Hurricane Katrina – Five Year Anniversary

A Look at the Numbers

In July of 2010, the Insurance Information Institute (I.I.I.) released its report regarding the damage and insurance claims at the point of the five year anniversary of hurricane Katrina. In the report, the I.I.I. discloses that Katrina, five years later, remains the largest “single loss” event ever to occur to the global insurance industry. The numbers within the report are staggering:

  1. Hurricane Katrina caused an estimated $41.1 billion in insured damage to both individuals and businesses.
  2. The National Flood Insurance Program (NFIP) insured $16.1 billion in losses. This number is not included in the insured damages figure above.
  3. The total amount of insured catastrophe losses due to Katrina ($61.9 billion) is the highest annual insured catastrophe loss ever experienced.
  4. Most of the claims generated by Katrina (1.2 million of the 1.7 total claims) were for damage to personal property.
  5. By the second year after the hurricane, 99 percent of the personal property claims had been settled by insurers.

As you can see from this evidence not only were the claims created by Katrina’s devastation substantial, but those individuals who were insured were paid back quickly and almost completely by their insurers. The system worked exactly as it should have in this respect.

Are We Learning from History?

While many of those who suffered from Katrina had homeowners insurance, most of them did not have flood insurance. As you may or may not know, flood insurance is a separate coverage not automatically included on a homeowners insurance policy. And while many who endured Katrina thought the flood, as a result of the hurricane, would be covered under the hurricane coverage afforded by their homeowners insurance policy, these individuals were sadly mistaken since floods are only covered under flood insurance policies.

As a result of this mistaken thinking and the small number of flood insurance policies issued before the disaster, the NFIP ended up in a deficit as the group attempted to give aid to individuals without flood insurance coverage.

This gives an important lesson to homeowners everywhere that damage to their homes as a result of a flood following or during a hurricane is not covered by their homeowners insurance policy. But are we absorbing and applying this lesson?

The Difference 5 that Years Make

Although many people have heard the horror stories of those who suffered devastating losses as a result of hurricane Katrina and who did not have flood insurance, it has not made consumers in the U.S. more apt to buy the coverage. In fact, the I.I.I. report shows that only 10 percent of Americans currently have flood insurance. This is 3 percent fewer than the number who had it before Katrina.

Even more worrisome is the continued belief that homeowners insurance includes flood insurance after a hurricane. Of the people polled around the U.S. about flood insurance claims, 16 percent of them thought the claims would be covered by a homeowners insurance policy if the flood was the result of a hurricane. Of those in states with high claims after Katrina, 35 percent of those polled thought that the flooding brought on by Katrina would be covered by their homeowners insurance policy.

The Importance of Flood Insurance

A flood is a flood, no matter what causes it. Rain coming into your home from a missing roof is not a flood, but a rising body of water that infiltrates normally dry land is. For the 53% of Americans who live in coastal communities, this distinction is vitally important.

Many individuals only buy flood insurance when their mortgage company requires them too because they live in a designated flood zone. But if Katrina taught us anything, it’s that you do not have to reside in an official flood zone for a flood to affect you.

Source by Christine Huddleston

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