Ascent of Money 4 - Sarah Seeliger


Insurance & Katrina


Something I found interesting in this chapter of Ascent of Money was how insurance companies dealt with the aftermath of Hurricane Katrina. Insurance was a huge part of why it was so hard for Louisiana to recover from Katrina because according to the book, getting insurance for a house in low-lying areas of New Orleans that were most affected by the hurricane is nearly impossible. Because of this, getting mortgages on houses also next to impossible. Hurricane Katrina was a really expensive disaster: there were 1.75 million property and casualty claims, and the insurance losses were estimated to be $ 41 billion. 
Because of Katrina, we were able to see the defects of an insurance system where responsibility was split between private insurance companies and the federal government. Private insurance companies were responsible for protecting against wind damage, and the government was in charge of protecting against flooding. A big problem arose when insurance companies came to New Orleans to asses the situation, and instead of helping policy-holders who were affected, they avoided paying them out by saying the damage was caused by flooding and not the wind. According to Money, "the New York Times reported that insurers had paid out an estimated $900 million less in coverage to the approximately 160,000 families who lost their homes in Katrina than the state of Louisiana believed those families were owed." (Osborn). Something else that happened that I found interesting was that because insurance companies suspected that Katrina would not be the last hurricane of this severity, they started to restrict coverage, boost deductibles, refuse policy renewals, and raise premiums (Osborn).

While doing some research, I found that the things that insurance companies did in the aftermath of Katrina affected insurance forever. For example, Hurricane Sandy was not nearly as expensive as Katrina, but people still faced problems with insurance (Osborn). Hurricane Sandy happened in October of 2012, and in May of that year, it was discovered that fraudulent damage assessments were made to "lowball" insurance payouts (Osborn). Because of this, the Flood Insurance Affordability Act was passed in 2014, but people still saw their premiums rise a lot (Osborn). 


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