After receiving a Bestwire News Report that indicated a Homeland Security Inspector concluded that "Write Your Own" Insurance Companies did not overpay flood claims following Hurricane Katrina, I waded through the 48 page report to find out why the Inspector came to that conclusion. As I have said in earlier blog posts, flood adjusters paid and paid and paid some more. They gave every benefit of the doubt to policyholders. In some "slab" cases, they simply reviewed satellite photographs and then paid policy limits. They never went to the loss site.
Two recurrent issues are keeping policyholders from full recovery following disasters. First, policyholders are not getting flood insurance even though it is available. Second, policyholders are not increasing the limits of coverage to reflect the full costs of construction or replacement. They are exposed to the risk of being significantly under-insured.
If another hurricane the size of Katrina or stronger strikes a metropolitan area this summer or fall, I am certain that we will have a repeat of the litigation and problems associated with Katrina. On May 8, the United States Senate voted against increasing the role of the National Flood Insurance Program to include coverage for "wind" peril. (See Miami Herald, Chicago Tribune, Biloxi Sun Herald) The Senators supporting the measure were from the coastal states most effected by hurricanes. These southern Senators and their constituency are increasingly facing the problem that private property insurance carriers will not sell a policy that covers the perils posed by a hurricane.