Pattern of Greed
Following up our post on Trent Lott, the insurance industry’s conduct in relation to Hurricane Katrina continues to be in the news. Yesterday, the grassroots group People Over Profits released their report Pattern of Greed: How Insurance Companies Put Profits Over Policyholders. The report outlines the group’s complaints about how the insurance companies handled claims relating to Katrina and other natural disasters. The report concluded:
It’s been a year since Hurricane Katrina swept across the Gulf Coast, leaving historic levels of death and destruction in its wake, and some in the insurance industry haven’t made good on their promise to compensate area residents who find themselves near ruin. While the insurance industry enjoys record profits and bulging bank accounts, too many people are left waiting for the settlements that will help them get back on their feet. It’s no surprise. As this report relates, the insurance industry has made a practice of collecting billions of dolalrs from policyholders over the years and then stiffing them in their time of greatest need. Hurricane Katrina is just the most recent example.
One of the most disconcerting parts of the report are allegations by many, including Mississippi Attorney General Jim Hood, that insurance adjusters were cajoling victims into signing forms that acknowledged their homes sustained flood damage by saying that the forms were necessary for them to immediately receive their checks. These forms can become important. The issue in most of these cases is “What caused the damage?” Generally speaking, if the homes were damaged by wind or water falling into the house (for example, rain through a torn off roof), then the insurance policies cover the damage. However, if the home is damaged by rising flood water, then the damages are only covered by flood insurance and not typical homeowners’ policies. Because of this, the insurance companies use the forms to deny coverage. When the insureds, who don’t really understand the difference between rising flood waters and flooding in the house due to rain, sign these forms they are potentially signing away their right to recovery.
Bloomberg also published an article today about the issue. In its summary of the issue, the article states:
As surely as Katrina transformed the Gulf Coast with 125- mile-per-hour winds and storm surges as high as 28 feet, clashes over insurance policies are shaping the region’s recovery, according to bankers, public officials and aid groups.
Disputed settlements, rates that have soared as much as 500 percent and insurers’ reluctance to write new policies in storm- prone areas are forcing people to move away from coastline homes and inner-city New Orleans neighborhoods, they say.
Interestingly, the article contains another complaint from Senator Trent Lott: “The insurance industry — State Farm, Allstate, Nationwide — has been the most unresponsive, insensitive I’ve ever seen.”
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