Lessons from Andrew

Hurricane Andrew hit South Florida with winds topping 160 mph on August 24, 1992, devastating several communities. According to Gary Kerney, of Verisk’s Property Claims Services, the insurance industry had never seen anything like the damage that Andrew inflicted on Florida and the Gulf Coast.

“It far exceeded the losses caused by Hurricane Hugo, which had made landfall in South Carolina four years earlier, and there were no other that I can recall, at least billion dollar catastrophes at that time. So Andrew, in and of itself, was quite an event for the insurance industry,” Kerney told Claims Journal Editor Denise Johnson.

According to the Insurance Information Institute (III), the hurricane resulted in $15.5 billion in losses. It damaged 125,000 homes and 82,000 businesses, according to AIR Worldwide.

Andrew’s devastation spawned change. According to the III, these changes have included greater scrutiny of coastal exposures by underwriters, a larger role for government in insuring coastal risks, strengthening of building codes and more reliance on catastrophe modeling.

Andrew also ushered in hurricane deductibles. According to III, 18 states including Alabama, Florida, Georgia, Mississippi, North Carolina and South Carolina now have hurricane deductibles.

Andrew taught Florida about the importance of strict building codes. Today the state ranks among the leaders in building codes.

Russel Lageza, an attorney who formerly worked with Florida regulators, notes that while building codes have improved, the benefits could be reduced due to dwindling wind mitigation credits. “Yes, we’re definitely more hurricane-ready in our building codes here in Florida but none of that will matter much if consumers don’t have the discounts and incentives to upgrade their homes to code. Those seem to be disappearing very, very quickly,” Lageza warns.

The insurance industry is not the only sector that learned lessons. The government, emergency responders, bankers and the construction industry did as well. “Everybody took a lesson out of Andrew, and we’re applying those lessons today, and our responses are getting much, much better,” Kerney says.

Some people downplay the danger when forecasters and officials begin warning about another hurricane. More often than not, the storm never makes landfall in the states. Or some people feel they can relax if the forecast suggests a below-average season. But if Andrew has taught us anything, it is that the there are no false alarms during hurricane season.

As Kerney says, “What we learned in 1992 is … there may be relatively few in the forecast, but it only takes one, and if that one hits, you know, all bets are off.”