If the name Andrea doesn't mean anything to you it may mean something soon, especially for those of us residing along the East or Gulf Coasts of the United States. It's the first name to appear on the Weather Service's 2013 Atlantic Hurricane season list, and I, for one, hope it will not be as memorable a season as last year.

As a victim still in recovery from Superstorm Sandy I have a keen interest in discussions about risk mitigation and recovery—especially in New York City. So when attending Friday's “Kicking Off Hurricane Preparedness Season 2013” symposium, I had a little more than a journalist's interest in what New York officials had to say about the recovery. I don't feel I learned a lot new. I live here and have done my best to keep tabs on the city's plans and progress.

However, there was one subject gone unmentioned. Yes, the city has its federal money. Residents and businesses have an opportunity to get financial help through loans and grants. But the panelists didn't discuss one big-budget expense looming for individual businesses and homeowners: affordability.

Howard Kunreuther, co-director of the Wharton Risk Management and Decision Processes Center, and one of the symposium's panelists, spoke after the meeting. He commended New York City for taking the initiative and planning for the next calamity. Take action now, he says, while people are still paying attention, and educate them not only about being ready for the next one but also in the value of having insurance. Too often, he believes, as a disaster recedes from memory, so does the take-up rate for insurance—especially flood.

However, people in New York—and New Jersey—face a dilemma with flood-insurance rates set to rise: how to afford higher premiums while mitigating flood risk?

Kunreuther advocates developing a means-tested voucher program to help those in need. It would serve two purposes. One—help individuals pay for coverage for a limited period of years. Second—it would be an incentive for people to mitigate their risk or face the full weight of increase at the end of the voucher period. If they have done the work, their reward will be discounted rates.

Kunreuther is an advocate of free markets, saying that regulators need to allow insurers to charge adequate rates for insurance if they expect the markets to prosper. But, rates also need to be affordable. Without changes, he says, adoption of risk-based principals will be a “non-starter,” adding there has “got to be a better way to deal this this.”

“We have to let everyone know how hazardous the risk is, something that many of low income do not realize, and we need to encourage the mitigation of risk,” says Kunreuther.

He is not naïve about the challenge and is well aware that the industry has a problem with its reputation. He believes the best way for the industry to address this is through transparency.

But will the industry cooperate?

One listener to Friday's discussion scoffed at the idea of insurance as an investment against risk. The listener has her own issues with her insurer who doesn't want to pay the loss because the company contends it was not flood, but seepage. Then there's the issue of the sump pumps that ceased working because of the power outage and a rider that excludes coverage for that failure. She feels insurers have the cards stacked against the policyholder by adding cryptic and contradictory language into policies aimed at not paying for claims. Luckily the sponsor of this event is not her carrier.

Joan Woodward, president of the Travelers Institute and moderator of Friday's panel discussion at the NYSE, says the insurer is launching a two-year effort to educate the public about insurance. The one thing she says Travelers learned from Sandy is that consumers need it.

One would hope other insurers plan to follow Travelers' lead, but it can't be a one-way conversation. A learning opportunity is a terrible thing to waste.

Special Reports /

As Hurricane Season Begins, Insurers Should Seize Opportunity to Educate

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