Recovery’s Two Major Impediments: $$$ and the “F” word

This is the second 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.

Our recovery has two speeds: s-l-o-w and s—l—o—w—e--r. One reason is a lack of money both from the insurance companies and from FEMA. Today, we’ll talk about money and the insurance industry.

Tomorrow, we’ll talk about the other reason for this unacceptably s-l-o-w recovery: the abysmal lack of appropriate and innovative leadership from those sitting in our White House. Hands down, there is no better example of this than Bush’s FEMA. But we’ll just have to wait ‘til tomorrow to skewer that subject.

Money
Money would solve nearly all of the problems we face in reviving our lives, jobs, communities, cities, and region and to do so in innovative ways so that we protect the wetlands throughout the region while implementing a world class environmentally sound levee system like that in the Netherlands.

Money will help us to recover in a way that adopts the best of the best practices for everything from low income housing to public education. Rather than the painfully s-l-o-w way experienced since Bush finally decided to end his infamous month long vacation a few days after Katrina ravaged the area, money will infuse the area with much needed cash . . . and infuse the area with a much needed emotional and psychological lift in spirits.

We need money to rebuild the infrastructure of our cities for things like roads, firehouses, school buildings, drains, street signs, stop lights, stop signs, and light posts. We need money to rebuild public buildings such as court houses, city halls, and other government offices Katrina destroyed.

Businesses need money to rebuild their buildings and replace the contents inside of those buildings.

Families need money to rebuild their homes whether those homes were in the 9th Ward at one end of the economic spectrum or in Lakeview, a New Orleans neighborhood at the other end of the economic spectrum. Families need money for their homes located in Slidell, Louisiana, which is just east of New Orleans or Long Beach, Gulfport, Biloxi, Ocean Springs, and Pascagoula, Miss., on the far east of the Mississippi Gulf Coast. Money is needed to completely rebuild the towns of Pearlington, Waveland, Bay St. Louis, and Pass Christian, Miss.,— each of which Katrina wiped clean and which comprise Katrina’s ground zero. (Yes, Katrina’s ground zero was in Mississippi, about 60 miles or so east of New Orleans.)

Money will help the Katrina region retain the dignity of its residents be they a disabled veteran, a senior citizen, a working class laborer, a computer geek, hair dresser, janitor, teacher, nurse, doctor, realtor, oil rig worker, etc. and so forth.

A major bottleneck for getting money to where it needs to go rests with Bush’s FEMA and the insurance companies. We certainly pay plenty enough taxes to expect FEMA to be here pronto stat when we need the agency to help communities, businesses, and families get back on their feet. We don’t expect amateur hour or some version of “Whose job is it anyway?” to be played.

We expect insurance companies to own up to their financial obligation and promptly pay on the wind insurance policies when its customers appropriately submit claims. We need that kind of confidence in our financial markets. Insurance companies are part of our financial security be it for our health, car, life, or home.

If we are going to insure what is clearly the greatest financial asset for most American families—our homes, then we must have insurance entities in whose hands we have complete confidence and on which we can depend–just like a good neighbor.

The way that insurance companies have turned their backs on the very customers who have paid the premiums that created the industry’s $108 billion profit in 2005 and 2006, they ought to be ashamed of themselves. Their greed is downright sinful, and the means by which the companies attained their wealth seems criminal. As a result of failing to pay on the legitimate wind claims, families and businesses cannot return to their homes, livelihoods, communities. What’s happening here is not unique except in its scope.

Private insurance companies are raising rates to astronomical levels for significantly less coverage for commercial and residential policies. They are also choosing to stop writing new policies not just here along the Gulf Coast but also all over the country from the West Coast to the Mid-West to the East Coast.

