SLABBED Daily – April 19

The Mississippi Press headline Dale: Insurance needs change offered a glimmer of hope; but, to paraphrase the immortal words of former Texas governor Ann Richards, Poor George! He was born with a insurance money in his mouth!

The insurance industry must change as a result of Hurricane Katrina, but most of the solutions being offered on the coast are not the answer, former Insurance Commissioner George Dale said Thursday at a luncheon.

“The way insurance is being delivered today is not working,” Dale told members of the Southeast Mississippi chapter of National Association of Insurance and Financial Advisors…

Dale said that one of the most popular proposed solutions to the insurance crisis on the coast is to offer a multi-peril option as part of the National Flood Insurance Program.

But he said that the national flood program built up more than $15 billion in debt during Katrina, and emphasized that this was without having to pay for wind-related damages.

Poor George! He still doesn’t get it.  The flood program did indeed pay for wind-related damages – and, the word for that is fraud.

The idea most likely to work, Dale said, is a federally backed reinsurance plan, similar to what was set up for New York following the attacks on Sept. 11, 2001.

Reinsurance serves as insurance for insurers, protecting them from debilitating claims and, according to advocates, allowing them to reduce premium costs for policyholders.

“Let the free-enterprise system work,” Dale said.

Poor George! Where has he been?  How could he not know his friends in insurance swaped the  free-enterprise system for a bailout?  He isn’t working right now, after spending 14 months at a law firm in Jackson.

A long-time fan of George’s, I felt he betrayed the public trust with his response to Katrina and was neither sad or surprised when he lost.   Others felt that betrayal, particularly those on the Coast.   AM in the Morning slabbed him:

Here on the Mississippi Gulf Coast is where Chicken George Dale helped his buddies in the insurance industry have their way with plenty of families and businesses.

Rather than protecting Mississippi’s consumers—the families and businesses that have to have insurance for their financial security, Chicken George served them up as if chicken on a grill in the middle of summer…

When Chicken George opened his beak to speak before the Lion’s Club in Clarksdale, Miss., he said Katrina was “the worst natural disaster in U.S. history . . . and put an undue burden on insurance companies.” Imagine that? What a thing for him to say as the man elected to protect commercial and residential consumers from insurance companies that want to collect premiums but not pay on legitimate claims.

Poor George! He must still have the taste of insurance money in his mouth.

2 thoughts on “SLABBED Daily – April 19”

  1. He just doesn’t know anything about economics and doesn’t seem to understand anything about Katrina.

    A federal reinsurance program for state regulated insurance would not “let the free enterprise system work.” It would be take the failed, unfair, and dishonest system we have now, which is not a competitive market where supply reacts to demand and therefore does not have “free enterprise” market pricing or efficiency, and would give it an unlimited line of credit with the US Treasury.

    His statement about NFIP shows no knowledge whatsoever about the program or about Katrina.

    NFIP was not set up to pay for itself, and especially not to pay for the volume and severity of claims from an event as extreme as Katrina. The maps and premiums are based on preparing for a 100-year flood event. Catastrophic levee and floodwall failure that destroy a major city is not a 100-year event. A 30-foot surge in Mississippi is not a 100-year event.

    On top of that the insurance industry received a windfall from taxpayers in three ways:
    (1) by committing fraud in the adjustment of claims where damage had been caused by both wind and water;
    (2) by collecting subsidies from NFIP that far exceeded their actual costs for loss adjustment and administrative expenses handling flood claims;
    (3) and by denying and delaying claims for so long that the federal government paid for trailers, vouchers, grants, loans, and tax breaks to help policyholders with losses that should have been paid by their insurance.

    No one seems to notice that the federal government spent more on disaster assistance for property losses than it spent on NFIP claims, and more than the insurance industry spent on homeowners claims.

    The multiple peril insurance program in NFIP would stop the fraud of billing taxpayers for the liabilities of private insurers and it would substantially reduce future disaster assistance by offering coverage that would pay promptly without the long delays and lawsuits.

    Wind insurance risks and premiums are much much easier to determine than flood risks. The risk models and loss data are already out there being used by state wind pools, insurers, and reinsurers. We know the expected probability and severity of hurricane winds. Wind premiums do not have the complications of levee assumptions, surge models, changing topography, and other factors that make flood risk so difficult.

  2. Great comments, Brian, particularly to a post with “gibberish” in the middle that wasn’t on my screen when I put it up.

    Federal reinsurance won’t stop the fraud, if anything, it will increase it IMO.

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