Fort Lauderdale, Florida, September 2, 2004—It’s a beautiful morning at a Fort Lauderdale beach but this evacuation sign is a reminder that Hurricane Frances is only 400 miles away.
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Fort Lauderdale, Florida, September 2, 2004—It’s a beautiful morning at a Fort Lauderdale beach but this evacuation sign is a reminder that Hurricane Frances is only 400 miles away. |
Independent agents braved seemingly relentless hazards
to help insureds through this year’s storms
By Phil Zinkewicz
As the holiday season rapidly approaches, many of us, especially those with travel plans, look anxiously to our weather experts to see what Mother Nature has in store. Will the kids be able to make it in for Thanksgiving dinner, or will a nefarious nor’easter cause them to be late for the sumptuous repast that awaits them? Will there be a white Christmas and, if so, how white and how deep? Will we find ourselves needing snow plows instead of snow shovels, or will the winter days be rainy, damp and dismal?
These are some of the uncertainties that many of us face about this time of year. But we would do well to remember that they are very minor ones compared to the uncertainties faced by residents of Florida, after the state’s devastating hurricane season this year. As of the last week in September, Florida had just become the first state since Texas in 1886 to be the victim of four hurricanes in one season. These destructive storms hit in a six-week period from mid-August through the end of September. One of the most pressing concerns for Floridians, undoubtedly, will be what their insurance picture may be like in light of the recent devastating hurricanes.
Friday the 13th
First, there was Hurricane Charley. This hurricane struck Florida on Friday, August 13, causing $6.8 billion in insured damages (according to the Insurance Information Institute, I.I.I.), leaving more than two dozen people dead and many more without homes, even though it hit a relatively sparsely developed stretch of the state before moving into North Carolina and South Carolina, more like a tornado than a hurricane. In the immediate aftermath of Charley, Robert Hartwig, the I.I.I.’s chief economist, called Charley the second most costly hurricane in U.S. history in terms of insured losses. The most expensive, Hurricane Andrew in 1992, caused an estimated $15.5 billion in insurance property damage, according to the I.I.I. If Charley had been all there was to deal with, that would have been enough
Labor Day weekend
But then, just three weeks later, during the Labor Day holiday weekend, along came Hurricane Frances. Frances swept through most of Florida in severe squalls, and wrought destruction in a scattershot fashion. Then, weakened after its long rampage through Florida, Frances became a tropical storm and began its move into the Gulf of Mexico, leaving chaos in its wake. Frances virtually shut down the fourth-largest state, home to 16 million people, for two days and caused damage not just to buildings—property damage estimated at $4.4 billion by ISO’s Property Claims Services unit—but to the state’s $53 billion tourism industry on the usually busy Labor Day holiday weekend.
The $9.1 billion citrus industry, hard hit by Hurricane Charley right before Frances, took another blow as Frances moved across the state’s best growing regions. The human toll, in lost housing and livelihoods, will also be great.
“We think it’s going to be an enormous bill,” American Red Cross President Marsha Evans told CNN shortly after Frances’ journey through Florida. “We think that it’s going to involve many more families perhaps than Hurricane Andrew did because it is so widespread.”
Ivan the Terrible
And right on the heels of Frances—less than two weeks later—came Ivan, hitting Florida on September 16. According to figures released by the Insurance Information Institute right after Hurricane Ivan, about one out of every five Florida homes had hurricane damage as a result of Charley, Frances and Ivan. Although Ivan, having hit only the panhandle area of Florida, caused much less damage to the state than did Charley and Frances, taken together, the three hurricanes are estimated to have produced insured losses in excess of the $15.5 billion caused by Hurricane Andrew.
Making history with Jeanne
And if all of that weren’t enough, Hurricane Jeanne hit Florida in the early hours of September 26, 10 days after Ivan, becoming the fourth hurricane to hit Florida in one season. Adding insult to injury, Jeanne hit at almost the exact location that Hurricane Frances had just a few weeks prior. According the ISO’s Property Claims Services (PCS), estimated losses were around $4.4 billion in the first days following Jeanne. Risk Management Solutions (RMS) estimated that insured losses could climb as high as $8 billion. RMS also said that Florida’s cumulative insured losses from the four hurricanes could reach as high as $25 billion.
One important question is how the insurance industry has fared during these catastrophes. How have agents and insurance companies conducted themselves in the face of Floridians’ distresses? Well, it appears that agents have once again proven their worth in these times of catastrophe, raising their industry’s overall public relations posture considerably. Insurers, however, have come under criticism because of the property insurance deductibles they have been imposing since Hurricane Andrew.
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Ono Island, “Florabama,” September 17, 2004— FEMA Urban Search and Rescue FL TF1 team member Hilda Wood and her white Lab, Ranger, search for survivors following Hurricane Ivan. |
Agents’ response
Let’s take the agents first. Immediately following Charley’s brief but destructive reign, the Florida Association of Insurance Agents’ (FAIA) board met in an emergency session to assess agency relief efforts. FAIA staff and volunteer agents visited the affected agencies at ground zero—all without power and phones, most with some structural damage. The initial and most important mission, called Phase I, was to help local agents in the hardest hit areas get up and running so that they could process claims as quickly as possible for their insureds. Thanks to volunteers from FAIA’s membership in outlying areas and FAIA staff and Cat Zone Coordinators, the majority of claims were processed as soon as possible.
