A.M. in the Morning!: Katrina's Karmic Payback: Insurance Reform

This is the fifth in a series of five to help the Democratic Party, particularly its presidential hopefuls, to get the framework right, to broaden its lens through which it views Katrina, what’s stopping recovery, what will speed up a vibrant recovery, and how Katrina affords us the opportunity to transform the basic quality of life for all Americans.

We all know that small and large businesses are choking on skyrocketing health care costs. The other day, a friend of mine said that his tiny company just wrote out a $44,000 check to cover the annual costs of its seven employees and their families. The other employees are covered through the insurance benefits of their respective spouses. Without businesses covering the costs, however, families are often going without attending to their health care needs to the tune of 47 million in 2005, according to the Census Bureau. This is a national crisis.

These aren’t the only insurance costs that are hurting us. Worker’s comp costs are also skyrocketing and hurting businesses in their pocketbook.

What is less well tracked, however, is the national crisis of insuring our homes—the most valuable asset for most families. News reports inside Katrina Land have revealed rate increases or rate increase requests from 23 to 400%. Inside and out of this Katrina-ravaged region, companies are either jacking up their premiums or refusing to write new policies altogether.

In May of this year, CNN Money reported that Allstate “the largest home insurer in the United States, said it would no longer write new homeowner policies in California, marking another reduction in its property coverage nationwide. . . . The carrier recently announced it would no longer write new homeowner policies in Florida, Connecticut, Delaware and New Jersey and in certain counties in the Atlantic and Gulf Coast regions.” California is the fifth largest economy in the world and accounts for one-eighth of the U.S. economy. Yet, Allstate is closing shop.

Homeowners have one less company from which to purchase their much needed homeowner insurance.

In February of this year, State Farm quit writing new homeowner policies in Mississippi. Back in 2002, State Farm’s moratorium on writing new homeowner policies included “Oklahoma, Arkansas, Kansas, Louisiana, Missouri, Texas, California, Montana, Oregon, Washington, Idaho, Hawaii, Alaska, Maryland, West Virginia and North Carolina. The company ha[d] also restricted activity in Arizona, New Mexico, Colorado, Utah, Nevada and Wyoming.” Just like a good neighbor, right?

When State Farm stopped writing homeowner policies in Oklahoma in June of 2002, its “policies represented 27 percent of the homeowner insurance market“ in that state. That same year Allstate “implemented a 35.2 percent rate increase on new homeowner policies” for its Oklahoma customers. You know those homeowners felt they were in good hands.
Regarding its 2002 decision to stop writing new homeowner policies in Oklahoma, State Farm’s company’s spokeswoman said "These changes are not a short-term fix. It will take time for us to regain our profitability." Since the company is a private entity, it is not required to publish its financials.

What we DO know is some one is making money. The industry posted $108 billion in profits in 2005 and 2006. What we DO know is that insurance companies deliberately directed its workers not to provide benefits under a policyholders wind policy even when wind caused damage to the Katrina-ravaged homes and businesses. [See Wind? Water? More like a Bunch of Hot Air!]

What we DO know is that the National Oceanic and Atmospheric Administration has told us that “[p]opulations and built environments in coastal watersheds are growing rapidly, with 55 percent of the U.S. population already living within 50 miles of the coast.”

The Coastal Community Development Partnership brings local governments as they promote safer and smarter development along the coast.

What we DO know is that Congressman Gene Taylor (D-MS), who lost everything in Katrina and only recently settled with his insurance company who had originally offered him and his wife . . . not . . . one . . . penny, testified before a congressional committee stating, “In response to the fact that the insurance industry apparently no longer wants to cover people for wind damage in coastal America, or will not provide that coverage at a cost that is reasonable, I am asking you to consider legislation that will expand the National Flood Insurance Program to include all natural perils.”

Taylor has introduced the Multiple Perils Insurance Act of 2007, H.R. 920, which amends the National Flood Insurance Program to cover all natural perils. It is coming up for discussion in a few weeks at the same time the National Flood Insurance Program comes up for reauthorization. Taylor’s law will help tremendously.

