Newsday Needs an Insurance 101. Let Me Help Them.

I am a generally a big fan and big critic of the insurance industry. The manner is which the industry handles flood (and earthquake) exposure is just plain ignorant.

I came across this article from Newsday. I nodded in agreement for one comment, and was disappointed with the remainder.

  1. I am all for simple policy wording. But it is a legal contract meant to protect both sides. People do foolish things because they think the insurance policy will come to their rescue. The insurance company and the pool of insureds helping to fund the pool should be protected from all the clever ways people try to pull a fast one.
  2. Insurance policies are not several hundred pages long. Bill Wilson, an insurance expert, correctly points out in the comments section that an auto policy is about 13 pages long and a homeowners policy is a bit more than that. Commercial policies are much longer, but they need to be…they are much more complicated legal contracts which give more coverage.
  3. Flood or wind-pushed water? I have never read a contract that had a clause for wind-pushed water. It’s because wind-pushed water is by definition a flood.
  4. No one is “covered” for wind-pushed water, unless they are covered for flood.
  5. Should Amtrak buy insurance? Good question? If it was 100% a federal agency or something like that, I would say no. But I think it is somewhat private and as such was meant to behave like a public corporation. In that case, then yes, they should buy insurance and manage their risks accordingly and not dumping them on the taxpayer. I don’t know the legal status of Amtrak, but this is a good question.
  6. “Policies that cover all damage would cost more, but I think many people and businesses and governments would pay more.” Many would yes. Many would object. This is a very complicated problem because in order to cover perils such as flood and earthquake you need to get exposures that are low risk to buy into the pool. A lot of customers in the low-risk category would object to paying for coverage that they don’t want or “need”

The only thing missing from this Newsday rant is the old “act-of-god” nonsense. (<wink> paragraph 4)

Here is a more balanced news account of the judges verdict:

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