Picking Up the Pieces
Although Hurricanes Katrina and Rita are behind us, hurricane season continues through the end of November. And while it does, residents on the Gulf and Atlantic Coasts are picking up the pieces and rebuilding their lives, while praying that the worst of the season is behind them.
A new report by Celent examines the immediate- and long-term effects of Hurricane Katrina on the insurance industry. The report noted that, in the near term, insurers will raise rates and tighten terms, and public insurance programs will expand.
In the long term, there may be fundamental changes to the insurance industry’s business model including: transforming capital requirements, new pricing methods, and a different approach to underwriting and claims. The report also describes the role that technology can play to support these changes and outlines the implications for insurers and technology vendors.
Celent analyst Donald Light said, “The human and economic consequences of Hurricane Katrina are still unfolding, but what is already clear is that Katrina is not just another big storm. Even in these early days, the unprecedented scale of Katrina and its aftermath demands a look at the longer-term implications for the insurance industry.
“… Katrina also has brought tough but meetable challenges for insurers, and real business opportunities for certain technology vendors,” he added.
Lewis Mandell, a professor of finance and managerial economics at the University at Buffalo School of Management in New York, offered hope for the economic recovery of New Orleans. He said that the demand for unskilled labor to clean up after Hurricane Katrina will be the main driving force in the economic recovery in New Orleans.
“If there is a positive aspect of this terrible catastrophe, it’s that it creates a huge demand for local unskilled labor, and there are very few unskilled jobs in America,” Mandell said in a press release.
“The huge clean-up effort alone is going to create a lot of jobs–much of them paid for by private insurance, some of them paid for by government–and with the jobs will come income for people who want to rebuild their lives.”
Meanwhile, many organizations are working to help out consumers and insurance professionals whose lives have been disrupted by both storms. The Texas Department of Insurance (www.tdi.state.tx.us) and the Louisiana Department of Insurance (www.ldi.state.la.us) each have extensive hurricane recovery information on their Web sites, including insurance company contact information. Agent associations in Louisiana and Texas, including IIABL (www.iiabl.com), PIA of Louisiana (www.piaoflouisiana.com), IIAT (www.iiat.org) and TIP/PIA Texas Affiliate (www.piatx.org) are also serving as resources for displaced agents in their regions.