Another major problem with the insurance industry is that it is only one of two industries exempt from the nation’s anti-trust laws. You know the laws that make it so you can’t do bid rigging and price fixing.

What we DO know is that the Senate’s Democratic Leaders have put together legislation to strip the insurance companies of its 62-year old exemption, and U.S. Senators Mary Landrieu (D-LA) and Senate Minority Leader Trent Lott (R-MS) are among its co-sponsors. This proposed law will finally make price-fixing behavior in the insurance industry illegal. The companion bill in the House is H.R. 1081.

What can WE do with all that we know?
The first thing we can do is to tell ourselves and each other that the time has come for us to end our propensity for political cynicism. Our knee-jerk cynicism grants us a momentary ego boost, but it has a decidedly detrimental impact to everyone including ourselves.

Clearing away our cynicism, however, allows us to recognize that rearranging the furniture as the building burns around us is, well, stupid. Its only real contribution is to paralyze us which prevents us from taking appropriate action.

However, clearing away our cynicism frees us up to be in a position to learn how to be politically savvy, smart, and sophisticated so that we can make our dreams come true inside the complex world of American politics. We do this one day at a time as we keep our eye on the prize and adjust our strategies and tactics as needed to achieve our goals.

Because we’re adults, we understand that some things take time, effort, and persistence.

“What being an adult means is knowing what you have to do and doing it, even though you may not feel like doing it.”

Robert T. KiyosakiRich
Dad’s Cashflow Quadrant

This definition applies to everything including politics. As we clear away our political cynicism, we will find a renewal of our spirits, our creativity, and our intellectual capitol all of which we need to be successful in any endeavor including political hell raising as we are inclined to do here at A.M. in the Morning!

Today’s Political Hell Raising Opportunities
Today, we can call and email our congressional representatives to request that they co-sponsor H.R.920, which is called the Multiple Peril Insurance Act of 2007.

In addition, let’s drown out the insurance industry’s opposition by calling and emailing our two U.S. Senators and our congressional representative to express our support to end the insurance industry exemption from laws that prohibit their ability to price fix, etc.

As usual, A.M. in the Morning! provides contact information and email letters as well as phone scripts and access to telephone numbers of your two U.S. Senators and congressional representative.

Thoughts on Katrina’s Bigger Picture
Katrina was a tragedy of epic proportions. The storm itself destroyed our Mississippi Gulf Coast. The levees that the U.S. Army Corps of Engineers had built failed to protect New Orleans. Clearly, shoring up those levees in a world class way is paramount. Through Katrina, we have learned that 28 additional states place Americans in New Orleans-like danger in 120 locations throughout the country. Each of these is unacceptable.

Nationally, we must commit resources to invest in world class levees throughout our nation to ensure that we protect our nation’s families, businesses, and communities against the danger of repeating the man-made disaster in New Orleans.

Committing to world class levees throughout our country infuses our own economy in ways that have been absent ever since Bush and Cheney moved into our White House six and a half years ago. With a renewed focus on math and real science, we can also breathe new life into all facets of our educational system. Finally, implementing a world class levee system across the country can further assist our commitment to environmental sanity.

In the wake of Katrina’s devastation, insurance companies fraudulently denied the claims of legitimate policyholders who sought payment on their wind policies. The result of the insurance industry’s deliberate denials of these claims has been to create a mounting financial crisis throughout the Katrina-ravaged region. Since the insurance industry is begging off of protecting America’s homes against wind damage just as it did with flood coverage in the 60s, we must expand our nation’s Federal Flood Insurance Program to cover all natural perils.

However, this is part of an ever expanding crisis with our insurance industry. We now add to skyrocketing health care and worker’s compensation costs, the costs of protecting the single asset that is central to how many of us define the American Dream: our homes. The time has come for insurance reform.

To be competitive in the world, our businesses need insurance reform. To run efficiently while providing all the services and programs we expect from our government, our towns, cities, states and federal governments need insurance reform. To protect our health and our homes, our families need this. The insurance execs can think of it as paying off Katrina’s Karmic debt. Anyway you slice it, insurance reform . . . it’s good for America.

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