Insuring a Fair Recovery

Published on

The New York Times

After the government, no group will be more essential to the rebuilding of the Gulf Coast than private insurers. At least one estimate of the final price tag has soared past the $125 billion mark, with insurers’ portion of the bill climbing as high as $60 billion. The companies will be trying to help their customers, while worrying about their own bottom lines at the same time. It’s important to make sure their judgments are fair — both for the sake of the hurricane victims and the taxpayers, who will pick up much of the tab the
insurers don’t pay.

The federal government does not regulate the insurance industry. At the moment, that job is left to the states. But many claim disputes are likely to hinge on whether damage was caused by the hurricane or the flooding that resulted. The latter is the domain of the government’s National Flood Insurance Program, and it’s inevitable that the government will end up paying a significant share for damages, especially in New Orleans. Insurers should not be allowed to duck their fair share of the cost of hurricane damage.

The presence of a few referees could be a boon — both to oversee the fairness of the general process and to protect the poorest victims, who cannot afford to hire lawyers and wait while they litigate disputes. The National Flood Insurance Program should hire independent adjusters and offer their services to hurricane victims. The Government Accountability Office should send investigators to oversee the division of costs as the process unfolds. The Homeland Security Department’s Office of the Inspector General announced that it would send auditors to monitor the spending of federal dollars.

Someone should be watching over the insurance companies as well, and insurers should embrace such oversight. The last thing the nation’s property and casualty insurers should want is to appear to be profiting from the hurricane, to become the villains of the rebuilding process. Now is the time to act creatively and install safeguards to protect Katrina’s victims — before all the checks have been written, when it isn’t too late to set the tone for the months of hard work that will follow.

Mississippi’s insurance commissioner, George Dale, is already trying to hire an outside expert to spot-check residents’ houses when claims have been denied to ensure that the claims were properly handled. But Mr. Dale is waiting for federal funds to pay for his new hire.

The attorney general in Mississippi, Jim Hood, has filed a civil suit to declare void the provisions protecting insurers from flood losses and to stop what he calls ”unscrupulous” insurance adjusters.

The regulators themselves will not be immune from questions about their ethics. It is a sad fact that the last three insurance commissioners in Louisiana have landed behind bars. The Foundation for Taxpayer and Consumer Rights calculates that the current commissioner there, Robert Wooley, received more than half a million dollars in campaign contributions from insurance companies in 2003 and 2004, which leaves him wide open to criticism from taxpayers who feel shorted by insurance companies. In the end, everyone will benefit from the most open process possible.

Consumer Watchdog
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