The private companies have not just failed us but also are deliberately abandoning American families and businesses everywhere just as it did in the 60’s with regard to flood insurance. The private sector simply begged off of it. That is the reason that the federal government stepped up to the plate and began its flood insurance program in 1968. And so it is again with Gulf Coast Congressman Gene Taylor’s proposed Multiple Perils Insurance Act of 2007 to include windstorms, floods and other purposes in the Federal Government’s Flood Insurance Program. The insurance industry’s insatiable insanity demands we act quickly to protect our families, our homes, and our businesses.

The Insurance Industry’s Insatiable Insanity

Insurance Company Documents

Nationwide on 9/4/2005: “if loss is caused by both flood and wind there is no coverage.”

State Farm instructions to adjusters on 9/13/2005: “where wind acts concurrently with flooding to cause damage to the insured property, coverage for the loss exists only under flood coverage.”

The documents from which the above excerpts have been taken, certainly appear to indicate that the insurance companies have deliberately directed its workers to refuse to pay legitimate claims from its policyholders. No wonder we need to pass the Multiple Insurance Act of 2007! (For more information on these documents, read Wind? Water? More like a bunch of hot air!)

When these private companies refuse to own up to their financial responsibilities, who do these companies stiff with their financial tab? That’s right! The federal government’s flood insurance program and policy holders like you and me.

The federal government contracts with the private insurers to adjust the claims for the federal insurance program. The private companies send the bills to Uncle Sam’s insurance program for payment. That sounds all fine and dandy until something like Katrina hits and the insurance industry ends up in a position where it determines whether to pay the full amount of wind damages for which it is fully responsible or to shift its own costs to the U.S. taxpayers through pushing off claims to Uncle Sam’s federal flood insurance program.

This is an obvious conflict of interest that Gulf Coast Congressman Taylor proposes to remedy with passage of the Multiple Perils Insurance Act of 2007. The amount of damages not covered by the flood insurance are born by the policy holders themselves. There are two reasons for this. First, for those permitted to buy flood insurance, the policy severely limits coverage and whenever damages exceeded the limits, those costs were then shifted to the policyholders themselves.

Secondly, many businesses and homeowners were prohibited from buying flood insurance because their homes and/or businesses were not in a flood zone. So when an insurance carrier wrongfully (and deliberately) asserts that the damage came from flooding and not from wind, the policyholder is left to finance the damages.

We can participate in stopping these financial shenanigans. We can do our usual political hell raising to make this a legislative reality for our families and businesses all across the country. Call or email your congressional representative to voice your support for Taylor’s Multiple Perils Insurance Act of 2007. The bill will be discussed in the next few weeks when the Flood Insurance Program comes up for reauthorization. Click on the hyperlink to go to a page with a sample email and phone script you are free to use as you desire. There is also a link to find your representative’s contact information. Just let your fingers do the walking.

Congress Dems and the Katrina Task Force
As far as I’m concerned, Congressman Taylor is THE Congressional Democratic expert taking the lead on Katrina recovery. When the Democratic Caucus created a Katrina Task Force right after the hurricane hit, Taylor stepped up to the plate to chair it. The task force has issued an 18 page report of legislative recommendations. Katrina and Beyond: Recommendations for Legislative Action which included the following.

1. Investigate the Katrina claims practice of insurance companies that contract with the National Flood Insurance Program.
   
2. Repeal the federal antitrust exemption as it relates to price-fixing, bid-rigging, or market allocation in the market for property insurance.
   
3. Establish all-perils disaster insurance coverage backed by the federal government.
   
4. Rebuild levees and flood controls to higher standards.
   
5. Relieve FEMA of its recovery mission and reassign those responsibilities to the appropriate federal agencies.
   
6. Reform FEMA contract procedures to eliminate cost-plus noncompetitive contracts.

These are practical steps to remove the barriers to returning home and rebuilding communities and cities after natural disasters such as Katrina.

The staff of NPR and the Democratic presidential hopefuls would do well to call Taylor’s office to talk with even the most junior member on staff whom I am certain can cite chapter and verse of what is wrong and how to solve the problems. Senator Mary Landrieu (D-LA) who was raised and has strong family roots in New Orleans, is also a strong leader in Katrina recovery. Her office is surely to goodness another fabulous resource that researchers should tap for real-time information and solutions that address problems stemming from Katrina.

