

If they aren't going to give you any money when you need it or deserve it, why even bother? Its like playing a dollar slot machine that gives you 5 cents every ten plays.

If these people had just saved up to money they paid to the insurance company in a bank account, how would it compar to what they got back?

[tbyg52]

10. It would have compared favorably *provided*

that they had *time* to save up before disaster hit.

Insurance is *supposed* to protect you against catastrophic events that you don't have enough resources of your own to deal with. It's supposed to spread the risk, in exchange for payment up front. Yeah, right.

[catmandu57]

11. Insurance is legally sanctioned extortion

The friendly neighborhood agent who sells the policy will smile and shake your hand, then the claims deparment will bare their teeth and say because you failed to meet the terms in subparagraph 12 section 3 clause 10 in very fine print and by doing so failed to pay the needed five dollars per month to justify paying for damages that may in fact have been an act of god (in which case they won't pay anyway), In short up yours buddy.

[Phoebe Loosinhouse]

12. Self-insurance pools? Tax credits for self-insurance?

We have a broken system.

Greed will break pretty much everything.