Remember the flood litigation in Mississippi? The fervor caused by Attorney General Jim Hood's lawsuit, which claimed flood provisions in homeowners' insurance policies were “unconscionable,” has quieted in recent months. The industry stated that its policies properly spelled out the exclusions and are unambiguous, and a poll taken at the 10th annual Property/Casualty Insurance Joint Industry Forum indicates that this confidence is not wavering.
The survey, conducted by the Insurance Information Institute, who hosted the forum, revealed that 80 percent of the property/casualty insurance industry executives expect victory in the wind versus water lawsuits brought in Mississippi. The results are not a surprise to Robert Hartwig, senior vice president and chief economist at the Institute.
“Homeowners' insurance does not cover flooding, including, but not limited to, flooding as a result of high tides or storm surges,” said Hartwig. “The policy language is crystal clear and unambiguous.”
A panel of industry executives and CEOs addressed many other issues as well, including how major catastrophes currently are being handled in the nation. Discussions focused on some of their concerns and successes following last year's hurricane season. In particular, they focused on regulatory constraints in Florida, which the panel said is keeping homeowners' rates too low in vulnerable coastal areas and, in effect, are encouraging development in high-risk areas at the cost of taxpayer and other homeowner subsidization.
New technology trends also were shared. Edward B. Rust., Jr., chairman and CEO of State Farm, described satellite imaging technology that allowed his company to identify damaged properties and issue checks to policyholders before adjusters had a chance to personally visit them. Even with the benefits of technology, executives spoke about the hard work and emotional toll adjusters faced while working in the devastated areas. They described adjusters who, having lost everything themselves, still worked around the clock to settle their neighbors' claims.
Edward M. Liddy, chairman, president and chief executive officer of Allstate, added that the 2005 hurricane season also has raised awareness of the need for a plan that deals with mega-catastrophes. “The solution is a private program sponsored by the government under which rates for homeowners would be actuarially sound,” he said. “States would create pools funded by all entities that benefit from a robust local economy such as the banking and real estate sectors. The key is to pre-fund the cost of reconstruction after a catastrophe.”
The panel discussion was moderated by Charles M. Chamness, president of the National Association of Mutual Insurance Companies. Sponsoring organizations included: ACORD, American Institute for Chartered Property Casualty Underwriters, The Geneva Association, Institute for Business & Home Safety, Insurance Information Institute, Insurance Institute for Highway Safety, International Insurance Society, ISO, National Association of Mutual Insurance Companies, National Council on Compensation Insurance, National Insurance Crime Bureau, Property Casualty Insurers Association of America and Reinsurance Association of America.
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