Preventing Collusion in the Insurance Industry
Closing the insurance industry’s loophole on anti-trust laws is another solution to the problems we’ve uncovered down here. The goal is to make it so that the insurance companies cannot engage in such things as price fixing or bid-rigging. At present, they are only one of two industries allowed to engage in any of these things and to do so with impunity as far as the law is concerned.

Let’s think about this a minute. Here at Katrina’s ground zero in Bay St. Louis, Miss., we’re in the middle of casino country. Can you imagine how many customers casinos would have here or in Vegas if they rigged everything and wouldn’t pay out the winners? Casinos don’t engage in this behavior, because the industry is regulated like crazy, as it should be. We need insurance reform to protect American families and businesses in both the property and casualty and health care insurance arenas. Insurance reform is a bread-and-butter issue for families and small businesses that the Democratic Party should immediately embrace and aggressively push.

The Senate’s Democratic Leaders have put together legislation (S.618) to strip the insurance companies of its 62-year old exemption from the nation’s anti-trust laws. U.S. Senators Mary Landrieu (D-LA) and Trent Lott (R-MS) are among its four co-sponsors. To close the loophole, click here for delightfully fun political hell raising activities. Turning up the heat is as easy as cutting and pasting into an email and reading a script into your phone. It’s hot as you-know-what down here in Katrinaville. Let’s help Washington DC feel the heat.

Between the increase in health care costs and increases in insuring our homes—in those areas of the country where we can still purchase it, this bread-and-butter issue is ripe for the Democratic Party to embrace and run on to expand its control of Congress and to recapture the White House. One or both of these areas impact each American some way or another. It’s certainly an issue that hits home with most folks, as long as we articulate our framework in a way that is smart, savvy, and sophisticatedly simple.

Broadening Katrina’s Lens: A five Part Series
Part 1: Broadening Katrina's Lens
Part 2: Recovery’s Two Major Impediments: $$$ and the “F” word
Part 3: The "F" Word: FEMA
Part 4: Katrina’s Bigger Picture
Part 5: Katrina’s Karmic Payback: Insurance Reform

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Mr. “I can do my job” isn’t doing his job

Our state’s insurance commissioner, George Dale, has been rather busy of late speaking before audiences spewing forth one or another talking points provided by the insurance industry with which he is in the preverbal political bed. In his latest appalling display of happily carrying water for the insurance industry, Dale told the Clarksdale Noon Lions Club Katrina [was] "the worst natural disaster in U.S. history . . . and put an undue burden on insurance companies.”

What?! This publicly elected official is unapologetically expressing concern over Katrina’s devastating impact . . . not for families, neighborhoods, communities, and cities all across the Gulf Coast of Mississippi, the state in which he is elected to protect consumers from corporate insurance running amok over them? That would be empathizing with the folks with whom we would expect him to empathize. After all, he is the insurance commissioner for the people of Mississippi.

No, sir. Dale has the gall to reserve his empathy for the industry which all through the Katrina ravaged Mississippi Gulf Coast region has been ripping off consumers, families, businesses, right and left, Republican and Democrat, rich, poor and middle class. In his official capacity, Dale expresses concern for the corporations which boasted obscene billion dollar profits in the aftermath of . . . now, how did Dale characterize it? Oh yeah, “the worst natural disaster in U.S. history.”

A friend too shy for direct attribution and to whom I’ll refer to as a gloriously delightful celestial spirit who came to me in the night summarized Dale’s disgusting public betrayal.

”This is unbelievable. George Dale told the Clarksville Lions Club that Katrina ‘put an undue burden on insurance companies.’ If people pay premiums year in and year out, how is it an ‘undue burden’ for insurance companies to keep the faith with policy holders? I guess George thinks that it is an undue burden for a casino to have to pay off when someone pumps their dollars into a slot machine and hits the jackpot.”

