After Disasters Strikes
First, some facts!
Only 14 percent of California homeowners have earthquake insurance. Why? Earthquake coverage can double the cost to insure a home, and deductibles are 10 - 15% of the home's replacement cost. When homes collapse, we all pay.
In the Miami-Dade County (FL) area, one third of homeowners have no choice but to pay the highest rates in the market to the state-run Citizens Property Insurance Corporation, the 'insurer of last resort,' because no private insurer will sell homeowners insurance. In some areas, new homeowners cannot even get insurance, so mortgage problems are popping up.
Insurers are cutting back coverage all along the Eastern seaboard, as industry models indicate a rising likelihood that a major hurricane could hit the Carolinas, New York or New England. Allstate, New York's largest insurer, stopped accepting new business in New York City, Long Island and Westchester County, while Nationwide is trimming coverage on Long Island as well as coastal Maryland and Virginia.
Homeowners, auto and other forms of insurance are seeing 10-20% premium increases this year.
There is a new organization called http://www.protectingamerica.org. Its aim is to create a catastrophic fund with the reserves that insurance companies must put aside for large disasters. Currently these huge companies get taxed on these funds they are holding.
For consumers, the issue (and what we pay for premiums) is based on re-insurance.
Reinsurance is the insurance that insurance companies buy to manage their exposure to catastrophic losses and is a major factor that drives the price consumers pay for property insurance.
A state/federal program to backstop insurance companies when payouts exceed a specific threshhold will enable companies to make more insurance available to consumers, and at a lower cost.
The Chairman of the Group is James Lee Witt, the former FEMA Director that was effective in Hurricane Andrew, and several Earthquakes. (The FEMA Director that made headlines in Katrina was Mike Brown).