Battered commercial and residential properties, and the hundreds of thousands of Gulf Coast residents left homeless by last year's storms, weren't the only ones to take a hit during the hurricane season of 2005. Claims adjusters were left exhausted by the work of sizing up the damage and resolving claims disputes, according to senior insurance industry executives.
"We had 70 or 80 people in New Orleans, and we had to move our claims office from New Orleans up to Baton Rouge," said Edward M. Liddy, chairman and CEO of the Allstate Corp. "We had 70 or 80 people who lost everything they had. They were up in Baton Rouge, and they were up there 24/7, 120 days in a row or so, resolving the claims of other people."
Liddy's comments came during the annual meeting of insurance executives at the Joint Industry Forum in January in New York. The insurance industry has come under fire from some quarters for moving too slowly in resolving claims.
Four months after Hurricane Katrina slammed into the Gulf Coast, generating more than 2 million claims, Liddy said his company has settled 70 percent of its homeowners claims and 90 percent of its automobile claims. "We're pretty pleased," he said. "We're generally hearing good things."
Liddy's peer, Frederick H. Eppinger, president and CEO of Hanover Insurance Group Inc., said the storms had changed his thinking about how to deal with catastrophes on a massive scale.
"While some of these folks were away from their homes for eight months last year, to go back to them again for only a month or two and say, 'You're not going to be home for another eight months,' was a very difficult thing for us," said Eppinger.
"It's a whole different environment," he added. "And again, I think the value of this storm is much more massive than just the dollars."
Some claims adjusters, those who managed to wade through debris to assess damage, did so at the risk of their own lives, said Jerry Jurgensen, CEO of Nationwide. "We got to the point this time, that we were having to send security along with claims adjusters because people were so upset that there were legitimate threats of bodily damage to our claims adjusters in certain situations."
Jurgensen said that 90 percent of the company's hurricane-related claims have been settled, but added that he was planning to increase his stable of full-time catastrophe adjusters. Adding adjusters, however, would ultimately get expensive, and that might soon show up on the bottom line. "Somewhere in the system, somebody's got to pay for this," he said. "It creates yet another cross-subsidization issue on other customers in other parts of the investment portfolio."
Even as the adjusters work to finish up outstanding claims related to the hurricanes, their gains are in danger of drowning in a wave of lawsuits brought on by Mississippi Attorney General Jim Hood to force insurers to pay for flood damage.
If Hood prevails, the industry would not only be facing billions of dollars in extra payments. Losing such a suit would tarnish the industry in the eyes of the capital markets and make it more difficult to raise new capital, said Edward B. Rust Jr., chairman and CEO of State Farm Mutual Automobile Insurance Co.
March 1, 2006
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