“To help remove unforeseen impediments to the relief effort,” says Will Ghioto, FAIA’s catastrophe chairman, “FAIA’s board authorized emergency funds necessary to help those who needed help and for those who wanted to help them. Obviously we could not anticipate all situations, but we made funds available to agencies that were sending their own personnel to the stricken areas. The FAIA dollars were available to reimburse lodging and meal expenses, supplies, water or food purchased to help agents in need. FAIA assigned staffers Fred Phelps and Jennifer Pace to help the volunteers and to keep up-to-date the FAIA’s Hurricane Charley Command Post.”
Ghioto says that lodging was an immediate need. “Several agencies near affected areas had rooms available that were identified on the FAIA Command Post. A room, a couch was sometimes all the volunteers had. The Office of Insurance Regulation issued an emergency order to prohibit property insurance cancellations and non-renewals in selected counties. The emergency order, among other things, prohibited cancellations and non-renewals between August 10 and November 15, unless there was a request from the policyholder. This, in itself, helped allay fears on the part of policyholders that their insurance would be cancelled in their time of need.”
In the meantime, in addition to working diligently to process claims, agents were providing some very common sense, but often overlooked, guidelines to their clients. These included:
• Get estimates from at least three, licensed and bonded contractors.
• Check references.
• Ask for proof of insurance. Ask for a written estimate and read the fine print.
• Get a written contract, including when the work will start, how much it will cost, payment schedules, and the quality of materials to be used. Never make a full payment up front. Don’t sign over an insurance payment check.
• Don’t make the final payment until the job is finished. Make sure all work that requires city or county inspections is officially approved in writing before final payment is made.
“That was only Phase I of our Hurricane Charley efforts,” says Ghioto, “and as we were implementing Phase II, Frances came upon us. Phase II consisted of clients returning to agencies to get connected with adjusters, leaving messages, keys, photos, etc. That included some who were homeless and who were in need of supplies and temporary housing. Volunteers provided clients with everyday supplies. They included sundries, such as shampoo, cream rinse, soap, razors, toothpaste, toothbrushes, hair brushes, shaving cream, lotion and deodorant, etc.; personal feminine hygiene products; Handi-Wipes, clean-up cloths in packaging, such as Pampers or Huggie wipes; hand sterilizer products; stress products such as Mylanta, Pepto, Alka Seltzer, aspirin, Tylenol, etc.; paper products such as toilet paper, paper towels, paper plates, plastic glasses, plastic ware, tissues. They carried with them food products as well, such as canned stew and thick soups, and practical items such as batteries, bug spray, flash lights, candles, lanterns and Fix a Flat.”
Ghioto says that agency volunteers were undergoing significant stress while providing all this assistance to both other agencies and agency clients. Often, they had to work in steamy conditions with no air conditioning, no lights and no telephones, he says. But the old adage holds true: No good deed ever goes unpunished. Frances and Ivan were readying in the wings to provide further stress. Ghioto says that the FAIA and its teams of volunteers have been working all this time to continue catastrophe efforts and will continue until the job is done.
Agents have once again proven their worth in these times of catastrophe, raising their industry’s overall public relations posture considerably. |
Insurers’ response
But what about insurers and their public relations image during this stressful time period? “By and large, our companies did very well,” says Ghioto, “although the direct writers did better by comparison. Companies such as State Farm and Allstate had operations set up virtually on every corner and were advertising on the radio that they had stations set up at Wal-Mart. Our companies did not have nearly enough visibility, and we’re going to have to work with them on that. Also, some companies did not immediately have adjusters in some of the more rural areas. Elderly folks, poor rural residents and others without homes or trailers had to cast about. Their agents didn’t have draft authority and there were no company representatives there to give claim checks. I had one elderly woman who came to me and she had just $11 in her pocketbook. All I could do was process her claim and give her some water and supplies. But we’re working with our companies to improve that situation as well.”
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Fort Pierce, Florida, September 9, 2004—This ship was heavily damaged by Hurricane Frances. |
One area where insurance companies are being criticized is in the policy provisions in homeowners policies.
Following the severe losses of Hurricane Andrew in 1992, 11 insurance companies went out of business and several others let it be known that they could not continue writing homeowners insurance in Florida under the then current conditions. Andrew had wiped out every cent of profits that the insurance industry had ever made on property policies in the state. In addition to hefty rate increases, insurers wanted to shift some of the burden of future hurricane losses to consumers via much higher deductibles. In order to keep Florida homeowners from experiencing severe market dislocations after Andrew, state regulators agreed to insurers’ requests and, in 1996, a separate windstorm coverage was introduced with higher deductibles, usually on a percentage basis rather than a dollar amount.
Consequently, because of the recent hurricanes, many Floridians will find their portion of losses much higher than a decade ago. If a house is worth $100,000, generally the deductible is $2,000 per hurricane, based on a 2% deductible. However, because there were multiple hurricanes, some Floridians might have to pay multiple deductibles on losses sustained, depending upon the interpretation of company adjusters visiting the scene.
Local agents in Florida say that policyholders shouldn’t be all that surprised about the higher deductibles because they have received numerous notices since the higher windstorm deductibles were introduced in 1996. And, Florida officials have said that the higher deductibles were necessary to keep private insurance companies in the state.
Nevertheless, the issue of multiple deductibles is bound to stir controversy as Florida continues to attempt to return to normalcy. *