Insurance agencies predict costly cleanup for Katrina

When disaster strikes, Americans are accustomed to seeing government agencies like FEMA and relief organizations like the Red Cross mobilize to react to the devastation that results from a storm like Hurricane Katrina. But there is another group as much a part of the cleanup, repairs, reconstruction and economic recovery as any of those other teams: America’s insurance companies.

Local State Farm agent, and county commissioner, Bill Zechman says most people don’t consider the cost to insurance companies generated by a major tropical storm like Hurricane Katrina. Most people are aware the federal government recently provided $10.5 billion in relief, but the cost of insurance claims may come to well over double that amount.

“We have a number,” Zechman said. “But I don’t know how reliable it is. Total insured losses, now this doesn’t cover the uninsured losses, and of course this doesn’t include public properties, total insured losses on the Gulf Coast are estimated by the industry, not just State Farm, but by the industry, at $25 to $26 billion.”

However, Zechman feels this figure is conservative.

“My reaction is the actual figure could vary wildly from that,” Zechman said, noting there are risk assessment experts who come up with those figures. “They have some computer models that will predict that, but it’s still extremely difficult to predict this far out when the actual reconstruction will take years to settle all the claims.”

Zechman said it is hard to really envision the scope of the losses, but noted there are figures from Warren County tax assessor Carolyn Miller’s office which show the total worth of Warren County.

“There’s a weekly update on total appraised property,” Zechman said, “and right now it’s running close to $1.8 billion dollars. So right now, if you accept that figure of $25 billion from the industry, it would be equivalent to about 14 Warren Counties,” Zechman said. “But I really think the figure is going to go higher than the $25 billion.”

Zechman also thinks the government will probably allot more funds to the reconstruction, which ultimately comes from taxpayers. But as far as the insurance industry is concerned, there are ways the massive costs are spread out.

“This is exactly why you pay that premium,” Zechman said. “You may go for years and years and never collect a dime on it, and then Katrina happens.”

But there are some other ways the insurance industry covers their losses that are perhaps not so well known.

“The insurance companies you deal with on a retail level, like State Farm, or Nationwide, Farm Bureau, AIG, the big AIG, Hartford, they’re not carrying all this 100 percent. In other words, they don’t put all their eggs in one basket. We buy what’s called re-insurance. And that is analogous to wholesale insurance.”

So, perhaps not surprisingly, retail insurance companies actually purchase insurance much like everyone else. Zechman explained how the system works.

“Let’s say we insure a house for $100,000,” Zechman said. “The retail insurance company will cover a portion itself, and the rest will be covered by the re-insurance company, but the customer can’t tell the difference, because we’re just going to write one check to cover the loss.”

Local hurricane aid efforts
The McMinnville Jaycees are helping to raise money to house over 120 Hurricane Katrina evacuees at Camp Discovery in Gainesborro, Tenn. This will include 60 to 80 mentally challenged individuals, as well as another 60 caretakers and family members who have been displaced from their hospital in New Orleans and are currently staying at Fall Creek Falls.

The Tennessee Jaycee Foundation, in conjunction with TEMA and Lakeview Church of Christ, are working to open Camp Discovery for these people.

During the fair, the Jaycees will be collecting monetary donations at their food booth. There will also be a trailer set up by the ballfields where non-perishable items can be donated.

Some suggested non-perishable items are: sheets, blankets, razors, pillows, garbage bags, soap, clothes and towels.

Checks can also be mailed to the Tennessee Jaycees, P.O. Box 14, Murfreesboro, Tenn., 37133.
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Local businessman Ronnie Perry has volunteered to haul items to victims of Hurricane Katrina.

Perry has placed a trailer at his business, Perry’s Garage located at 510 Sparta Street, and is asking for donations of non-perishible food items, such as canned goods, along with clothing, diapers, paper plates, bowls and cups, paper towels, toilet tissue and personal hygiene items.

When the trailer fills up, Perry will then transport the supplies to one of the storm damaged areas where they will be distributed as needed. For more information, contact Perry at 473-5568.