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Natural Disaster Of Hurricane Katrina Essay

1351 words - 5 pages

Ethical Dilemma: Natural Disaster of Hurricane Katrina-Insurance Companies Deny ClaimsHurricane Katrina was a hurricane like no other in our country’s history. Its furystruck the gulf coast on August 29, 2005 and as with 9/11, we were inundated withimages from television and newspapers twenty-four hours a day, seven days a week. We were first hand witnesses to the human suffering of people escaping to their roof tops, clinging to tree branches and bodies floating in the flood waters. There was great destruction not just to property but also to the lives of those who inhabited the Gulf Coast region. As with 9/11, there has also been a great impact on the insurance industry. Theessentialness of insurance is to allow the rebuilding of destroyed homes, businesses, and communities and to allow people to get back to living their lives once again. In order to cope with the effects of catastrophes the industry had to “come up with mechanisms that would preserve the nation’s insurance industry in the aftermath of natural or man-madecatastrophes.” (Tuckey, 2006)There are many issues that the insurance industry faces since this natural disaster occurred. The impact of Katrina has been substantial and widespread and has affected the customer in a negative fashion due to the frustration of filing claims and fighting with insurance companies. Will the total impact prove detrimental to the industry as a whole? These and many other issues need to be explored in order to gain complete insight into what exactly happened that fateful day and what will the future bring to the industry.
A succession of catastrophes can raise the specter that insolvency may become a possibility. “The regulatory goal of ensuring solvency, however, conflicts with the goal of ensuring affordable and available coverage.” (Berliet, 2006) With such large amounts of money being paid out on claims year after year a company can fail due to insolvency. This can be a lose-lose biforked situation. A company can be overly concerned with insolvency and increase rates in order to make up for actual or expected losses and can price themselves out of the market or they can decrease rates due to being concerned with over pricing and therefore forfeit building up claims reserves which will also increase the possibility of insolvency as well. Companies must enact methods by which to protect themselves and the industry from going under from such unimaginable natural disasters.
“Hurricane Katrina inflicted record property/casualty losses of $35 billion to $55 billion at the end of August 2005, an amount large enough to wipe out most of the estimated pretax operating profit of the entire insurance industry for the year.” (Berliet, 2006) What a scary thought, that the whole industry could be wiped out by one natural disaster. One would wonder how the industry keeps afloat when it takes hits like this over and over again. The industry does survive, thankfully, but not without a price. That price is an...

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