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Minnesota Public Radio - Marketplace
Sep 19, 2003
by ANCHOR: DAVID BROWN - REPORTER: AMY SCOTT
Insurance industry starts crying uncle over damage claims due to Hurricane IsabelDAVID BROWN, anchor: Well, on television, it was a day for news cameras along the East Coast to keep the lenses wet with sea spray and to show dramatic scenes of flooded streets in Baltimore. Out of frame, of course, were some perfectly dry streets just a few blocks over. It's Friday, September 19th. I'm David Brown.
And just to be clear, there's little doubt that what was once was called Hurricane Isabel turned many lives upside down from North Carolina to Virginia and Maryland, dissipating as it moved inland. The storm's been blamed for as many as 17 deaths and four and a half million people were without power today. But as airports and stores reopened, the damage estimates begin, and almost as if on cue, the insurance industry has started crying uncle. MARKETPLACE's Amy Scott takes a somewhat skeptical look at the costs and the claims.
AMY SCOTT reporting: As hurricanes go, Isabel turned out to be fairly tame. Analysts now expect insurance payouts won't top a billion dollars. Robert Hartwig, economist at the Insurance Information Institute says this year's blizzards, hail and tornadoes have already trumped that.
Mr. ROBERT HARTWIG (Insurance Information Institute): There were several other events that, in fact, produced more losses than Isabel did. They just didn't get the attention.
SCOTT: That hasn't stopped insurance companies from complaining. This morning, an executive at American International Group, or AIG, warned Isabel would strain struggling insurers. He said low premiums in the 1990s left many companies unprepared for the big payouts and investment losses of this decade. But Doug Heller with the Foundation for Taxpayer and Consumer Rights says insurers are in the business of being prepared.
Mr. DOUG HELLER (Foundation For Taxpayer And Consumer Rights): Insurance companies are risk assessors. That's what the industry is about, that's what they're supposed to do.
SCOTT: When the predicted does happen, Heller says insurance rates often jump. After the Northridge earthquake in Los Angeles, insurance companies threatened to stop selling home insurance altogether unless they could scrap earthquake coverage. But Heller says the point is, homeowners had already paid for that earthquake just as they'd paid for Isabel.
Mr. HELLER: So it's outrageous that there is discussion of using Hurricane Isabel as an excuse to raise rates. But I can assure you, it's happening.
SCOTT: When Hurricane Andrew hit Florida a decade ago, Heller says AIG sent out a memo urging its agents to, quote, "get price increases now."
In Washington, I'm Amy Scott for MARKETPLACE.
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