The repercussions from Hurricane Katrina have not yet died down, and the effects may reach much farther than the need to rebuild.
Insurance companies are on the defensive. Irate homeowners, incensed at what they see as desertion by their insurers, are suing for the money to restore their homes in the wake of claims denials. Equally irate legislators, led by, among others, Senator Trent Lott (R, Mississippi), are pushing for a change in the law that exempts the insurance industry from federal antitrust oversight. Lott lost his own home, and his insurer, State Farm, declined his claim. Now he, and a bipartisan group in both chambers of Congress, are exploring the possibility of subjecting the industry to greater federal oversight.
The reasons for this threatened Federal footprint on the industry?
Claims reduced or denied outright by insurers, who said that most or all damage was caused by uninsured flooding rather than covered wind.
Steep increases in homeowner rates, or unavailability of coverage, as insurers lower their own risks, ceasing to write new policies in coastal and other disaster-prone areas (think California and earthquakes) and substantially raising premiums for the policies they do retain.
Language in policies that confused homeowners, particularly with regard to anti-concurrent clauses. These state that if any damage is caused by an “excluded peril,” then the insurer need not pay the claim even if other damage was caused by a covered peril.
Alleged assurances by agents that homeowners were covered by their current policies.