Hurricane Katrina: One Year Later continued

Area agents have received overall good reviews with 90% of homeowners who filed after the storm saying they are satisfied with their insurers, according to the Insurance Information Institute (III). Despite the high rating, earlier this week the state of Louisiana gave policyholders an extension to file lawsuits. Homeowners were given an extra year to file lawsuits over claims from Katrina and Rita after the Louisiana Supreme Court upheld the constitutionality of two laws requiring the extension. Typically, policyholders have a year to file suit on a homeowners claim, but the court’s decision doubled the state’s filing window, causing some alarm among insurers about potential class-action lawsuits.

This year’s hurricane season should only yield 12 to 15 named storms, seven to nine of which are predicted to be hurricanes, according to the National Oceanic and Atmospheric Administration. In 2005, there were a record 27 named storms and 15 hurricanes, seven of which were severe hurricanes. Five of the seven major storms accounted for more than 90% of last year’s $56.8 billion in insured catastrophe losses.

And fewer storms is always a good thing. The Gulf region is still spinning from Katrina—and so is the insurance industry. With carriers such as Allstate withdrawing from hurricane-prone areas, and premiums soaring in coastal areas, many agents must now struggle to find affordable coverage for their clients.

Many carriers reviewed and tightened underwriting practices to reduce their exposure as a result of the devastation of Katrina. With predictions of a prolonged period of above-average hurricane activity hanging over their heads, insurers have taken seriously projections that the Northeast is susceptible to a major hurricane.

Katrina also changed how the industry handles risk modeling on several levels. Although hurricanes are nothing new, Katrina contained several surprises. Insurers must now take into account the rapid escalation of reinsurance costs, as well.

Agencies also have learned about firms that bring in temporary office facilities, computers, satellite phones, Internet connections and other needed equipment to allow the agency to quickly get back up and functioning. This physical, functioning presence sends a real statement to the community and the agency’s customers about the professionalism and stability of the business. As with third-party emergency phone service, you need to establish relationships with these emergency facilities firms well before a disaster strikes.

Agencies learned the value of providing employees with tools to work and communicate from anywhere. Not only does this portability allow agents to be more efficient and responsive, it gives the agency more flexibility to continue to operate from homes or other locations when the office is unusable. Of course, for agencies to get full value from this portability, their agency management system needs to remain available. Many agencies have now have their agency management systems hosted by their vendor or a third party with a protected facility located in a different geographic area. Some vendors also allow agencies that want to maintain in-house systems to contract for this remote hosting in emergency situations.