Insurance Companies Hit Billion Dollar Jackpot
With a government insurance commissioner gleefully bouncing around the state touting the latest round of talking points the industry supplies him, no wonder the insurance corporations have been able to hit the billion dollar jackpot.

The Insurance Industry Institute reported that the private insurance industry boasted $44.2 billion in after-tax profits in 2005 and $63.7 billion in after-tax profits in 2006. That’s some heavy profit making. These profits were after the companies had paid out $40.6 billion in Katrina claims. Of course, that wasn’t all of the Katrina-related claims. The industry sent the U.S. federal government flood program a $23 billion bill.

So far, claims paid out on Katrina add up to $64 billion— and this amount only accounts for those who’ve been paid on their claims through 2006. By the end of last year, the private insurance companies had paid $41 billion. These same companies essentially handed a $23 billion bill to American taxpayers for damages that these private companies determined for themselves that flood waters had caused. How generous that the private insurance industry only stiffed the U.S. taxpayers for 36% of the bill, so far.

On his official government website, Congressman Gene Taylor, a good Democrat from the Katrina ravaged Gulf Coast of Mississippi, has an incredible collection of “documents that suggest fraud by insurance companies in the handling of Katrina wind and water claims.” These documents appear to officially direct claims adjusters with such doozies of corporate policies like this one from Nationwide “if loss is caused by both flood and wind there is no coverage.”

NO coverage?!

Or this doozie from State Farm that instructed adjusters that “where wind acts concurrently with flooding to cause damage to the insured property, coverage for the loss exists only under flood coverage.”

Dale’s Foot-in-Mouth Disease
Dale’s insults to Katrina’s survivors continued. The Clarksville Press Registry reported

The enormous impact from Hurricane Katrina should leave Mississippians wondering if they should live "in harm's way," State Insurance Commissioner George Dale.

Let’s see now. According to the U.S. National Oceanic and Atmospheric Administration

“Populations 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” National Oceanic and Atmospheric Administration (NOAA)

The Coastal Community Development Partnership brings together NOAA and EPA offices to better support state and local governments as they promote safer and smarter development along the coast.

Is Commissioner Dale suggesting that 55% of the U.S. population move inland? Katrina’s devastation went well over 100 miles inland. How far inland would he recommend that over half of America’s families move? 150 miles inland? 200 miles? How would he recommend accomplishing that? If it isn’t hurricane country, it’s tornado country or blizzard country or earthquake country.

Dale should focus on doing the job to which he was elected rather than pretending to be the grand master of city planning.

Mr. “I-can-do-my-job” shouldn’t have one
In his impromptu speech before the state’s annual Municipal League conference held on the Gulf Coast this week, Dale repeated this mantra many times “I can do my job.” Thanks to John Leek at Cotton Mouth Blog, another Gulf Coast blog, we have video of Dale’s public admission.

Considering the man has been in the pocket of the very industry he has been responsible for regulating in the 32 years Dale’s been elected to this office, I’m glad to hear him admit that he can do his job. The question, of course, is “when is he going to start?”

Verrrrry Interesting
Before the Lions Club, Dale continued his showmanship in demonstrating his expertise in the foot-in-mouth department. "Can we survive another (Katrina) . . . ?" Excuse me?! This from a man who has all but prostituted himself for the insurance industry that has made recovery all but practically impossible for everyone involved?! Thanks to Dale’s buddies in the insurance industry and their shameless flackey with this Mississippi Insurance Commissioner, surviving Katrina has yet to come to a resilient conclusion.

When I read those highly insensitive words, I thought of the ever popular 1970’s comedy show Rowan and Martin’s Laugh In. The show had a character named Wolfgang, the Nazi soldier who would pop up behind bushes to say the infamous line "Verrry interesting...but schtupit!"

