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Home insurance and flood insurance

Whether you actually believe in climate change or global warming, the insurance industry does believe and, as a result, it's rapidly moving out of insuring against extreme weather events. No matter where you live, you are going to find it increasingly difficult to buy anything more than cover for basic storm damage. The words "water damage", particularly resulting from flooding, and "wind damage" are increasingly redefined so the insurer will not have to pay out. Leaving the more general issue to one side for now, the government is supposedly an insurer of last resort against flood damage. The National Flood Insurance Program is run through FEMA and the cover is sold through your local insurers. This is an excellent idea. As the private insurers pull out of flood insurance because this part of the business makes a loss, the taxpayer can pick up the bill. It's perhaps the one part of big government that even the most dedicated of tea party members might approve. Except it does not always work as well as it should.

In a hearing of the Insurance Committee in the New York Senate this March, 2012, there was evidence about the aftermath of Tropical Storms Irene and Lee. It seems the majority of people owning property in the New York area did not have flood insurance. Not unnaturally, they are struggling to find the find to rebuild. However, there are also people who did have cover under the National Program and they are still waiting for a reasonable offer of settlement to be made so they can begin rebuilding. There seem to be two main problems. The first is a shortage of claims adjusters with experience in dealing with flood claims. The result is that the few experts are spread thin and the other claims are dealt with by placeholders who often confuse claimants and delay their claims by asking for redundant information. Worse, few private insurers have a policy of consistency so that the first claims adjuster on the scene deals with the claim to resolution. This means claimants may have to deal with an endless sequence of adjusters who have no knowledge of what has gone before. Needless to say this is deeply frustrating.

However, there is also a suspicion that the insurance industry deliberately goes slow. The longer the delay in paying out on claims, the more investment income the insurer can make. This applies equally to the private and the national insurers. The Senate Committee heard that about 92,000 claims had been made and some money had been paid on 78,000 of those claims. In total some $545 million had been paid out for Irene and Lee of which about $145 had come from the National Program. These figures led the Committee to suggest the National Program was not working as it should. The government policy should be to get sufficient money to the owners as quickly as possible so that rebuilding work can begin. Home insurance should be all about restoring the home with the fewest barriers in the way. As it is, those who do buy the National Program should always be better off than those holding a bare homeowners insurance policy. But it may take more time than you expect to collect a fair settlement of your claim.

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