Insurance Transparency Project

Calling All Perils,

This story has a happy ending, which I’ll get to tomorrow.  But I want to highlight this A.P. stunner, which needs a little decoding but ultimately shows a strange disconnect in the insurance debate, particularly on the part of Donald Powell, president Bush’s Katrina recovery czar, but not him alone.  It is becoming clear the insurance industry has failed to pay at least $2.7 billion in Louisiana wind claims — claims for which it collected premiums.  Not mentioned here at this hearing before a Senate subcommittee:  enforcing insurance law.

In the story, Powell criticizes Louisiana officials for allowing the LRA to pay policyholders’ wind claims, thereby running up a shortfall.Powell testified that the federal funds, from the Department of Housing and Urban Development, were intended only for people who didn’t have flood insurance, and should only pay for flood damage. The theory being that the New Orleans levee breach was the government’s fault, making flood claims, and only flood claims, the government’s responsibility.  But as the story says:

However, unlike other states affected by the 2005 storms, Louisiana’s “Road Home” grant program is projected to award about $2.7 billion to more than 43,000 applicants whose homes were damaged by the hurricanes’ wind and didn’t have any flood damage.

As Powell says:

“We were always very clear that the federal government would not fund state housing programs to cover wind damage,” Powell testified before the Disaster Recovery Subcommittee of the Senate Homeland Security and Governmental Affairs Committee.

Of course, he’s right. Why should taxpayers pay for wind damage? That’s what homeowners’ policies are for.

For exercise in frustration, read the whole story because no where does anyone ask:
1. Did the 43,000 have homeowners insurance?
2. What are insurers doing about it?

The answers are:
1. Of course they all did; everyone does.
2. Not paying wind claims.

But Sen. Landrieu, at the hearing, and other officials get into a finger-pointing argument over whether or not the LRA did or did agree to pay wind claims and whether the federal government did or didn’t agree to it.

Even the very effective LRA executive director, Andy Kopplin, completely misses the point:

Kopplin said the Road Home program was designed to aid any resident whose home sustained major damage, whether wind or water was to blame.

“When the president said he would do what it takes and stay as long as it takes, he didn’t say except if you had wind damage,” Kopplin said.

And more:

Kopplin blamed the program’s projected budget shortfall on inaccurate data provided by the Federal Emergency Management Agency. He said FEMA underestimated both the number of homeowners who could be eligible for grants as well as the severity of damage to homes.

War Eagle says: Um, esqueeze me, but what about the insurance compa...

But then Powell says, no, it was for flood only.

In February 2006, he said, federal and state officials “mutually agreed” to fund grants for about 106,000 homeowners who had flood damage. With those homeowners getting an average grant of $72,000, the program was expected to cost a total of $7.6 billion, he added.

War Eagle: Yes, but, the insur…

Then Senator David Vitter, R. La., adds that he’s “stunned” because it seemed clear that the Road Home was only for flood:

“But the state designed the program to cover wind as well as water damage anyway. Did no one in Baton Rouge realize this would result in a huge shortfall?” Vitter asked in a written statement.

War Eagle: Buh, buh….

Then Gov. Blanco said Vitter is making “serious, unfounded charges.”

“Chairman Powell was personally present for all LRA meetings when the program was designed to include wind damage. He heaped praise on our work, not criticism. The White House and Sen. Vitter are now using the same kind of calloused logic that insurance companies used to dodge paying what is necessary to get our people back home. Our people do not deserve the suffering inflicted by sick political games.

War Eagle: Herrow?…

Then, Sen. Landrieu says:

Road Home “has not lived up to its billing,” and Louisiana residents “have moved beyond frustration to cynicism and hopelessness” amid delays in the processing of the grant applications.

War Eagle: AFLAAAAAAAC!!!!!!!!!!!

ITP says: There, there, little buddy. I’m sure some day, someone will ask the sellers of wind policies, issuers of wind contracts and collectors of wind premiums why the state of Louisiana and the U.S. Government have to pay $2.8 billion in wind claims.

I don’t mean to be sarcastic, but GEEZ!

Hey, Non-Profit Prophet: What have I been telling you?

Ida rules. Tomorrow, I’ll get to the happy ending.