My old friend, Bob Hunter, insurance director for the Consumer Federation of America, cited a candid reader posting to my blog in his testimony this morning before the Senate Judiciary Committee on whether the industry deserves to keep its federal antitrust exemption. The posting, about insurer mishandling of Hurricane Katrina claims, came from James W. Greer, president of the Association of Property & Casualty Claims Professionals. The full reference follows.

(For NU's breaking news story on the hearing, click here.)

Mr. Hunter, who testifed that my blog “has other interesting posts on this subject,” included the following in his Senate submission:

Many concerns have been raised about the poor performance of property-casualty
insurers in paying legitimate claims in the wake of Hurricane Katrina. Some have suggested that the lack of attention to individual claims by some insurers may have been the result of collusion. Consider this startling blog entry from the President of the Association of Property/Casualty Claims Professionals, James Greer, posted on the Web site of Sam Friedman, Editor of the National Underwriter (Your Own Worst Enemy, Continued, www.property-casualty.com, Feb. 21, 2007.)

James W. Greer, CPCU:

Although I live and work in Florida, my home is on the Mississippi Gulf Coast where I have family spread from one side of the state to the other. I spent six months there leading a team of over 100 CAT adjusters and handling the wind claims for the state's carrier of last resort.

I personally walked through the carnage, saw the people, and felt the sorrow. I climbed the roofs, measured the slabs, and personally witnessed very visible and clear damage caused by both water AND WIND.

I also observed something else that surprised me, and, after 28 years as a claims professional who has carried “the soul” of a bygone industry in my practices and preachings, I was ashamed of those to whom I had vested a lifetime career: An overwhelming lack of claims adjusters on the Mississippi Gulf Coast.

The industry simply did not respond. The industry appeared as distant to the Miss. Gulf Coast as the federal government was accused of being to New Orleans. It was as if some small group of high-level financial magnates decided that the only way to save the industry's financial fate from this mega-disaster was to take a total hand's off approach and hide beneath the waves and the flood exclusion.

While media reps repeatedly quoted, “Each claim is different and will be handled on its own facts and merits,” the carriers behaved as one…if there was evidence of water, or you were within a certain geographic boundary, adjusters were largely absent on the coast.

(Actually, State Farm did have one of the largest CAT facilities, located centrally on the coast, but there was little evidence of other carrier presence.)

I personally observed large carriers simply refusing to respond, or even consider arguments of wind involvement…well-rationalized sets of facts, coverage and legal arguments. The silence from industry officials “far from the field” who retained the authority for claim decision-making was deafening.

In an article posted on the Association of Property & Casualty Claims Professionals' Web site shortly after Katrina hit, I described the catastrophe as “Claims Greatest Challenge,” and pondered the industry would respond. Now we know.

As a member of an old Aetna family that has been widely dispersed since its demise in the '90's, I remember the day when leaders of that fine company routinely cited, and tried to honor, the social/moral contract the insurance industry had with society. It is clear that, in today's business environment, the soul of the insurance industry is missing, and despite the rhetoric of its PR machine, the industry no longer recognizes such a social/moral obligation.

As a lifetime claims professional, I will never quit writing, teaching and showing those who are interested the way things should be done to serve the best interests of the industry and its customers according to the best practices and behaviors of a bygone claims age. Perhaps someday a change in mindset will once again begin to evolve.

Clearly, for the Mississippi Gulf Coast, the Katrina catastrophe, the animosity and the litigation, it was never really about flood…nor was it about the flood exclusion. It was, and is, about the failure of the insurance industry to keep its promise…a promise that it will respond when loss occurs.

The only thing sold in insurance is peace of mind. The victims of this storm, and certainly those in Mississippi, will never again find peace of mind in insurance.

Actions do speak loudest. On the Mississippi Gulf Coast, the insurance industry simply failed to act. In the end, it will pay dearly for that decision, as will all of society.

James W. Greer, CPCU, President, Association of Property & Casualty Claims Professionals

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