Yep. That's schtupit, alright. George Dale needs to voluntarily retire and work directly for the insurance industry he has protected from any real regulation.

Personally, I think the real question is this. "Should the good people of Mississippi even entertain the thought of surviving another year with an Insurance Commissioner who is a mouthpiece for an industry that ripped off the families and businesses of the Katrina-ravaged regions of the Mississippi Gulf Coast and New Orleans?!"

The answer is no.

Dale’s handling of the Katrina disaster alone should have the Democratic voters in South Mississippi sending this guy packing come the August primary.

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Wind? Water? More like a Bunch of Hot Air!

Ever since the last drop of Katrina rain passed through the Gulf Coast and the water receded after the levees burst in New Orleans, the insurance industry has been hell bent on implementing at full throttle its great American rip off program. In no time flat did those who had likened their company to good neighbors or to the security of being in good hands issue written instructions on how to maximize what seems to have been their goal: blame Katrina’s damage on flooding.

Let me help the insurance industry become crystal clear on this point. This was a H-U-R-R-I-C-A-N-E! We didn’t call this Katrina, the flood. We didn’t call this Katrina, the tornado. We didn’t call this Katrina, the storm surge. Everybody calls it . . . H-U-R-R-I-C-A-N-E Katrina. Capiche? Now let’s get technical.

The National Oceanic and Atmosphere Administration (NOAO) states on its hurricane preparedness website that “[h]urricane hazards come in many forms: storm surge, high winds, tornadoes, and flooding.”

In other words, a hurricane is a natural disaster consisting of both wind and water. How does one slice and dice the impact of one on the other and the amount of damage directly attributable to each?

Gulf Coast Congressman Gene Taylor (D-MS) testified before Congress that insurance companies were choosing not to pay on claims unless the policy holder provided an eye witness. [See Video: Katrina Insurance Claims Hearing: Rep. Taylor Testimony on the homepage of A.M. in the Morning!]

Can you believe this?! Unethical,? Of course. Heartless? Obviously. Ruthless? Evidently. Maniacal and Evil? Absolutely.

Stupid? No. These corporate execs who made the decision to blame Katrina’s damage on water comes out of value system foreign to most of us of any religious or spiritual background. Seems these execs live in a decency-free bubble where their god, the Almighty Dollar, reigns supreme. There will be no conversions. So, forget any lofty notions of that sort.

What we need are two things. First, we must fully understand how they are getting away with this horrendous travesty. Second, we must understand and implement what we can do to prevent its continuation.

Look, they know how to play us and play the politicians. Moreover, they know how to take advantage of the conflicts of interest that are inherent in the U.S. Government’s National Flood Insurance Program (NFIP).

Yesterday’s piece titled Scamming Policyholders & Taxpayers reported that our federal government has been in the flood insurance business since 1968. The private insurance companies pretty much got out of the flood insurance business “because of the catastrophic and unpredictable nature of floods.” In 1983, the federal government turned over to the private insurance industry the selling, servicing, and adjusting of those policies and claims. This may have been a fine arrangement for those natural disasters that dealt with floods only.

However, when it comes to a hurricane which by its very nature simultaneously involves several types of natural calamities such as storm surge, high winds, tornadoes, and flooding, a conflict of interest rises when it is the private insurance companies that are determining whether damage would be covered by them or by the federal taxpayers. In this instance, the conflict of interest is $23 billion.

So far, claims paid out on Katrina add up to $64 billion— and this amount only accounts for those who’ve been paid on their claims through 2006. By the end of last year, the private insurance companies had paid $41 billion. These same companies essentially handed a $23 billion bill to American taxpayers for damages that these private companies determined flood waters had caused. How generous that the private insurance industry only stiffed us for 36% of the bill.

What a racket! But could companies really be that methodically maniacal to stiff its own customers and the American taxpayers to the tune of at least $23 billion?!

On his official government website, Gulf Coast Congressman Gene Taylor (D-MS) has an incredible collection of “documents that suggest fraud by insurance companies in the handling of Katrina wind and water claims.” The doozies below are from Nationwide, State Farm, and Allstate.

