Reading the reminiscences of former Florida InsuranceCommissioner Tom Gallagher's trials in the aftermath of HurricaneAndrew got me to thinking about what a hit the insurance industrytook from that storm. I'm not talking about the financial hit, butthe reputational hit.

In Chad Hemenway's exclusive story about Gallagher and other's experience that dayand the days after, it is striking how Andrew epitomizes insurer'sdéjà vu reaction to catastrophe. They honor the claims, making themandatory pronouncement about their sensitivity toward theirclient's fate and desire to make them whole.

What befuddled many an insurance customer is after a storm whensome insurers leave them in the lurch as carriers abandon marketsthey find are no longer profitable in the aftermath of thedisaster.

The story cites the reality that insurers were faced with. Theyhad taken on too much risk and were paying the price for theirover-zealous behavior.

But that was 20 years-ago. Insurers today use models and otheradvanced technology to get a better understanding of their riskexposure. Yet, there is concern that some will manage to findthemselves caught in the same situation they have in the past. Thefallout of the soft market is that in pursuit of premium volumesome carriers take too much market share, and have to later dealwith the consequences of their poor judgment.

The business executive makes a conscious decision that it istime to leave because the money ain't there anymore. Thepolicyholder, on the other hand is left bewildered.

Customers don't understand why a company, that has taken theirpremium for years, and never suffered a loss during that periodeither abandons them with a non-renewal or needs to jack theirrates up.

After reporting on this industry for so long, I've come tounderstand the reasoning behind these decisions by insurers. Buttry explaining the intricacies of maximum probable loss andcatastrophe modeling to the average property owner. Their eyesglaze over. Their attitude turns to fury and disbelief. Insurersare referred to in ways that are more associated with piracy, andagents often have to take the heat for decisions that are out oftheir hands.

When an insurer leave, as carriers did in the aftermath ofAndrew, and have done again in the face of a major naturaldisaster, customers are left to make a mad scramble for coverage.They aren't happy. Agents aren't happy. And the carrier customershave loyally paid their premiums to for years can bet that theirreputation will be tarnished for years.

Word of mouth is a powerful thing. With social media, the rippleeffect of negative opinion is magnified considerably.

If there are lessons for insurers to remember as we remember thedevastation left behind in the wake of Hurricane Andrew it would bethese:

One—don't bite off more than you can chew and two—price risk forexposure not volume.

This industry may not like to admit it, but it is in a peculiarposition. It is a business that is built on public trust. Carriershave to balance the faith people place in them to be there to makethem whole after a crisis against the stark realities of marketforces and keeping the company solvent.

Andrew shows us that sometimes that is a hard balance to makeand a lesson some companies fail to remember.