Insurance and Disasters
Overview: Catastrophe Recovery
Helping Americans Rebuild Their Lives
Dr. Steven Weisbart, CLU, of the Insurance Information Institute talks about the importance of having enough and the right kind of insurance in case of catastrophic damage caused by storms and flooding.
In recent years, Americans have sustained staggering property losses caused by natural and man-made disasters, including hurricanes, tornadoes, flood, fire and terrorism. The insurance industry has played an instrumental role in helping individuals, businesses and communities recover from these terrible events.
In 2008 alone, insurers paid 3.9 million damage claims to their policymakers, totaling more than $27 billion, in 40 states as a result of 37 catastrophes. In 2005—the year of hurricanes Katrina and Rita—the insurance industry paid more than $62 billion in claims to victims of disasters.
Key Public Policy and Industry Issues
State and federal public policies can help strengthen loss recovery and mitigate the impact of future disasters. Key areas where government may make a difference include:
- A Federal Megacatastrophe Fund—The growing costs of natural disasters has made insurance more expensive and less available in disaster-prone parts of the country. Some insurers support a policy framework that would ensure that the federal government would serve as a financial backstop in the event of especially severe “megacatastrophes.” Others believe that such a policy is not necessary. States have considered but generally rejected creating state catastrophe funds, with the notable exception of Florida.
- State Action—Many state governments have taken action aimed at strengthening loss coverage and preventing future loss. State policies include incentives to insurers and policyholders to strengthen financing and improve properties to limit disaster damage.
- Programs to Reduce Losses—Upgrading and enforcing building codes can significantly limit losses as a result of disaster. Many states require insurers to offer discounts to policyholders who strengthen their properties. In addition, several federal programs support loss mitigation.
- III White Paper—Catastrophes: Insurance Issues
An in-depth review of disaster losses, public policy issues, and insurance industry practices.