Yesterday Athenae asked who will be next?
One suggestion…read this November 28th LA Times article titled “Insurers learn to pinpoint risks — and avoid them” It discusses how new computer technology including data mining is utilized to develop knowledge which is then sold to insurance companies “to help them decide whom to cover and how much to charge.”
Since Hurricane Katrina last year, those decisions have been running pretty much in one direction.
Based in part on RMS’ predictions, companies like Allstate Corp., the nation’s second-largest property insurer, have gotten out of some lines of coverage altogether. It and other companies have spent the year dropping or paring back policies from Oregon to New York.
“Between hurricanes along the East and Gulf coasts and earthquakes along the West Coast, it is an open question whether the private insurance industry will continue to insure the coastline at all,” said University of Pennsylvania economist Howard Kunreuther, one of the country’s foremost authorities on disaster.
Insurance regulators, economists and consumer advocates question if new these developments will “undermine the very nature of insurance.”
As the industry expands its ability to “slice and dice” customers and applicants, Texas Insurance Commissioner Mike Geeslin, among others, worries that “the risk-transfer mechanism at the heart of insurance could break down.”
If that happens, Geeslin warned, “insurance will stop functioning as insurance.”
There is much more in this article and if you own a home you ought to read it as well as your homeowners policy. If you read the article you’ll understand that last point.
Apart from parsing insurance policies and the shared risk in the private insurance sphere though, what is occurring in New Orleans raises the issue of government and shared risk.
New Orleans is a major port for the US and South Louisiana is a major provider of natural gas, oil and refineries for that oil. The area has assumed great risk (coastal wetland destruction, Mississippi River Gulf Outlet) to provide goods and energy to the country. (for more go here) It all came crashing down on them with Katrina. Particularly the federal levees came down. The Army Corps of Engineers admitted it was their design failure that caused the levees to breach which in turn flooded the city.
The people of New Orleans had assumed they were protected. They weren’t. Having assumed risks to meet the needs of the country they believed there would have been a recovery response equal to the destruction they have endured. It hasn’t. They thought we were all in this together only to be met this past 462 days with neglect and abandonment. Worse they have endured the slings and arrows of the Why Live There, Why Rebuild Below Sea Level crowd and ask are we truly alone in this? Does the rest of the country not realize the importance of our port and off shore resources? Was there not a social contract? Is this not the UNITED States of America?
The questions go unanswered. It ought to frighten us all. If a city of such economic importance, rich in cultural and historical significance can be laid to waste and perhaps laid to rest from lack of will and commitment to make the part whole again, then who among us is safe? The new Congress could go along way in demonstrating we indeed share in the risk and responsibility by addressing the rebuilding of the levees to Cat 5 protection and restoring Lousiana’s wetlands.