Insurers Say Settlement Rates High After Katrina

Mississippi’s top insurers report that they have settled 82 percent to 96 percent of property claims six months after Hurricane Katrina.

Robert Hartwig, chief economist for the industry’s Insurance Information Institute, said Mississippi’s settlement rates show insurance companies are living up to their contracts with policyholders, despite assertions to the contrary.

Mississippi Attorney General Jim Hood and other attorneys are suing major insurers for refusing to cover damage from Katrina’s storm surge. Private policies exclude water damage from coverage, even “wind-driven water,” although many policyholders were unaware their policies covered only wind from a hurricane.

Insurance Commissioner George Dale also set up a mediation program as an alternative to settle insurance disputes, with 1,489 policyholders signed up.

“It is not the case that the vast majority of policyholders are somehow having trouble reaching agreement with their insurance carriers,” Hartwig told The Sun Herald. “The numbers don’t bear that out at all. I would expect that the percentage of claims closed will continue to increase.”

Some insurance companies categorize claims as closed when adjusters finish their work and a check is issued for the cash value of the loss. The numbers for closed claims from Allstate fall into this category, giving it the lowest closure rate of 82 percent.

Mississippi Farm Bureau reported the highest settlement rate at 96 percent, followed by State Farm at 94 percent.

Allstate listed some claims as open because the policyholder is still due “replacement cost” money once repairs are made and they document additional expenses.

Policyholders dissatisfied with settlements might be included in closed claims if they have not notified their insurer.

The Mississippi Department of Insurance requires less detailed reporting, but will be requesting more information from insurance companies in the future, Deputy Commissioner Lee Harrell said.

“It’s a learning process for us,” Harrell said. “We’re going to continue to gather data from the insurance industry as it relates to this storm.”