9/4/2005: Nationwide instructed its adjusters that “if loss is caused by both flood and wind there is no coverage.”

9/13/2005: State Farm instructed adjusters that “where wind acts concurrently with flooding to cause damage to the insured property, coverage for the loss exists only under flood coverage.”

6/28/2006: On-site damage assessment by engineer Jerome Quintero of Rimkus Consulting Group for Allstate… concluded that there was “insufficient physical evidence to determine the proportion of wind versus storm surge that destroyed the structure.”

11/4/2005: Jerome Quintero’s damage assessment after revision by Rimkus staff who never visited the site. Quintero’s conclusion of “insufficient physical evidence” was changed to “storm surge and waves destroyed the residence.” Quintero’s name was signed to the revised report without his knowledge.

So there we have it. In the three examples, Nationwide, State Farm, and Allstate seem to be essentially instructing its adjusters to blame Hurricane Katrina’s damage on water alone thereby sticking the American taxpayers with an inflated $23 billion bill.

We haven’t even begun to talk about the rebuilding costs that weren’t covered at all or the folks who didn’t have flood insurance because they believed their policy provided adequate coverage. We haven’t touched on the fact that many like my own family are not in an official flood zone and may not have purchased flood insurance.

What is important, though, is to recognize that what the insurance companies are doing to New Orleans and the Mississippi Gulf Coast can happen to over half the population of our country.

“Populations 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”

National Oceanic and Atmospheric Administration (NOAA)

The Coastal Community Development Partnership brings together NOAA and EPA offices to better support state and local governments as they promote safer and smarter development along the coast.



The name of the game is to be informed and to take action.

Yesterday, we discussed the need to eliminate the insurance industry’s exemption from the anti-trust law governing business throughout our country. Right now, the Senate is considering the Insurance Industry Competition Act (S. 618), which will make it illegal for the insurance companies to collude with each other for things like price fixing and claims adjustment. Go here to tell your two U.S. Senators that you support the Insurance Industry Competition Act.

Today, we take action to protect ourselves from the inherent conflict of interest created because the insurance industry gets to determine for our federal government the amount of damage allegedly attributable to flooding at the same time the private insurance industry is determining the damage at the same property that it will attribute to wind.

Congressman Taylor has introduced H.R. 920, which amends the National Flood Insurance Program. In his testimony before Congress, he stated, “in response to the fact that the insurance industry apparently no longer wants to over 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 explains that under the rules of the House of Representatives, the insurance plan would have to be financed in a way that pays for itself. “Thus, any argument that this would be taxpayer-subsidized would be eliminated. Under the new rules of the House, that is not an option.” What Taylor is referring to is that when the Democrats were swept into office last November, Speaker of the House Nancy Pelosi instituted strong fiscal controls on spending. She ended the fiscally irresponsible era under Republican leadership.

Lastly, Taylor stated, “This problem affects thousands of people. Quite frankly, people should be encouraged to get out of coastal areas in a time of a storm, rather than encouraged to stick behind with a camera to record the event.” Amen to that!

Speaking of the Amen Corner, former Congressional Speaker of the House Newt Gingrich (R-GA), that compassionless conservative crony, has already come out against national disaster insurance. What a shock! The only thing those so-called conservatives are interested in is conserving their power.

During the apex of his reign in Congress, Gingrich accepted almost $425,000 in political contributions from the insurance industry coffers. Newt being a mouthpiece for an industry that has so blazingly betrayed the American people and her families isn’t all that shocking these days.
And just as the wind got knocked out Newt’s political sails, we can partner with Congressman Taylor to take the wind out of the insurance industry’s selling to us wind insurance policies on which they fail to appropriately pay out after a natural disaster.

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.

After all, the more this private industry continues to push their wind vs. water rationale, the more it sounds like nothing more than a bunch of hot air.

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